March 4, 2005

Cherry-Picking the NHL: The Real Deal Behind the Bain Offer

by CHRIS LYNCH , American Digest Sports Editor

BY NOW YOU MAY HAVE HEARD about the $3.3 BILLION bid by a group headed by Bain Capital to purchase the entire NHL.

Some folks have said this deal would never happen because teams like the Bruins and Maple Leafs would never sell. Others, like Eric from Off Wing Opinion, see this as a possible PR move by Bain and Game Plan.

I see this as a Trojan horse. Bain is as smart as they come when it comes to takeovers and turnarounds. They see real value here. There is a product with a large base of loyal consumers but there is also a management in place that has consistently shown that they don't know what they are doing. I don't think Bain really wants to buy all 30 teams.

I think they might just want to buy just 15-20 teams.

If Bain is able to make acceptable offers to 15 to 20 of the teams who might be willing to sell and these teams agree to the terms - then suddenly Bain controls the voting in a hostile take-over of the NHL. Some teams like the Bruins, Rangers, Red Wings, Blues and Maple Leafs will probably never agree and to sell and what will result will be a prolonged legal battle. This is probably just what Bain wants.

Remember there was no hockey this year because of an owner lock-out. If the owners in the Bain group said to the players association that they were willing to not only accept the last offer they made but also throw in both a salary floor (I'll explain this later) and payroll exceptions for players from teams not part of the new Bain group - then I bet the players come on board. Remember that the players probably have no love lost for the Jeremy Jacobs and the other owners who just locked them out and canceled hockey for the entire year. Also remember that the NHL owner's current plan is to continue to low ball the players and field replacement players in the fall if need be.

So if the Bain group can get 15-20 teams - they can have a season next year with the same familiar players meanwhile the teams who voted against the Bain Group would be out in the cold. Some have suggested that these hold-out teams (Bruins, Rangers, Maple Leafs, etc) go back to an "original six" type deal but they would probably have to do so without both the NHL name (the Bain group would have that name tied up in litigation) and without many of the fan favorite top stars.

Bain specializes in take-overs and turn-arounds. They aren't doing this for the heck of it. They smell blood and a chance to make some real cash. Normally Bain specializes in breaking unions (my friend Tim who is very active in Union affairs hates them for this) but this time they would be busting the owners.

Think about it - just like in a hostile take-over - if Bain controls 51% of the voting stock - they win! In this case it would be just 15 out of 29 teams (Anaheim wouldn't count because they are in limbo between owners). The end result of legal action could very well be that the courts rule in favor of the 51% owners of the "new" NHL and the Maple Leafs, Bruins et al either get with the program or are out of the NHL and they can go play with themselves.

Some people would complain that this could never happen to the "original six" type teams but read the business pages and you will see stories of company founders kicked to the curb almost every day of the week.

Maybe the Bain Group plays under a different name like the North American Hockey League for a couple of years. They don't care - as long as the NHL name is in mothballs because of legal wrangling.

Another reason the Bain group probably doesn't want those team is because many of them purposely sold their TV rights for below market costs. Take the Rangers deal with parent MSG or the Bruins deal with NESN (of which the Bruins are part owners) for example. Bain could probably drive down the value of these teams with the new competing league and fold them back in at very reduced rates later on.

Bain probably doesn't even want those teams like the Maple Leafs and Rangers to join at first because as long as those teams aren't part of the deal and are operating as a separate competing league - then anti-trust issues melt away. You can't have a monopoly if you have competition.

I see the big payoff for the Bain group as a Hockey Channel. Once they control these teams they can partner with a Direct TV or someone like that to be the sole source for away games. The individual teams would be able to maximize local TV deals for home games but all away games would go to the league deal. This could be a tremendous source of revenue. The Bain group realizes that they don't need wide-spread appeal - just passionate fans who may be a comparatively small group but who are willing to shell out good money for good hockey.

The Hockey Channel could also get low cost content from the European leagues (don't laugh - ESPN was founded on Australian Rules Football). Maybe even broadcast an end of season showdown between the North American champion and the European champion.

Oh, the salary floor I mentioned before - the Bain group could use this as a carrot to the players association and also as a stick to cities whose fan base can't support a team. If they can't support the league minimum payroll - then the team gets moved to a city who can.

AMERICAN DIGEST SPORTS EDITOR Chris Lynch serves his own brew daily at A Large Regular, and contributes to Lynch can be reached at

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Posted by Vanderleun at March 4, 2005 8:10 AM | TrackBack
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"It is impossible to speak in such a way that you cannot be misunderstood." -- Karl Popper N.B.: Comments are moderated and may not appear immediately. Comments that exceed the obscenity or stupidity limits will be either edited or expunged.

Sounds like what we hockey fans need and want. Dump the NHL Dump the red line. Go to internation ice surfaces and rules. Go to a world play-off.

Posted by: Lou Issel at March 4, 2005 11:36 AM


Who really cares about the NHL? Player salaries are huge for what? A lousy game. Gretsky says he couldn't play today with the game being as it is.

What surprises me about Pro sports is that they keep selling tickets, and guys still pay for people they despise to make millions, but the value of sports seems to go down every year. Since it is only about money now, who bothers to remember anything fondly about it for long?

I suppose lots do, but even so, it seems psychicly dead. It has no soul even though it's still popular. There is a sense, I think, that guys love sports in about the same way they love beer commercials. You drink the beer, enjoy the spectacle a bit, and then just piss it all out after getting a buzz.

