Bain Sweetens Offer for NHL

Bain and Co. has upped their offer for the NHL to more than $4 billion (hat tip Off Wing Opinion).

Ask yourself - what is the NHL? At its core it is an umbrella business and brand name under which 30 franchises operate. In essence the NHL is no different as a business than a Burger King or Dominoes Pizza. Bain is expert at maximizing profits at such operations (Bain owns substantial stock in both Dominoes and Burger King).

Publicly Bain is saying it is an bid for the entire NHL (thus the $4 billion plus figure being bandied about) but I wouldn't be surprised if this is cover for Bain's true mode of attack. Bain is probably approaching individual owners and working from a list that has some who would definitely sell for the right price, some who might sell at the right price and those who are not selling no matter what. The less you hear about this bid in the press - the more that is probably going on behind the scenes.

The way I see it - Bain wants to gain voting and operational control over the NHL by purchasing 15 or more franchises. This will allow them to streamline the business operations of the NHL and maximize profits. I don't think they need to buy all 30 franchises - in both the Dominoes world and the Burger King world there are both corporate owned and privately owned franchises. The privately held franchises (I see teams like the Red Wings and Toronto in this group) would have to follow agreed upon operating procedures and branding guidelines just like an owner of a local Burger King.

Here's my overview of how the deal could come together:

1. Bain purchases 15 or more franchises to gain voting control over the NHL.

2. Bain then sets up a new corporation that dictates the operating and marketing guidelines for the independent franchises (in the best case Bain would own 100% of the franchises but I don't see that happening). The guidelines include a payroll floor but not a ceiling - this should be sufficient for the NHLPA. Owners of independent franchises would receive stock in the new NHL corporation so that they would share in the wealth of the new way of operating.

3. Teams would be able to keep home gate receipts, monies from home concessions and broadcast rights to home games. The broadcast rights for road games would be owned by the NHL and would be used to form a new Hockey Channel (similar to what both MLB and the NFL have done). In addition - the NHL sells the rights to broadcast one game a week to the CBC in Canada and ESPN in the US. These contracts would include X number of playoff games plus the Stanley Cup. The new NHL could even partner with ESPN where ESPN would provide the air time - the NHL the product and they would split the ad revenue. The Hockey Channel with the regular season road games could be a bonanza for the new NHL.

4. Cities would be put on notice that franchises that are not supported at the gate are in danger of being relocated or eliminated. Just as Burger King doesn't operate franchises just so the locals can enjoy a Whopper - so too the NHL feels no responsibility to operate a franchise at a loss just so a city can have pro hockey. The folks from Bain would make this a true business - not just a hobby for some rich owners.

5. Merchandising would be split three ways - with a portion going to the team of the item being sold (say a Bruins jersey is sold - so a percentage of the sale goes to the Bruins), a portion going to the NHLPA if a player's name or likeness is used (say if the Bruins jersey said "Thorton" on the back) and the remainder going to the new NHL corporation. This arrangement would keep everyone happy.

I have said from the start that Bain is serious in this bid. You have not heard the last of the takeover bid by Bain for the NHL.