The Sale of the Pittsburgh Penguins and a two car funeral
With the Pennsylvania Gaming Association set to award the sole gaming license for the Pittsburgh region Wednesday, the future of the NHL’s Penguins a key to the Isle of Capri’s casino bid took a dramatic step backwards Friday evening when Canadian billionaire Jim Balsillie announced he had decided he was no longer interested in buying the Penguins.
Statement from Mario Lemieux: “Jim Balsillie delivered a notice of termination Friday, and it is our understanding that he has stopped negotiating with the National Hockey League to get the necessary consent to buy the Pittsburgh Penguins.
While these developments create significant uncertainty, the Penguins organization will re-evaluate our situation after the Pennsylvania Gaming Control Board makes the decision on the awarding of the Pittsburgh gaming license.
What is clear is the best way to assure that the team remains viable and in Pittsburgh is to award the gaming license to the Isle of Capri.”
Statement from NHL Commissioner Gary Bettman: “Friday’s development was unfortunate. If the Isle of Capri is not granted the license on Wednesday, then an already difficult and volatile situation will be aggravated. It is imperative that the Penguins have a new arena on economic terms that make sense for the franchise for the team to remain in Pittsburgh.”
Balsillie and Lemieux announced an agreement in principal to purchase the Penguins on Thursday, October 5. The announcement of the purchase coincided with the Penguins season opener at the Mellon Arena, the oldest facility any NHL franchise in playing in. Built in 1961, the arena features few of the amenities NHL franchises need to survive economically.
The same issues SBN raised in an Insider on October 7 needs to be mentioned once again. Who exactly is managing the sale of the Pittsburgh Penguins? Is it Bozo the Clown? Why did the Pittsburgh Penguins hold a major press conference on July 28 to announce the sale of the franchise, only to see the sale blow up in their collective faces? Who exactly did the due diligence to determine Sam Fingold’s real interest in the Pittsburgh Penguins? And why should anyone have believed Jim Balsillie was going to able to complete a sale that another billionaire Sam Fingold couldn’t take over the finish line?
Well those words proved to be prophetic; evidently Balsillie like Fingold either lost interest or wasn’t prepared to accept the terms and conditions set by the National Hockey League for whoever ends up the hapless owner of the beleaguered NHL franchise.
According to The Globe and Mail, Canada’s TSN the complete breakdown in the proposed sale to Balsillie was in the NHL’s insistence regardless of the decision the Pennsylvania Gaming Association announce Wednesday the National Hockey League as a condition of sale was going to force Balsillie to keep the team in Pittsburgh. If the Isle of Wright’s casino bid is accepted their plan includes building a $290 million arena and handing the keys to the arena over to the Penguins. If Isle of Wright’s bid isn’t accepted, there is another concept that has been suggested.
A so called Plan-B to keep the Penguins in Pittsburgh was floated in mid September. Plan B includes: The company (one of the two other companies – the successful bidder) to contribute $7.5 million a year for 30 years, the Penguins $8.5 million up front and $4.1 million per year, and the state $7 million a year through a slots-backed fund, all toward the new facility. There also is $26.5 million in state funds for land acquisition and site preparation in Uptown, adjacent to Mellon Arena.
As much as it has been discussed, it makes no sense when you closely examine the plan. The other two bidders have each made definitive economic commitments to community groups in Pittsburgh, groups that are backing the other two bids based on the promises made. Is it realistic to expect either group to make a $225 million contribution above and beyond what they’ve already committed to? It’s been clear from the beginning, the only casino bidding group committed to building a new arena is Isle of Capri.
What if anything can be read into Balsillie’s 11th hour decision to abandon his interest in buying the Penguins? However, in trying to determine what could have forced Balsillie to change his mind, none of what happened Friday can be considered good news for the Penguins future in Pittsburgh. When Balsillie signed a letter of agreement to purchase the Penguins he had been aware as Fingold had known if the Isle of Wright are successful Wednesday the Penguins face a good future in Pittsburgh.
