Thoughts on '32 Thoughts': Friedman and Marek discuss the Senators' Sale and other items of interest
Today’s episode of the ‘32 Thoughts Podcast’ had a lot of information on the Senators’ sale process.
Asked by Jeff Marek who had emerged as the lead horse in the bid to become the Senators’ next owner, Elliotte Friedman was hesitant to provide an answer because different sources had different opinions.
“I don’t want to say anything about who’s the lead horse and who isn’t because how many times has this changed?” Friedman asked. “We say someone is the lead horse and either it changes or they’re out.”
One of the reasons Friedman believes this is because Ryan Reynolds and the Remington group were considered at one point to be the favourite earlier on in the process. And, recently, Steve Apostolopoulos was deemed to have the best chance because he was believed to have offered the highest initial bid of $1 billion.
“Apostolopoulos was the lead horse for a while and now he isn’t.
…
“I said a couple of weeks ago that this process wasn’t smooth. It was a choppy, kind of out-of-control process and now everyone is seeing it. Like, I don’t know what happened exactly with the Apostolopoulos family. There’s a guy named Mike Ozanian. He writes for Forbes. He has really good intel. He called (the Apostolopoulos bid) a joke. He said they don’t have the money and they were never a serious bidder for the (Washington) Commanders. He’s done enough reporting in the sphere of sports ownership that I listen to what he says. But, I have had people just as adamantly tell me they do have a lot of money. They can do this and anyone who says otherwise is wrong. What someone told me the biggest question was, is I guess there are three sons and I guess they all have to agree (on the purchase). But, that’s neither here nor there right now because at the moment, they’re not in.”
Friedman was referring to an Ozanian tweet that downplayed how deep Apostolopoulos’ pockets were.
Friedman then pivoted to the two parties who realistically have the best chances of landing the team.
Assuming this stays the way it is, we’re down to two ownership groups – both who have ties with the NHL. The Kimels from their time in the Pittsburgh group and obviously Andlauer still in Montreal. It is believed that the Kimel bid is larger right now than the Andlauer bid. What I don’t know is how big that chasm is. Is it a close chasm or a really long Carl Lewis-style jump chasm? I don’t know the answer to that. I don’t know how close they are.
Bruce Garrioch reported that Toronto billionaire Jamie Salter joined the Kimels’ bid and that the group submitted a new number to GSP on the weekend. If the Kimel bid is now the highest, perhaps Salter’s inclusion is what has helped push it over the top. For fans that are hoping for a robust front office that leans heavily into modern processes that include the integration of analytics, this development may be a positive one.
Over the weekend, a couple of new developments occurred that hinted at why Apostolopoulos left the process. TSN’s Shawn Simpson reported that the frustrations stemmed from “the board asking that the Steve Apostolopoulos bid pick up the tax bill for one of the girls. From what I'm told this has been a crap show.” Bruce Garrioch corroborated what Simpson had heard on a weekend hit on Montreal sports radio.
Friedman not only mentioned that this was one of the new obstacles in negotiations, but another that included some anti-dilution protection that ensures the ownership stake of the Senators will not diminish.
“A couple days before the Apostolopoulos thing got reported last week and got out there, someone told me we’ve got another problem. I said, ‘What is this?’ We talked about what we kind of mentioned on the pod on Friday that there were some new hurdles there. And, one of the issues, I believe, is the capital gains taxes that would be faced by the Melnyk family and the other thing that I was told is that there seems to be a desire to have some anti-dilution protection built in. Now, what that means Jeff is let’s just say that Melnyk’s daughters – Anna and Olivia – they keep 10-percent (ownership), okay? What apparently has been discussed is the idea that that 10-percent always stays at 10-percent. So, for example, if Andlauer or Kimel gets the team and then sells it again, there’s no danger that their percentage would drop below 10(-percent). It would always stay at 10 and I heard that that kind of thing is a big sticking point to some people. Not all, but some. The capital gains taxes, I mean, if that’s true, I don’t understand how anyone can expect the buyers to pay that. What it says to me is this, Jeff. I don’t know what the team is going to sell for. Everyone is talking about a billion dollars, but is that the team plus the real estate value of the building or the team at a billion? Whatever the case is this, there’s a $450 million debt believed on the team. Okay? And, secondly, Eugene Melnyk paid, I think, $93 million to buy the team. So, let’s just say he sells it for a billion. The capital gains taxes on that are enormous. It could be like $900 million and you have to pay the capital gains out of that, like that’s a massive number. But, that is usually on the seller to pay. I mean, I don’t know of any situations where the buyer has paid that before. Maybe it’s happened, Jeff, but I don’t know that. And so, obviously, they’re balking at this.”
