Monday, July 16, 2007

The middle man

Hockey fans were essentially introduced to Jim Balsillie in December of 2006.

At the time, he was in the news as the Canadian billionaire about to purchase the Pittsburgh Penguins, and Balsillie made his coronation official by going on Hockey Night in Canada, giving a candid interview with Ron MacLean via satellite from the backyard of his home in Waterloo, Ontario.

We knew the BlackBerry; we didn't yet know Mr. BlackBerry.

That appearance on network television, answering questions on a forum for millions of hockey fans, wasn't the norm for Balsillie. As we've seen since, he's never been front and centre when it comes to the media coverage of his bid for an NHL franchise in Hamilton.

And that's where Richard Rodier comes in.

As part of some work I was doing on the Never in Hamilton package last week, I was sifting through the photo archives, looking for any kind of visual representation that would work with the stories. And one search for various entries in the 'Hamilton' + 'NHL' theme, going back five-plus years, turned up a grainy, black and white head shot of Rodier.

What on earth did Rodier, Balsillie's middle man and the lawyer now serving as the face of his bid for the Nashville Predators, have to do with bringing NHL hockey in Hamilton in 2002?

From The Globe and Mail on Jan. 24, 2003:
A Toronto-based group has submitted an all-cash bid to buy the Ottawa Senators and plans to move the team to Hamilton.

Richard Rodier, a corporate lawyer in Toronto, submitted the bid yesterday on behalf of HHC Acquisition Corp. Rodier declined to provide details of the offer or say who else is involved. But he said the bid has been fully financed and he and Hamilton city officials have discussed using Copps Coliseum.
HHC Acquisition Corp.? That's a new one. Or at least when it comes to the most recent history involved here.

You see, Rodier fronting bids for NHL teams isn't anything new. It was even later reported in The Globe that this HHC group had attempted to make a play for the Buffalo Sabres during that team's bankruptcy — although those overtures, and those made regarding the Senators, were never taken all that seriously in the press or the hockey community at large.

After all, who was this crackpot Rodier making all-cash bids? And what kind of takeover could a mystery company no one had ever heard of make?

We now know who Rodier is, and just what sort of financial heft he has in his corner. We also know that Balsillie's been in the market for an NHL team going back long before his play for the Penguins, even if his ties to the process have been kept relatively secret.

Here's a quote from Rodier from that same 2003 article:
"In addition, we have considered the issues regarding any territorial rights issues that may exist and we are confident that we have a strategy in place to address those issues," he said, declining to provide further details.
There's been a plan in place for years, and it apparently includes some sort of circumvention of the rights issues regarding the Toronto Maple Leafs. (As an aside, current Senators owner Eugene Melnyk was approached regarding moving that team to Hamilton prior to his taking ownership in Ottawa, and it was only when Gary Bettman stepped in that Melnyk backed off that relocation.)

If you include the plays for the Sabres, Senators, Penguins and Predators, Balsillie's been lining up for troubled NHL franchises now for a lot longer that has been reported to this point.

And you can bet he'll be at the front of the line for whoever bottoms out next.

Labels:

14 Comments:

At 10:47 AM, July 16, 2007, Anonymous Lyle Richardson said...

Nice piece of work, James. You'll get your own column in the G&M yet!

 
At 11:59 AM, July 16, 2007, Anonymous Anonymous said...

So..he's a four-time loser and we're all sure that Bettman is incompetent?

 
At 12:12 PM, July 16, 2007, Anonymous Baroque said...

He hasn't "lost" anything yet. He has tried four times to aquire a hockey team and hasn't been given the opportunity to lose as an owner.

 
At 12:24 PM, July 16, 2007, Anonymous Frank said...

James, your article give proof that Rodier was linked to HHC Acquisitions (HHC), but no where do you provide proof that Balsillie was involved in HHC. Therefore, your allegation that Basillie has been trying to acquire teams for several years is unfounded.

