SBD/Issue 60/Franchises

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  • NBA Formally Announces Plans To Buy Hornets, Find New Owner

    NBA Paid More Than
    $300M For The Hornets

    The NBA yesterday completed a deal to buy the Hornets from George Shinn for more than $300M, the first time the league has taken ownership of a franchise. NBA Commissioner David Stern said that there is no timetable on the league selling the team. “It is unusual for us as a league,” Stern said, adding that the NBA is not in a hurry to sell the team and is not currently soliciting buyers. The NBA stepped in to buy the franchise after minority investor Gary Chouest could not agree on a deal to buy the franchise from Shinn, who Stern said was no longer able to absorb further financial losses. “We have the luxury of time,” Stern said. “We decided that rather than saddle the franchise with more losses, it would be prudent for us to step in.” The league's takeover is subject to a vote by the NBA BOG, which likely will occur next week. The NBA confirmed that it has retained Wild Vice Chair Jac Sperling, a native of New Orleans, to be the Hornets' Chair & Governor, while Hugh Weber will maintain his role as team President (John Lombardo, SportsBusiness Journal).

    IN STABLE CONDITION: Stern said that the move was "made to stabilize the Hornets after a lengthy ownership transfer failed to be finalized and absolve the franchise of significant debt problems that might hinder its overall value and ability to be sold." Stern: "In order to make things move as smoothly as possible, we thought it best if we moved in -- and we're confident that whatever we decide to do here, it will not be harmful to the overall league or franchise values." He indicated that the league "doesn't have a timetable in place to seek a buyer, but [the] NBA's objective is for the franchise to remain in New Orleans for the long term." Stern said that he "will have to look at new revenue streams that could include inducements from the state as a way to strengthen the team's financial outlook." He added, "I think that the state will be a party along with the team and possibly the city to a broader deal -- but that's one of the issues. And I think it's a fair issue, and the governor knows we're coming." Sperling said, "The league has assured me that management will have the necessary resources to build on that success and grow the business through increased ticket and sponsorship sales, keep the team competitive and further the team's relationship with the fans of New Orleans" (New Orleans TIMES-PICAYUNE, 12/7).

    UNCHARTED WATERS: In N.Y., Belson & Beck note the NBA is "moving into potentially choppy waters in buying a team for the first time." In recent years, MLB and the NHL have been "embroiled in the complex, expensive and often embarrassing process of owning or financing teams," including the Expos, Rangers and Coyotes. In buying the Hornets, the NBA is "trying to avoid the public problems that these clubs encountered." Still, it remains to be seen whether the Hornets "will be allowed to substantially increase payroll." Authority "over trades and the payroll will rest primarily" with Weber and Sperling. But NBA Senior VP/Marketing Communications Mike Bass said, "Franchise-altering decisions will ultimately be reviewed by the league" (N.Y. TIMES, 12/7). Stern said that he "wasn’t worried that getting involved with a team in crisis would create an unwanted precedent for other cash-strapped teams." He said that he is "confident every other team in the league has the funds to withstand any losses." Stern noted that Shinn "had the idea of a league takeover in October, when it looked unlikely he would find a buyer that would keep the team in New Orleans." Stern said the Hornets’ credit line had "reached its maximum and borrowing money would just add to the losses the team had already accumulated" (WSJ.com, 12/6). Mavericks Owner Mark Cuban said, "It's a very smart move by the league" (NBA.com, 12/7).

    Despite Strong Record And Presence Of
    Chris Paul, Hornets' Attendance Still Off

    WHAT MAY THE FUTURE HOLD? CBSSPORTS.com's Ken Berger wrote, "The future of the NBA in New Orleans, one of America's finest and star-crossed sports destinations, took a definite turn toward life support Monday when Stern announced that the league is stepping in to save the Hornets from themselves. The question now is: Who, if anyone, will come forward with the deep pockets and patience to keep the team in Louisiana?" Despite a "compelling team with [a] marketable superstar in Chris Paul who has orchestrated the best start in franchise history, the Hornets remain among the worst teams in the NBA in attendance." It clearly is "in nobody's interests to operate a team in a market where it is doomed to lose money forever" (CBSSPORTS.com, 12/6). SI.com's Ian Thomsen wrote the NBA bringing in Sperling is a sign that it "will be focusing on the local market." But unless a "prospective owner steps forward with the goal of keeping the team in Louisiana, the NBA can't afford to cut short its options." Thomsen: "Its ability to move to a larger market is one of the most attractive qualities of this franchise, and the NBA isn't going to reduce the value of a franchise -- which would hurt the value of the league is a whole -- in order to keep the Hornets in a city it has called home for only five years." Unless fans "swarm to the New Orleans Arena in order to keep their franchise at home for the shortterm, the new owner of the Hornets will place New Orleans in a pool among larger available markets," including Chicago, Anaheim, San Jose and K.C. (SI.com, 12/6). FANHOUSE.com's Sam Amick cites a league source as saying that there is "reason to believe the league is looking strongly at the possibility of moving the team to Kansas City and the Sprint Center" (FANHOUSE.com, 12/6).

