The Real Deal Behind the Bain Offer

By now you may have heard about the $3.3 BILLION bid by a group headed by Bain Capital to purchase the entire NHL.

Some folks have said this deal would never happen because teams like the Bruins and Maple Leafs would never sell. Others, like Eric from Off Wing Opinion, see this as a possible PR move by Bain and Game Plan.

I see this as a Trojan horse. Bain is as smart as they come when it comes to takeovers and turnarounds. They see real value here. There is a product with a large base of loyal consumers but there is also a management in place that has consistently shown that they don't know what they are doing. I don't think Bain really wants to buy all 30 teams.

I think they might just want to buy just 15-20 teams.

If Bain is able to make acceptable offers to 15 to 20 of the teams who might be willing to sell and these teams agree to the terms - then suddenly Bain controls the voting in a hostile take-over of the NHL. Some teams like the Bruins, Rangers, Red Wings, Blues and Maple Leafs will probably never agree and to sell and what will result will be a prolonged legal battle. This is probably just what Bain wants.

Remember there was no hockey this year because of an owner lock-out. If the owners in the Bain group said to the players association that they were willing to not only accept the last offer they made but also throw in both a salary floor (I'll explain this later) and payroll exceptions for players from teams not part of the new Bain group - then I bet the players come on board. Remember that the players probably have no love lost for the Jeremy Jacobs and the other owners who just locked them out and canceled hockey for the entire year. Also remember that the NHL owner's current plan is to continue to low ball the players and field replacement players in the fall if need be.

So if the Bain group can get 15-20 teams - they can have a season next year with the same familiar players meanwhile the teams who voted against the Bain Group would be out in the cold. Some have suggested that these hold-out teams (Bruins, Rangers, Maple Leafs, etc) go back to an "original six" type deal but they would probably have to do so without both the NHL name (the Bain group would have that name tied up in litigation) and without many of the fan favorite top stars.

Bain specializes in take-overs and turn-arounds. They aren't doing this for the heck of it. They smell blood and a chance to make some real cash. Normally Bain specializes in breaking unions (my friend Tim who is very active in Union affairs hates them for this) but this time they would be busting the owners.

Think about it - just like in a hostile take-over - if Bain controls 51% of the voting stock - they win! In this case it would be just 15 out of 29 teams (Anaheim wouldn't count because they are in limbo between owners). The end result of legal action could very well be that the courts rule in favor of the 51% owners of the "new" NHL and the Maple Leafs, Bruins et al either get with the program or are out of the NHL and they can go play with themselves.

Some people would complain that this could never happen to the "original six" type teams but read the business pages and you will see stories of company founders kicked to the curb almost every day of the week.

Maybe the Bain Group plays under a different name like the North American Hockey League for a couple of years. They don't care - as long as the NHL name is in mothballs because of legal wrangling.

Another reason the Bain group probably doesn't want those team is because many of them purposely sold their TV rights for below market costs. Take the Rangers deal with parent MSG or the Bruins deal with NESN (of which the Bruins are part owners) for example. Bain could probably drive down the value of these teams with the new competing league and fold them back in at very reduced rates later on.

Bain probably doesn't even want those teams like the Maple Leafs and Rangers to join at first because as long as those teams aren't part of the deal and are operating as a separate competing league - then anti-trust issues melt away. You can't have a monopoly if you have competition.

I see the big payoff for the Bain group as a Hockey Channel. Once they control these teams they can partner with a Direct TV or someone like that to be the sole source for away games. The individual teams would be able to maximize local TV deals for home games but all away games would go to the league deal. This could be a tremendous source of revenue. The Bain group realizes that they don't need wide-spread appeal - just passionate fans who may be a comparatively small group but who are willing to shell out good money for good hockey.

The Hockey Channel could also get low cost content from the European leagues (don't laugh - ESPN was founded on Australian Rules Football). Maybe even broadcast an end of season showdown between the North American champion and the European champion.

Oh, the salary floor I mentioned before - the Bain group could use this as a carrot to the players association and also as a stick to cities whose fan base can't support a team. If they can't support the league minimum payroll - then the team gets moved to a city who can.