Look for a sparse lineup to buy the Hurricanes
Another southern U.S. hockey franchise came up for grabs over the weekend, with the long-time owner of the Carolina Hurricanes now officially looking for a minority partner to share the joy, and pain, of trying to sell hockey to the NASCAR nation.
Stories like this tend to set hearts aflutter in Winnipeg and Quebec City, hockey hotbeds that desperately want to return to the big leagues. But a quick look at the economics of the Hurricanes - a team that has been far more successful than the woeful Phoenix Coyotes - shows that while fans may be excited, there's very little about NHL ownership to attract hard-headed business types.
The Hurricanes' current owner is a software tycoon by the name of Peter Karmanos Jr., and he has hired investment bank Allen & Co. to help find a 50-per cent partner in a team that won the Stanley Cup four years ago. (The stake is up for sale after Mr. Karmanos's former partner in the team passed away two years ago.)
Forbes magazine's oft-quoted survey on the value of sports franchises pegged the price tag on the Hurricanes at $177-million (U.S.) in a January survey, up an impressive 5 per cent from the previous year. However, not even Forbes' editors appear to put much faith in these numbers. In an item Tuesday on a possible sale, Forbes national editor Michael Ozanian said: "Despite playing in a great building (RBC Center), I believe he will only get about $85-million for half the club. The folks in North Carolina really don't care about hockey."
Here's where the economics of hockey get wonky for anyone who actually cares about making money on a team - and backers of a potential Winnipeg franchise include Thomson Reuters chairman David Thomson, who is deeply committed to preserving his family's wealth and cares very little for hanging out with stay-at-home defencemen and the rest of the hockey crowd. Mr. Thomson owns the land and arena that would be home to the second coming of the Winnipeg Jets.
In the past, pro sports owners were willing to subsidize teams on an operating basis, in return for massive capital gains when they eventually sold a franchise. In a world where the price of joining the NHL owners' club went up, year after year, the league had a compelling story to sell.
Those days are gone. Mr. Karmanos bought the Hurricanes in 1994 for $48-million. Any gains he stands to make now from selling a stake in the team will be more than offset by the money that Mr. Karmanos lost as he propped up the Carolina franchise over the past 16 years. In Phoenix, of course, the last owner dropped an estimated $300-million before heading for the exits.
With thin corporate support and a relatively small regional broadcast audience to drawn on, the economics of NHL hockey in Winnipeg or Quebec City don't look a whole lot better than the business case facing owners in North Carolina, or Arizona. Small-market cities are going to struggle with the NHL's current realities, including the big-ticket price tag on a team. They can't count on capital gains when they sell.
Anyone other than a sports-mad, ego-driven player will steer clear of paying the price that the NHL is asking for admission. That's a description that clearly doesn't apply to Mr. Thomson - but may fit a certain Research In Motion executive.
IPO Woes
Initial public offering buyers took a beating Tuesday, with shares in newly public companies slumping as they made their debut in the midst of a broad stock selloff.
With nervous investors retreating from small-capitalization stocks, shares sold in a $100-million IPO from oil company C&C Energia are down sharply from what investors agreed to pay for the company last week. C&C, which is developing oil properties in Colombia, sold stock at $8.50 a share and is now changing hands at $6.90. FirstEnergy Capital led the offering.
Income play Homburg REIT sold $160-million of units last week at $10 each, and the trust is now at $9.70 in its first day on the Toronto Stock Exchange. The Homburg underwriting was led by TD Securities.
These IPOs are starting to trade in the wake of a week that saw stock benchmarks fall 5 per cent, and a shift out of the perceived risk of small-cap stocks into more stable companies.
This slump comes as Porter Aviation tries to get a $120-million initial public offering off the ground - the financing was delayed last week, with the airline planning to update its paperwork with results from the most recent quarter.
See Andrew Willis's Streetwise Blog at ReportonBusiness.com
