Professional sports franchises don’t come up for sale often — especially Canadian NHL teams — and according to a University of Guelph professor, that means there could be considerable interest in buying the Ottawa Senators.
So what kind of money does someone need to even think about buying the Sens, and what goes into a deal of this magnitude?
Ann Pegoraro, the chair of sports management at the university, said someone with deep pockets would need to buy the team, valued by Sportico at $655 million US.
“Given the rising valuations of most sport franchises, it is now common to have multiple owners,” she said in an email.
“It’s possible we might see a few groups form to bid for the Senators.”
Moshe Lander, a sports economist with Concordia University, said the logistics of a sale aren’t all that different from buying a house.
“You would not be expected to be able to write a cheque for $655 million US,” he said.
“You can go to the bank and you can try and structure a deal, where it’s with borrowed money, and that’s probably the common way to do it.”
How attractive is the team to prospective buyers?
The last time a Canadian team was involved in a sale, the team wasn’t technically Canadian yet.
In 2011, the Atlanta Thrashers were purchased and moved to Winnipeg by True North Sports and Entertainment Ltd., becoming the Jets.
In 2008, the Edmonton Oilers were sold to Darryl Katz in a deal worth about $200 million US — according to Sportico, the Oilers are worth $1.29 billion US today — a pretty good return on investment.
So it’s clear that Canadian NHL teams don’t come up for sale all that often, and can be quite lucrative — something Lander said is by design.
“What the NHL does on purpose is make sure that not every market has a team, and that creates an excess demand,” he said.
“[The NHL keeps] that desire so that it’s a toy for billionaires to play with. And there’s a lot of billionaires sitting on the sidelines saying, ‘Man, I’d love to get into the hockey game.'”
But what about the Senators would make the team attractive to buyers?
Pegoraro pointed out that according to Sportico’s valuations, the team has increased 21 per cent over last year (the biggest increase in the league) for the $655 million worth.
“With the recent [memorandum of understanding] for a new arena, they are certainly an attractive buy,” Pegoraro said.
“The supply of sports franchises for sale is limited overall, and more so in hockey, so all of these factors together make the Senators attractive.”
Lander said the “devil is in the details” when it comes to whether the arena deal is a positive or negative for a prospective buyer.
How much money — if any — will come from government? How quickly can work get started?
“For now it’s promising, but it’s not enough to add value and it’s not enough to attract buyers,” he said.
What can a buyer expect in terms of return on investment?
Pegoraro said the average NHL franchise is worth $1 billion right now, which is roughly equal to five times their annual earnings.
Using the NHL’s Nashville Predators as an example, Pegoraro said the returns can be quite high.
The team sold 15 years ago for $175 million and according to Sportico’s most recent valuations, is now worth $775 million.
Lander said most teams don’t make much profit in the year-to-year operations of the team, and the real value is discovered when a team is sold.
“It is possible that the new owners of the Senators will see an increased valuation for the club within a year of ownership,” Pegoraro said.
“Sustaining the growth will be key as the new ownership moves forward with relocating the team [arena] and building their legacy as NHL owners.”
Single owner or group?
Pegoraro said that with the ever-rising cost to attaining a sports franchise, having multiple owners is common now (hello Ryan Reynolds!).
So would it make sense to bring on a celebrity at one or two per cent of the total value or does that complicate things?
“Celebrities bring excitement, attention, new audiences and form a co-branding like relationship,” Pegoraro said.
“We have already seen the Ottawa fans embrace Ryan this past weekend.”
She used the examples of Justin Timberlake and Lebron James owning small percentages of the National Basketball Association’s Memphis Grizzlies and Liverpool of the English Premier League, respectively.
Not to mention Reynolds already co-owns a team with Rob McElhenney of It’s Always Sunny in Philadelphia: Wrexham AFC of the National League in England, the fifth tier of soccer in that country.
How long will this take?
Pegoraro said deals of this magnitude could take a while to complete, with many factors to consider.
Each league will have its own processes for finalizing a sale, though she said the belief is bidding will start to heat up in the coming weeks.
If that happens, a sale could be done by the new year, but it’s a hard question to answer.