Tuesday, 14 July 2015

Cashing In

With the cost to even submit an expansion application to the NHL at $2 million of non-refundable money out of the $10 million application fee that's needed, it's probably not in anyone's best interest to look at expansion with a looming $500 million price tag to follow if you're successful. In other words, it might be better to investigate an already-established franchise to see if it is for sale. As of right now, there aren't many in the NHL that can be had, especially if one is looking for a successful franchise. It appears that the Pittsburgh Penguins, though, may be close to being sold after owners Mario Lemieux and Ron Burkle retained investment banking firm Morgan Stanley to look at selling some or all of their stake in the Penguins.

"We conduct periodic reviews of our business and, because we have received several inquiries about the franchise in recent years, we decided to engage Morgan Stanley for their insight and counsel," Lemieux and Burkle said in a joint statement in early June. "After buying the team out of bankruptcy, ensuring its long-term future in Pittsburgh and creating a strong foundation for continued success, we believe it is time to explore our options."

According to some, those options may include an $850 million price tag in a bid expected next week, turning a handsome profit after the two rescued the Penguins out of bankruptcy in 1999. Not a bad investment for a guy who couldn't get paid by the Penguins because of their bankruptcy. So while an expansion franchise would be nice for some investors, wouldn't the Penguins be more enticing? After all, they have a couple of world-class superstars in Sidney Crosby and Evgeni Malkin, some all-star contributors in Marc-Andre Fleury, Kris Letang, Chris Kunitz, Phil Kessel, and Patric Hornqvist, a new arena in the Consol Energy Center that has seen 377 consecutive home games sold out, and the land that the former Mellon Arena sat on awaiting development.

Seems like that would be the wiser investment, no?

Morgan Stanley was the same firm that helped negotiate the sale of the Buffalo Sabres to Terry Pegula in 2011 for $189 million, so it would appear that Lemieux and Burkle are due for a massive windfall in this sale. It sounds as though they may still retain a small piece of ownership in the Penguins while selling their controlling interest to a new party. After all, Lemieux's son, Austin, appears to be on the verge of making the 40-man roster cut with the USHL's Omaha Lancers if scouting reports are to be believed, and there's a chance he could play there this season. I'm pretty sure Papa Lemieux would like to take in a few of those games as well, and having to watch over the Penguins on a day-to-day basis may not allow for that freedom.

According to Forbes' valuation of NHL franchises, the Penguins ranked in at a worth of $565 million, but both the NHL and the team feel that valuation is low. Even at a conservative $600 million, Lemieux and Burkle are looking at a massive profit. By retaining a portion of ownership, Lemieux has stated he would like to retain a title and position with the Penguins as well as having access to a luxury box at Consol Energy Center. Honestly, for a guy who saved the Penguins twice and has seen three Stanley Cups with the team, I don't think he has anything to worry about. Nevertheless, it's encouraging to see Lemieux wanting to be a part of the Penguins going forward.

Reports have a potential offer being made next week for the Penguins. There could be a new owner in Pittsburgh sooner than we think.

Until next time, keep your sticks on the ice!

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