    ON HIS WAY OUT: YAHOO SPORTS' Adrian Wojnarowski writes for Shinn, the Hornets "were little more than a prop to celebrate him as an upstanding pillar of the community." He is selling the team to the NBA and "gets to make believe he did it because he cares about the franchise staying in New Orleans." Wojnarowski: "Another load of garbage out of him, another con on another city. Stern made this easy for Shinn, who does a public service and cashes out of the NBA. ... Maybe the Hornets will find a buyer to keep them in New Orleans, but that appears a most improbable ending to this story. For George Shinn and David Stern, New Orleans served its purpose. The photo-op’s over" (SPORTS.YAHOO.com, 12/7).

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  • NHL BOG Approves Matthew Hulsizer's Plan To Purchase Coyotes

    Hulsizer (c) Wins Approval From NHL To Buy
    Coyotes; Glendale Lease Issue Still Looms

    PEAK6 Investments CEO Matthew Hulsizer yesterday "won unanimous approval" from the NHL BOG to buy the Coyotes, according to Jeff Klein of the N.Y. TIMES. The NHL, "which has owned and operated the Coyotes for the last year and a half after the club filed for bankruptcy, has imposed a Dec. 31 deadline for the sale of the club to keep it in the Phoenix area." Hulsizer: "I'm optimistic that we are going to get this thing done by the end of the year." Hulsizer is "negotiating with the city of Glendale" over the lease to Jobing.com Arena, a "stumbling block for previous prospective buyers." Hulsizer said, "I believe we have negotiated most of the lease and we are just waiting to finalize that." He added that "that would happen at a Dec. 14 meeting of the Glendale City Council" (N.Y. TIMES, 12/7). Hulsizer said, "This is not a home-run investment for us. It's been my experience that if you make a great product, hockey teams have a lot of value. Those things tend to grow over time. I tend to be a longer-term investor. As I look out 25 years, I think people will look back and say 'Hey, that might have looked smart.' Right now, it's not going to look smart for a long time though." While Hulsizer will be the majority owner of the Coyotes, he said that he "won't be running" the team. ESPN.com's Scott Burnside noted "some members of the Ice Edge group of investors, the group of businessmen who tried to buy the team last spring, seem likely to play a role when the purchase is completed." Hulsizer said that they "will be minority owners as well." Hulsizer added that he "expects to bring in a president of the team who will have credibility in the hockey world" (ESPN.com, 12/6). The GLOBE & MAIL's David Shoalts cites sources as saying that Hulsizer and Glendale are "negotiating a multi-year lease that could pay him $100-million toward the Coyotes' annual losses through parking charges, taxes and property levies from a community-facilities district created around Jobing.com Arena" (GLOBE & MAIL, 12/7).

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  • Pistons Sale Reportedly Delayed Until After All-Star Break

    Ilitches Reportedly Have Lowered Initial Bid For
    Pistons, So Now Gores May Have Top Offer

