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Family drama has happy ending for NFL and Steelers
Published January 26, 2009
In this time of financial upheaval, one of the nation’s historic treasures, the Pittsburgh Steelers, has been sold to its existing principal owner.
It is a story out of Hollywood, full of quarreling family members, a rebuffed billionaire suitor and gambling interests, all under the watchful eyes of the NFL.
With time running out in 2008, Dan Rooney and his son Art II stepped up with a proposal that made sense for the Rooneys and gained league approval on Dec. 17. As it lurches towards its final chapter, it is a story worth telling.
Founded in 1933, the Steelers are the fifth-oldest franchise in the NFL, after the Chicago (now Arizona) Cardinals, Green Bay Packers, Chicago Bears and New York Giants.
The Rooney family members have been majority owners of the Steelers since the team’s inception, with the five Rooney brothers, including Dan, each owning 16 percent and the family of John McGinley owning the other 20 percent.
The 2008 season represented Dan Rooney’s 54th year with the Steelers, a family name and franchise inextricably linked.
Stanley Druckenmiller was the 106th-richest American in the Forbes 400 in 2008, with an estimated net worth of $3.5 billion. Having had his long-standing purchase offer — which would have included a significant up-front cash payment and retention of Dan Rooney as principal owner — rejected, Druckenmiller pulled out.
My suspicion at the time was that he would be back. A buyer like this from Pittsburgh would find it hard to go cold turkey on this deal. And in this time of financial crisis, the Rooneys would be hard-pressed to find a similar suitor. My suspicions were wrong, however, as Druckenmiller stayed away.
Dan and son Art II had long expressed their desire to buy out the shares of Dan’s four brothers. Both divested their interest in the family racetracks that came under the harsh gaze of the NFL.
The four brothers initially believed Dan and Art’s offer to be undervalued, but became sold with the upgraded offer.
Art Rooney Jr., who had a falling out with brother Dan in the late 1980s, lives in Pittsburgh and has worked for the Steelers. He had said earlier this year that there was a “good chance, a real good chance” that the Rooneys will no longer own the Steelers.
Tim, John and Patrick Rooney Sr. are heavily involved in racing interests and have resigned from the Steelers’ board.
The brothers initially hired Goldman Sachs to conduct a valuation analysis of the team, which was estimated to be worth between $800 million and $1.2 billion.
The reasons for selling
Patrick Sr. had stated that the gambling interests of the family were more profitable than the Steelers, referencing the huge disparity of revenues in the NFL and the problems small-market franchises face competing with the large-market teams. He has further referenced the brothers’ interest in avoiding inheritance taxes.
The brothers’ involvement in racetracks was contrary to NFL policy prohibiting NFL team ownership association with gambling interests. The NFL has required that the new ownership be divested of all interests in the racetracks, which Dan and Art II have done.
The brothers also believed there would be tax consequences retroactive to the beginning of 2009 by the new Obama presidential administration, an administration that Dan actively supports.
The approved deal
NFL owners on Dec. 17 approved Rooney’s plan for restructuring Steelers ownership by a vote of 31-0. They allowed two of their long-standing tenets (requiring that one person own at least 30 percent interest of a team and a $150 million debt limit) to be skirted in apparent deference to Dan Rooney and the importance of continuity in ownership.
While John and Art Rooney Jr. will remain minority partners of the team, Dan Rooney will hold 20 percent, and Art II 10 percent. The NFL will allow Dan and Art II to be treated as one person owning 30 percent of the team.
Dan and Art II will also incur $250 million in debt, and their shares in the Steelers will be used as collateral for their loan.
Finally, the NFL owners voted to approve three minority investors in the team that were secured by Goldman Sachs.
The NFL owners’ affinity for Rooney continuing his ownership was evident in comments by fellow owners.
“We’ve looked at it very positively and hope they can get everything worked out,” said Houston Texans owner Bob McNair.
I know from experience at league meetings how respected Dan Rooney is and how much tradition and history weigh on the minds of the ownership among all the NFL teams. Like the Green Bay Packers, the Chicago Bears and a few others, the Pittsburgh Steelers are a franchise that resonates history, tradition and success in the NFL.
With the continued presence of Dan Rooney — albeit with allowances made by the league — all seems right with the Steelers.
Andrew Brandt (email@example.com) is president of The National Football Post and teaches sports business and sports law at the University of Pennsylvania’s Wharton School of Business and Georgetown University Law Center, respectively.