When news broke last Thursday that Mario Lemieux and Ron Burkle were putting the Penguins up for sale, there was a mix of confusion, outrage, and concern over why they (and specifically Lemieux) would do such a thing. People took it as an affront that he would “give up” on owning the team.
The fact is that since Opening Night in 1984, Lemieux has answered the bell time and time again for this franchise. He’s done more for this franchise than can ever be monetarily quantified. He’s been carrying around a lot of this franchise’s baggage; he’s earned the right to set them down.
Lemieux didn’t get into owning the Penguins out of the goodness of his heart — he got into it because the previous owners deferred over $26M of his salaries that he was owed. Howard Baldwin and Roger Marino were inept as owners, producers of terrible action movies, and spent money more recklessly than a drunken sailor on shore leave. When the team eventually filed for bankruptcy in October of 1998, they owed $114M of debts, with $26M to Lemieux on his deferred 7 yr/$42M contract signed in 1992.
As per this Washington Post article from 1999, Lemieux sat down with his attorneys and agent to draft a business plan on how to raise capital and purchase the team. Various investors, both large and small, were brainstormed and courted to contribute to the consortium. Ron Burkle was quickly brought on board for a $20M+ investment. But even with all this cash inflow, some in Pittsburgh felt that Lemieux would just be waiting with his hand out as one of the larger creditors. So to counteract that argument, Lemieux folded his own $26M owed into $20M of equity in purchasing the franchise, essentially forgoing $6M of upfront wealth for a large share of the team.
In June 1999, Lemieux/Burkle’s group were awarded ownership of the Penguins for $107M. Now keep in mind that the NHL of 1999 was a much different landscape than it is now. ABC/ESPN/ESPN2 signed a 5 year deal worth $600M ($120M per year), which wasn’t a lot for each of the then-27 teams to split. By contrast, the Pens signed a deal with Fox Sports Pittsburgh in 1999 for $9M/year for just the local rights.
The Civic Arena/Mellon Arena was reaching the end of its service life, so a campaign immediately started to get a new arena for the Penguins, too. However, much like his career at times, Lemieux suffered from poor timing and bad luck — just a few years earlier, there was a bloody-knuckle fight over publicly funding yet another arena for a sports franchise. So the Penguins hooked their wagon to teaming up with a casino (Isle of Capri) to help offset the funds needed for the arena. When the Barden Group (Rivers Casino) got the license instead of Isle of Capri in 2006, things looked grim.
Presumably as a scare tactic, Lemieux and his Super Friends met with Kansas City in January 2007 about potentially moving the team there. Magically, two months later the Penguins and government officials agreed on a funding plan and the Pens signed a lease that keeps them in Pittsburgh from 2009 to 2040. The Consol Energy Center opened in 2009 and the value of the franchise skyrocketed from the $107M the Lemieux/Buerkle group bought it for to the Forbes’ estimation of $565M in November 2014. Just using some quick gorilla math, Lemieux’s $20M gamble is going to turn into a $106M return for him.
Whether the lease is ironclad or not is up to a lawyer billing out at $400/hour. What is a fact is that Pittsburgh is a keystone market for the NHL now. The presence of stars like face-of-the-NHL Sidney Crosby and Evgeni Malkin are a big reason why, but the attendance and TV ratings are extremely strong, too. Add in the fact that Consol Energy Center is a jewel of an NHL facility and it all adds up to the conclusion that the NHL simply won’t allow a potential owner to move this franchise.
With three franchises in Gary Bettman’s failed Sun Belt expansion experiment floundering (Florida 66.1% attendance capacity, Carolina 67.4%, Arizona 77.9% and always in financial trouble), why would the NHL allow a new owner to move Pittsburgh and their 101.3% capacity? My personal, second-tier thinking opinion is that the recent re-alignment of the divisions was done with potential re-locations in mind already.
- Arizona to Las Vegas — no effect on division
- Carolina to 2nd Toronto team — no effect, separates two Torontos
- Florida to Quebec — no effect on division, perfect rival for Montreal
And finally, Pittsburgh itself is in a better place than 1999. The streets aren’t lined with gold, but there is a more diverse economic environment to pull potential investors from, in addition to the plethora of well-heeled individual investors. Already Todd Reidboard of Walnut Capital has kinda-sorta thrown his hat into the ring. Others will make their presence known in short order.
But don’t lament the loss of Lemieux. He’ll probably stay on as either a minority owner or some type of goodwill ambassador employed by the team. After 31 years, let’s allow this version of Atlas to take the world of Pittsburgh off his shoulders.