    The sale of the Pistons "will be delayed until at least the NBA All-Star break in mid-February ... and possibly longer," according to financial sources cited by Kaplan & Lombardo of SPORTSBUSINESS JOURNAL. Citigroup, which is representing Pistons Owner Karen Davidson in the sale, "recently notified interested buyers that it would like to close a deal by February." Kaplan & Lombardo note "even if a deal is announced in the next few weeks, closing by mid-February could prove tough." Citigroup "wants to accelerate the timetable because there are concerns about the effects of ownership uncertainty on the franchise" (SPORTSBUSINESS JOURNAL, 12/6 issue). In Detroit, Gregg Krupa notes as negotiations to buy the Pistons "proceed haltingly," sources said that there have been "no new bidders since an exclusive, 30-day negotiating period between Davidson and Ilitch Holdings, Inc., failed to yield an agreement last month." The sources said that they "believe the Ilitches lowered their original bid," and that Platinum Equity Chair & CEO Tom Gores "is now the highest bidder." It is "believed both continue to negotiate with the Pistons." Sources believe that for Davidson and Citibank to "realize something in excess of $400 million in the sale, they might either have to wait until the economy rebounds or push the purchase among foreign interests, including in the Middle East, India and even China, where the NBA is intent on expanding its business." But if they "choose either course, unless a current bidder increases a bid, the sale may take longer than February" (DETROIT NEWS, 12/7). A source indicated that speculation that Ilitch and Gores are working "on a deal to jointly buy the Detroit Pistons is untrue" (CRAINSDETROIT.com, 12/6).

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  • Nationals' Deal With Werth Makes Other Teams Take Notice

    Blockbuster Deal For Jayson Werth Already
    Changing Perception Of Nationals Franchise

    The Nationals' seven-year, $126M deal with RF Jayson Werth has "changed so much about this baseball offseason," according to Adam Kilgore of the WASHINGTON POST. The contract "drastically shook the market for free agent contracts and altered Washington's perception in two ways." For some, it "sent a signal that the Nationals are poised to add enough pieces to compete," but for others is "served as a referendum on their business savvy." One agent called the contract "the stupidest thing I've ever seen." But Nationals GM Mike Rizzo "heard the criticism and responded with a shrug," because team officials "got the player they wanted." Rizzo: "Instead of having to recruit players and overpay players at times to come to Washington, I think we're trying to get this place to be a destination." One player agent said, "It lets everyone know the Nationals are serious about winning. It got everybody's attention" (WASHINGTON POST, 12/7). In DC, Tom Boswell writes signing Werth for "more than he's worth is a fine gamble" for the Nationals, because "sometimes, you have to jump-start the future." Rizzo said, "When two rival GMs in your own division are saying that you overspent, you must be doing something right. Did we go an extra year and another $18 million beyond anybody else? Yeah, we did. I'm not ashamed." Boswell notes owners of "bad teams are described with one of two words: cheap or dumb." In one day, Nationals Owner Ted Lerner has "removed himself from the first category." There were doubts about whether the Lerners, "knowing that baseball is a dark forest of scary, exciting variables," would finally decide to "jump into the game." Boswell: "Now we have 126 million answers -- all of them 'Yes'" (WASHINGTON POST, 12/7). ESPN's Buster Olney noted the Nationals "spent more money on Werth than all the free agents the franchise had signed in the previous 20 years combined" (ESPN.com, 12/6). ESPN's Pedro Gomez said of the deal, "It's been only 24 hours, but yet it is still sending shockwaves throughout large and small market teams" ("Baseball Tonight," ESPN2, 12/6).

    GETTING THEIR MAN: ESPN BOSTON's Gordon Edes noted the Red Sox this week are "mailing renewal notices to season-ticket holders," and team officials "got their man" by trading for 1B Adrian Gonzalez. On Sunday, there were reports that the deal fell through, and that "much-advertised splash the Sox were seeking to make would have been instantly transformed into a belly flop, leaving the occupants of Yawkey Way dripping wet with embarrassment." But after landing the Padres star, the Red Sox have a "great face to put on a billboard, not only for this season, but for years to come." With Gonzalez "in the fold, the Sox can send out those renewal notices, and expect many happy returns" (ESPNBOSTON.com, 12/6).

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  • MLB Franchise Notes: Mariners Projecting Losses For '11 Season

    Armstrong (l) Says Mariners Projecting Loss
    For '11, But Payroll Will Remain The Same

    Mariners President Chuck Armstrong admitted that the team is "projecting losses for the 2011 season ... with attendance down last season and the effects of having two of the past three seasons with more than 100 losses." Armstrong confirmed that the Mariners "will not reduce player payroll" for '11 after reducing it more than $8M last season. Armstrong: "Last year, our player payroll budget was $94 million, and it won't be going down from that." With the team projecting losses for the upcoming season, "keeping the payroll at the same level wasn't a given." Armstrong said, "We don't have much flexibility now. If we had to reduce it, we might have had to do some things that might have been damaging in the long run. We're not involved in any kind of salary dump. I'm grateful for us having the ownership to do that" (Tacoma NEWS TRIBUNE, 12/7).