Capital gains taxes are the taxes owed on the profits of a sale of an investment if they are held for at least a year. The capital gains tax rate can vary depending on income, but higher earners pay a higher percentage. Once the sale goes through, the estate would be looking at a considerable sum of money that it would owe in taxes. Knowing that, if you’re selling a hockey team that was heavily leveraged and other groups are desperate to own the team, maybe you want to do everything within your power to take home as much money as you can. As crazy as it sounds for the estate to ask someone else to cover profits lost to capital gains, does it hurt to ask? What’s the worst that someone can say? No?
**evil laughter**
The harm is that these asks can be a major turnoff for the prospective buyers. If it is the intent of the daughters to remain part of the organization as minority owners, I wonder if the Kimels and Andlauer are wondering whether it is even prudent to keep them around in any capacity.
Friedman reiterated the time-sensitive nature of this process and that information can become inaccurate quickly before dropping a bomb that the Kimel and Andlauer bids were believed to have come in at the high $800 million range.
“Again, it’s a bit of a slower process and the one thing we’ve learned is this thing can change at any second. What’s true today might not be true tomorrow, but that’s kind of where it stood. And, the other thing too is, I don’t think either the Kimels or the Andlauers were at a billion. I bet they were somewhere in the 8s, the high 8s. That’s what I bet. Now, they’ll have to go higher than that. I don’t think that’s going to get it done, but all of a sudden, we’re kind of in a weird spot again. People might think that Andlauer’s the lead horse and they might be right. People might think Kimel is the lead horse and they might be right. I’m not sure because this is a crazy process and it always changes, so we’ll just have to wait it out.”
When asked whether the NHL wants this to settle quickly, Friedman alluded to how out of control the process has become. Not surprisingly, it should not be a surprise to see the NHL target the Kimels and Andlauer as their preferred bidders. They are known entities that the league is familiar with.
“I think they’d like to get it over with in the sense that… like, when I said before that this was out of control, people argued with me and said, ‘You’re wrong.’ This isn’t to pay myself on the back or anything like that. It’s kind of the nature of the game in this business. You say things and people tell you how dumb you are. But, now you can’t argue that. Now, you can’t help but look at this process and say, ‘What’s going on out there?’ So, I think they would like this to end. Now, they know Andlauer. They know the Kimels. Apostolopoulos was a bit of an unknown to them. The Neko Sparks group was an unknown to them. Now, if it’s just those two, these are people they know and I think it gives you a better chance of closing it quicker because you’re comfortable with the groups. But again, you’ve got to get it right.”
Fatigue with this process is very real. Fans just want it over with, so we can all move on and forward with whoever buys the team. The longer this drags out, the easier it is to get cynical about this offseason and how it could be a missed opportunity to improve the quality of the organization and its roster right away.
On a completely different note, Marek and Friedman touched upon Scott Laughton’s availability and how the Flyers were generating a ton of interest in the player.
Friedman mentioned that as part of the rebuild, the Flyers certainly wanted some veterans and quality characters to help nurture their young players. As a popular player within that Flyers room, Laughton was singled out as a player the Flyers may prefer to keep, but the interest in him and what teams may be willing to give up may be too good of an opportunity to pass up.
One of the teams that is reportedly interested in Laughton is Ottawa and that interest dates back for quite some time.
“Ottawa has liked him for a long time,” said Friedman. “They have talked about him before, but I think there are other players out there.”
Contextually, I don’t know whether Friedman meant that there were other “players” or organizations out there inquiring on Friedman or whether he meant that there are literally other players out there that Ottawa could and should be targeting. Hopefully, it’s the latter because as I wrote about yesterday, Laughton’s a modest producer who doesn’t offer a ton of defensive value. And, as a player who is about to enter his 30s, there is not a ton of stuff to get excited about beyond his intangibles and character in the room.
If you have not given the analysis a read, you can read about it here.
Didn’t Laughton just win a Gold at the WHC? And remind me who one of the Assistant Coaches was? Is this a repeat of the Windsor Spitfires Syndrome?