Pittsburgh has to be considered an established NHL market having being home to an NHL franchise since 1967. The Penguins won back-to-back Stanley Cups in 1992 and 1993. Pittsburgh is a good sports town, and with the Pirates playing their games during the summer months, the Steelers during the fall, the Penguins are the only game in town during the winter. In the not too distant future Gary Bettman and company will be forced to deal with four or five franchises that face uncertain long-term futures in their respective markets. Its unreasonable to believe if Balsillie or Fingold honestly believed the Isle of Wright would be the winning bid they would have walked away from owing one of the best young NHL teams, in a hockey city, playing in a new arena built with someone else’s money.
That leaves two realistic possibilities – the Isle of Wright bid is doomed to fail or upon doing their due diligence both businessmen (Fingold and Balsillie) came to believe the Isle of Wright’s plan to build an arena for $290 million can’t be accomplished.
The proposed arena voters in Sacramento overwhelmingly rejected on November 7 would have cost $540 million. The Dallas Cowboys earlier this week announced their plans to build a $1 billion stadium. The New York Yankees and the New York Mets have broken ground on stadiums that will each cost in excess of $550 million. The bottom line, the financial bottom line – the costs associated with building a state-of-the art sports facility has increased dramatically in the last six months and certainly a great deal since the Isle of Wright announced their $290 million arena plan more than a year ago. Its probable whatever arena plan the Isle of Wright have proposed no longer meets the needs Fingold and Balsillie believed they needed to make the Penguins economically viable in Pittsburgh.
The other possibility is Balsillie wants nothing whatsoever to do with Plan B, believes the Isle of Wright’s bid will fail and has no interest in providing significant funding for an arena in Pittsburgh. In other words if the Isle of Wright bid fails he wanted to be able to move the Penguins, an option the NHL wasn’t prepared to offer him. Mario Lemieux wants to sell the Penguins for $175 million. It’s reasonable to believe any business person who pays that much for the Penguins gets an arena he believes will offer him all of the amenities he needs to succeed.
What next than for the sale of the disaster known as the sale of the Penguins. The name that will be on the top of everyone’s list will be Mark Cuban.
“I already know that not creating my own ownership group to buy the Penguins will go down as a huge mistake. There are only so many hours in the day, and I didn’t have the time, or the expertise in hockey to do it right. My mistake.” Mark Cuban wrote on his blog on November 2 a month after Balsillie had signed his letter of agreement to purchase the Penguins. Did those words mean anything; is Mark Cuban a man of his word? Penguins’ fans are hoping and praying he meant what he said. If Mark Cuban believes he made a mistake he can now correct that error in judgment.
“You may or may not be an NHL fan, but if you are a fan of greatness in the making, watch the Pens. Malkin, Sidney Crosby, Jordan Staal, Marc-Andre Fleury, the oldest of the 4 is about 20 years old. All have super star qualities. Crosby and Malkin? They will not only remind Pens and NHL fans of Mario and Jaromir Jagr, but could have them wondering whether watching them play together is what watching Mario and Gretzky playing together would have been like.” Cuban added on his blog.
The analogy of the two car funeral. The optics of the sale of the Penguins is laughable. In less than five months the National Hockey League and the Pittsburgh Penguins has not once, but twice blown up in the faces of those involved. There is no excuse whatsoever for those involved with the sale of the franchise to have ever allowed what has taken place.
Either the NHL and the Penguins were to eager to accept Fingold and Balsillie (clearly once those men did their due diligence they realized they’d be making a big mistake or the sellers are so desperate they’ll accept anyone interested in buying the team. Bad enough it happened once, inexcusable it took place a second time. It borders on amateur hour, and yes the Pittsburgh Penguins and the NHL actions in doing their due diligence are so terrible they couldn’t organize a two car funeral.
For Sports Business News this is Howard Bloom