It is quite possible that Balsillie learned or Rodier's past experience with HHC and asked him to work for him on his bids for Pittsburgh and Nashville.

Have you checked the provincial corporate registry to see who the directors of HHC were?

 
At 12:42 PM, July 16, 2007, Blogger James Mirtle said...

The entire purpose of HHC was to ensure Balsillie's (and perhaps others') anonymity, and while I can't give definitive proof he was the one behind the moves, it's not hard to connect the dots.

I'm prepared to make that assumption based on what I know. Balsillie was denying he was part of the Pittsburgh bid right up until he signed the deal.

 
At 1:17 PM, July 16, 2007, Anonymous Anonymous said...

James, you should get a G&M lawyer (or any lawyer, really) to pull the Articles of Incorporation and other such documents for HHC Acquisitions. Should give you some insight into who the directors are, and that may help with the dots.

 
At 2:24 PM, July 16, 2007, Anonymous snafu said...

Excellent piece of work, James!

Is TB's little conspiracy theory right after all? You'd think a guy could buy a team after all those attempts if he really wanted a team. Buffalo even is within driving distance.

 
At 4:12 PM, July 16, 2007, Anonymous Frank said...

James, if you did some research you would see that Balsillie was in no financial position to make an all cash offer for a hockey team in January, 2003.

At that time RIM stock had fallen to $10 from a high of $55 in 2000, RIM had just posted its second straight year of increasing operating losses, they were up to their asses in law suits, and they were in the process of laying off 10% of their work force.

RIM did not start to take off until late 2003 going to $100 by 2005 and currently $225 plus.

Prior to joining RIM in 1992 Balsillie was a CA/MBA for a major accounting firm in Toronto. He come from a family of modest means. He made all of his wealth from stock options, only in the last two years. Therefore, he was in no financial position to buy a hockey team in January 2003.

Therefore, he probably wasn't the driving force behind HHC

 
At 4:18 PM, July 16, 2007, Blogger James Mirtle said...

Which is why, at that point, they were looking to bring in heavy hitters like Melnyk to invest in a team in Hamilton. But the information I have has Balsillie linked to HHC going way back, regardless of his bankroll.

 
At 5:54 PM, July 16, 2007, Anonymous Gerald said...

He made all of his wealth from stock options, only in the last two years.

Actually, Frank, even at that he has not truly "made his wealth yet.

At last count, his wealth consisted almost entirely of RIM shares (11.5 million last I checked). He has been issued options, but he appears to acquire and keep.

Where did the notion come from that he has ever made all cash offers? Certainly this one is not.

 
At 11:27 PM, July 16, 2007, Anonymous Frank said...

Good points Gerald - as usual. Yes, there is a big difference between paper worth and liquid worth - the years 1987 and 2001 are deeply seared into my memory!

With regard to all cash purchases, what is being referred to here is NO vendor take back financing, NO vendor minority equity participation and NO swap of shares with one of the purchaser's companies.

Of course any cash purchaser will probably have 40% to 50% of first charge financing, and perhaps more in secondary charge financing, and is probably contributing no more than 50% of his own money to the deal.

In any event, 11.5 million shares at $236 is a lot of paper worth - $2.715 billion. Even if we assume Balsillie borrowed a portion of this to purchase his shares on the way up, and assume potential tax liabilities on the unrealized capital gains - I'm sure his net worth (on paper) has to be somewhere in the $1.5 billion range.

Now let's assume he buys the Nashville franchise for US$235 million or lets say for Cdn$250 million (rounded) and then lets say he has to spend $250 million to renovate Copps and fund one time start up costs, we are looking at a total investment of $500 million. Assuming 50% debt financing, Balsillie would have to put $250 million of his own money into the deal - or about 17% of his net paper worth. This could be accomplished by selling his shares or borrowing further against them or a combination of both.