People didn't just used to love sports, they loved the Game itself. There was something about Baseball, for example, that the whole country seemed to love and respect. Now, it's just a few who care. There is so little to admire in the men or their maner.

Posted by: mark butterworth at March 4, 2005 12:09 PM

Those a great points and in the main I agree with them.

What you leave out however is the gambling aspect. Take that away and sports vanishes.

Of course, the role that gambling now plays in sports and the interest in it just amplifies your overall take on it.

You're right about Baseball especially... in a way it was the last to go. As for corruption, egos, and general bad behavior, don't even get me started on Basketball. Football would be as bad but it doesn't go on as long.

Posted by: Gerard Van Der Leun at March 4, 2005 12:36 PM

Just a couple of quick thoughts - hockey fans are among the most passionate in the world. They might not be numerous and hockey might be a boring sport to many Americans but the hockey fans would support the new league. Hell the NHL got over $2.1 billion in revenues last year and that was with lousy management.

As far as gambling - if the Bain folks make it a world wide operation - the London bookies would help out there.

The one other big revenue kicker that is being overlooked is a public offering. Once teams and power is consolidated - the Bain folks could make a public offering and really rake in the cash. Hockey fans wouldn't buy based upon projections - they would buy to hang the stock certificates on their wall over the TV.

Posted by: chris at March 4, 2005 1:15 PM

A lot of food for thought. Very interesting. This would be a great discussion over about 5-6 beers.

GVDL-How much gambling takes place re: hockey. There is fantasy football/basketball, rotisserie baseball, but the market for hockey seems weak to me. (The group I belong to couldn't get even 3 people out of 30 to commit, even before the strike).

Another thought--it would appear that the demand for hockey is fairly inelastic. You either love hockey or ignore it. There aren't a lot of converts. If you accept that premise, there's still going to be a negative cash flow problem regardless of who owns the teams.

I think the NHLPA needs to accept reality. The NHL isn't as popular as the NFL. So why should they expected to be paid higher then an NFL player?

I would be disappointed to see decades of tradition thrown in the dumper. But I'd be interested in any professional league. (Hell, I was a season ticket holder for the Cincinnati Cyclones).

Posted by: JohnO at March 4, 2005 2:04 PM

How would the hold-out teams be "out in the cold"?

Are you suggesting that the Bain group would kick the hold-out teams out of the NHL? That would be a stupid move. Without teams like the Leafs, Bruins and Rangers it would be a second rate league, and would would lose a lot of value.

Posted by: Steve C at March 5, 2005 3:49 PM

Steve - what I am suggesting is that Bain needs to acquire just 15 teams to have voting control. The rest of the teams (Maple Leafs, Rangers, Bruins) who don't agree to acquisition will be left to either sell to the new league or create a new one. Some of these teams would cave and sell - I'd guess the Bruins. The rest of the teams would be forced to play themselves or not at all (a new original six if you will).

The Bain league would be the premiere league and the remainders would be just that. I don't think that the owners planned to have this lockout just to get in a bidding war for players (which is what will have to happen to survive). What's the appeal of the Maple Leafs if all the best players play in the Bain league? If the Rangers try to corner all the talent in the original six league - then the others may say screw it and sell out to Bain.

The Bain league can always add new teams in Boston, New York, Toronto, etc. where the teams refuse to sell out.

If Bain gets 15 teams to sell - they hold all the cards.

Posted by: chris at March 6, 2005 3:24 PM

But what would Bain do with their voting control? Vote the non-Bain teams that won't sell, out of the NHL?

The non-Bain teams would be the big market, rich teams (Leafs, Red Wings, etc.) that are profitable today. They can afford to pay the best players $8-10 million per year. The smaller market teams that Bain could buy (the majority) can't afford those salaries.

Where do you think the best players would choose to play?

Posted by: Steve C at March 6, 2005 10:26 PM

Steve - I think you are wrong in saying that the big market teams are profitable. Philly is owned by Comcast and the Rangers by Cablevision (via MSG). These teams don't show a profit because they undersold their TV rights to the parent company. Other big market teams are in the same boat.

I think the players would be inclined to the Bain group because:

A: If Bain gets voting control - they probably wind up with the NHL name

B: More teams = more players = more peer pressure to play with friends and teammates

C: Bain realizes that the players are the product and would probably be more willing to spend for value. Meanwhile the current owners are trying to hammer down player contracts. If the current owners say "take a 40% cut and we'll talk" and Bain says "we'll honor your current contract" - who do you think the player goes with?

D: Some of the name players would like to stick it to some of the current owners. Do you think any member of the Bruins thinks they owe something to Jeremy Jacobs?

Posted by: chris at March 7, 2005 7:00 AM

I agreee that Bain could get the NHL name and maybe even the Stanley Cup, and those are powerful brands, but without the Red Wings, Maple Leafs, Bruins etc. it's a second rate league.

The Flyers and Rangers can hide their profitablity with accounting tricks, but they and the other big revenue teams, with their bigger fanbases, can simply afford to pay players more. These are the teams that sign the huge free agent contracts and would be happy to continue without a salary cap. It's the small market teams that are holding out.

Bain Capital's business is cutting costs in the companies they acquire. The NHL wouldn't be any different. Since player salaries are the number one expense, it's not hard to figure out where they'd start.

All this personal vendetta stuff plays well in the media, but Goodenow and the owners are smarter than that. It's all about the money.

Posted by: Steve C at March 7, 2005 12:29 PM
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