    MOVING ON UP: In S.F., John Shea reports the Giants' payroll, "already the biggest in the National League West, will skyrocket in 2011." Giants Senior VP & GM Brian Sabean yesterday said that the team's payroll will be $120M next season, compared to a "touch above" $100M at the end of this season. Sabean: "Ownership stepped up. They could've screwed things down but didn't." Shea notes the higher payroll is the "result of built-in raises ... and projected salaries for the six arbitration-eligible players" (S.F. CHRONICLE, 12/7).

    THANKS, BUT NO THANKS: ESPN.com's Buster Olney reported the A's "walked away from the Adrian Beltre talks because time and again, the third baseman made it clear that he had little interest in taking the offers from the Athletics, which were always the highest on the board." The A's "will look for other players now, but the reality is that this franchise continues to rot, while waiting for a decision on whether the team can move to San Jose." Agents "talk about how their players aren't really that interested in the Athletics partly because of their facilities." The A's "need a decision to build hope" (ESPN.com, 12/6). CSNBayArea.com’s Ann Killion said of Oakland-Alameda County Coliseum, "It's a dump. It's a dump and they get 5,000 people. It's a miserable, depressing place to be. They've got to do something" ("Chronicle Live," Comcast SportsNet Bay Area, 12/6).

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  • NHL Franchise Notes: Thrashers Confident Team Is Staying Put

    Thrashers Still Seeking New Investors Or New
    Owner; Future In Atlanta Still Up In The Air

    ESPN.com's Scott Burnside noted the "search continues for new investors or a buyer for the Atlanta Thrashers, but team president Don Waddell believes the NHL will not allow the team to be moved to Canada." Waddell said, "I don't believe Gary Bettman's going to allow someone to come in and buy it and move it." But Burnside noted that is "not to say the team's future in Atlanta is assured." The team's attendance "continues to sit near the bottom of the league, and current ownership has been embroiled in a lengthy internal legal battle between different factions within the original group that bought the team." It is "believed the Thrashers could be purchased for a bargain basement price -- say somewhere in the $125 million neighborhood -- if a prospective owner was willing to keep the team in Atlanta" (ESPN.com, 12/6).

    PASSING THE TORCH: The GLOBE & MAIL's David Shoalts reported the NHL BOG yesterday "approved the sale" of Flames investor Harley Hotchkiss' 22% stake in the team. Hotchkiss' shares, "which are being sold as an estate-planning move, will be purchased by the other partners in the club." Hotchkiss, 83, said that he "approached his partners about a year ago and told them at that time that he was facing a medical challenge." Hotchkiss: "I believe I'll fight my way through it, but it got me to thinking about what to do with my Flames interests and what to do about my long-range estate planning. This is a result of that" (GLOBESPORTS.com, 12/6).

    WHAT A DIFFERENCE A YEAR MAKES: THE HOCKEY NEWS' Ken Campbell wrote there is "probably nobody in the United States hoping George Bush's tax cuts for the rich are extended beyond Jan. 1 more" than Sabres Owner Tom Golisano. Sources said that East Resources President & CEO Terry Pegula has "signed a letter of intent to buy the Sabres," and part of the tax plan for the sale "has to do with capital gains." Under the Bush tax cuts, Golisano would have to pay only about 15% federal taxes "on the money he makes from the sale of the Sabres," but if the tax cuts ended, he "would owe somewhere in the neighborhood" of 35% in capital gains tax. Campbell wrote it "probably behooves Golisano to get this done as early as possible," which is why there could be an announcement on the sale "before Dec. 31" (THEHOCKEYNEWS.com, 12/6).

    IN OR OUT? In Dallas, Mike Heika wrote if the group of lenders running the Stars "believe they can maintain ownership into the summer, then they need to step up and become the owners of the team." They "need to give a face to their group and tell the fans there is a plan in place." The lenders interviewed former Ducks and Nationals President Tony Tavares "and are considering making him an interim president or CEO." Potential Stars buyers and the lenders also are "still talking and hoping they can ... find the right price at some point, but that's not something that seems to be close to happening." Heika wrote, "It just seems the team needs to go one direction or the other" (DALLASNEWS.com, 12/6).

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