But now lets go back to the start of 2003 when he was alleged to be the main guy behind HHC. This is just a guess but lets assume his RIM shares at the time totaled 7 million at $10 giving him a gross paper worth of $70 million. Again, deducting debt to acquire the shares and unrealized tax liabilites his net paper worth was about$40 million.

Now lets say the Ottawa franchise (sans building) was worth about Cdn.$100 million at the time. Assuming 50% debt financing, the purchaser(s) would have to put $50 million of their own money in the deal.This assumes they were going to rent Copps as is, so no capital was needed for a building.

Now if Balsillie invested 20% of his net paper worth (RIM shares)
into the franchise, this would amount to at most $8 million which would make him a 16% partner.

Even this amount of investment is unlikely as given the difficulties RIM was facing at the time it would have been very difficult for the Co-Chairman to file with the Securities Commissions that he was selling 20% of his shares without causing the stock to "crater". And given the "tech collapse" just two years earlier it would have been difficult and costly to borrow further against his own shares to raise the cash.

Therefore if Balsillie was involved with HHC it was probably only as a minor investor - within a much larger group.

 
At 11:29 PM, July 16, 2007, Anonymous Frank said...

Good points Gerald - as usual. Yes, there is a big difference between paper worth and liquid worth - the years 1987 and 2001 are deeply seared into my memory!

With regard to all cash purchases, what is being referred to here is NO vendor take back financing, NO vendor minority equity participation and NO swap of shares with one of the purchaser's companies.

Of course any cash purchaser will probably have 40% to 50% of first charge financing, and perhaps more in secondary charge financing, and is probably contributing no more than 50% of his own money to the deal.

In any event, 11.5 million shares at $236 is a lot of paper worth - $2.715 billion. Even if we assume Balsillie borrowed a portion of this to purchase his shares on the way up, and assume potential tax liabilities on the unrealized capital gains - I'm sure his net worth (on paper) has to be somewhere in the $1.5 billion range.

Now let's assume he buys the Nashville franchise for US$235 million or lets say for Cdn$250 million (rounded) and then lets say he has to spend $250 million to renovate Copps and fund one time start up costs, we are looking at a total investment of $500 million. Assuming 50% debt financing, Balsillie would have to put $250 million of his own money into the deal - or about 17% of his net paper worth. This could be accomplished by selling his shares or borrowing further against them or a combination of both.

But now lets go back to the start of 2003 when he was alleged to be the main guy behind HHC. This is just a guess but lets assume his RIM shares at the time totaled 7 million at $10 giving him a gross paper worth of $70 million. Again, deducting debt to acquire the shares and unrealized tax liabilites his net paper worth was about$40 million.

Now lets say the Ottawa franchise (sans building) was worth about Cdn.$100 million at the time. Assuming 50% debt financing, the purchaser(s) would have to put $50 million of their own money in the deal.This assumes they were going to rent Copps as is, so no capital was needed for a building.

Now if Balsillie invested 20% of his net paper worth (RIM shares)
into the franchise, this would amount to at most $8 million which would make him a 16% partner.

Even this amount of investment is unlikely as given the difficulties RIM was facing at the time it would have been very difficult for the Co-Chairman to file with the Securities Commissions that he was selling 20% of his shares without causing the stock to "crater". And given the "tech collapse" just two years earlier it would have been difficult and costly to borrow further against his own shares to raise the cash.

Therefore if Balsillie was involved with HHC it was probably only as a minor investor - within a much larger group.

 
At 12:06 AM, July 17, 2007, Anonymous Anonymous said...

http://www.dundasstarnews.com/dsn/news/news_702843.html

Here's your proof he's part of HHC.

 
At 9:45 PM, July 21, 2007, Anonymous Anonymous said...

Richard Rodier and HHC were in the news in Hamilton for years, and Jim Balsillie was always rumoured to be the main guy behind the group.

I am pretty surprised that most members of the media have acted as if Rodier, and especially Balsillie, made their first appearance on the scene with the attempted purchase of the Penguins.

 

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