March 3 - Does $3.5 Billion Get You The Pucks?

So what is the NHL worth? Bain & Company, a highly respected Boston-based LBO shop, thinks the number is around $3.5 billion. That is what the firm has offered to pay for the league and all of its 30 franchises. I am assuming that for this money, Bain and their investment partners will get everything: the TV rights, the arena leases, the merchandising revenue, Hockey night in Canada, some sticks, a few pucks and a below-market cost dental plan. Hell for $3.5 Billion they probably want Gretzky to throw in his wife.

The Sportshaolic worked on Wall Street in his former life so he thought it might be instructive at this point to gauge the merits of the bid. With that said, what is the league worth? I guess the first assumption that has to be made is that Bain will be buying a league with some sort of buy-in from the players. Why is this the case? Because there is no way Bain can make this work under the old cost regime. The league has argued that its clubs have lost $500 million over the past two seasons, but lets assume they are exaggerating and the real number is 250. There is no way Bain is going to plunk down 3.5 billion for a league that losses $125 million each year. Without a new labor agreement, some would argue that the league, as a business enterprise, is worthless.

Ok, so Bain is going into this assuming that they can get the players to show up and play under a new salary structure, i.e. a cap. In order for this to work for Bain, the league would have to turn from a $125 million dollar loser into at least a $125 million dollar annual winner. The reason for this is simple. Lets assume Bain plunks down a billion of its own money in this deal and finances the rest with debt. They are going to want at least a 15 percent return on their investment (probably more like 20 percent) and that means roughly $150 million in net profits per year. Is that doable? That is the million dollar question. Is this league, run under a new cost regime, capable of generating those kinds of profits? I guess the boys in Boston think so and I suspect they believe that the real earnings power of the league is much higher. And why is that? Well, if that $150 million is correct, Bain's $3.5 billion dollar bid is probably high since it means the firm would paying roughly 24 times earnings for a enterprise that can only be generously described as a slow grower. That seems a bit rich to the Holic. With that said, the Sportsaholic believes the bean counters at Bain probably think they can shut some losing franchises and pull closer to $200 million out of the league each year. Under that scenario, Bain would be paying something closer to 16 times earnings and that makes a lot more sense. The question I have is whether the league, sans labor strife, has this kind of earnings power? That is the key question and only its resolution can confirm whether Bain's bid is fair.

The Sportsaholic wants to be frank at this point. There is almost no chance this proposal is seriously received. There are just too many complicated questions to answer. For instance, would local management just cease to exist? How would current franchise owners be compensated? Who would manage each team? Would the Stanley Cup be renamed the Bain Trophy? Regardless, there is one very important message that Bain sent yesterday and I am sure it is resonating with some team owners. The message reads: NHL team owners are sitting on assets that have depreciated greatly and will continue to do so at an accelerated pace so long as the this labor strife continues. Look no further then the bid price. Bain has offered $3.5 for the whole shooting match. There are 30 teams so this equates to just $116 million per team. Before the work stoppage, Forbes estimated that the leagues 30 teams were worth close to $5 Billion. So Bain's proposal marks a 30 percent markdown from just a year ago.

There is no doubt that some owners, such as those in big market towns like Detroit and Toronto will dismiss this proposal out of hand, but there are probably a handful of owners out there who wouldn't mind selling. Hey Disney just sold the Ducks for less then $70 million and I am sure that Disney is not the only disgruntled owner. Many others would probably jump at a $100 million dollar take out bid. The Sportsaholic agrees that yesterday's proposal is probably nothing more then a shot over the bow, and a weak shot at that, but it does send a signal. Hockey is on the precipice of ruin. Owners have plunked down small fortunes on these franchises and yet they cannot find a way to run them profitably. The cost structure is currently irreconcilable with the league's revenues and until the ledger can be straightened out, the league's assets will continue to depreciate. Who knows, a year from now Bain may march into league headquarters with a $2.5 billion dollar bid and the votes of 20 owners already in hand.

Do you remember that girl in high school whose looks were a bit controversial. During the school day, this damsel looks a bit tame and demure, perhaps laden down by a poor selection of eyewear and a pair of uninspiring cargo pants. When guys are sitting around ranking the school's top girls, she gets some mention, but nobody thinks she's going to start on opening day. In otherwords, she is serviceable. She would be a credible prom date, but guys aren't exactly trading up in March for a chance to snag her during the early "asking" period. But the girl at hand is not always so demure. She has a wild side and when she flaunts her alternative image, she suddenly moves up the charts. With contacts and a pair of tight jeans, the girl in question is not longer a utilitywoman. In fact, she is outstanding and guys are now scrambling to grab her attention. You know who this girl is? Her name is Georgia Tech. Last night against Wake Forest, the Yellow Jackets were the hot girl in the first half. The Jacket offense was clicking, albeit against a very porous Wake defense, and even the disappointing BJ Elder was getting into the act. More importantly, GT was playing solid defense, holding Wake guards Chris Paul, Justin Gray and Ty Downey to 3-12 combined shooting. GT led by eight at half and that was only because Wake was getting every call in the world. Well, in the second half, for some unexplained reason, our fair girl reverted back into a utilitywoman. Wake came out and blitzed GT on both ends of the court. GT guard Jarret Jack kept the Jackets in the game, but Ty Downey and Wake's token Lithuanian were too much for GT to handle down the stretch. People should keep an eye on Downey - he is Wake's most reliable player in the clutch. Unfortunately for GT, the Yellow Jackets are much closer to being the ordinary chick then the beautiful one. At times, like in the first half last night, they look pretty damn nice. But unfortunately, they are proving that it's just a tease. Like the rest of the ACC, the Jackets don't play great D and Luke "Carrot-top" Schenscher simply does not give them the physical presence they need inside. They are good enough looking to get invited to the prom, but they are certainly not in the running for prom queen. Some may disagree, but the Sportsaholic doesn't think Wake is contender for that crown either.

If you like offense, you should stay as far away from Athens Georgia as possible since you won't find it a Georgia Bulldog basketball game. Last night, the Bulldogs put up only 38 points in a blowout loss at home to Florida. This is coming off a 37 point abortion against Vanderbilt over the weekend. This is not some recent phenomena. The Bulldogs have scored more then 60 points in conference play only four times this year and they have failed to reach 50 on seven separate occasions. Leading scorer Levi Stukes is shooting 37 percent from the floor and he is not alone. The Bulldogs are only shooting 40 percent form the field and 63 percent from the line as a team. In fact, there is only one guy on the club who is shooting 50 percent from the field and his name is Dave Bliss. That is not a misprint - the Bulldogs actually have a guy on the team named Dave Bliss, although I will add there is no relation to the disgraced SMU coach. The Georgia debacle can be traced back to one man and one man only: Jim Harrick. In case you don't remember, Harrick was fired at Georgia after only two seasons. The reason for the firing: charges of academic fraud, fake expense reports and allegations of sexual misconduct - many of which have been confirmed. Harrick was the one who brought Tony Cole onto the Athens campus and let him play even though he knew the kid had sexually abused women in the past. Hey, I'm all for second chances, but Harrick gave a college scholarship to a sex offender. Selling dope is one thing, but I got to draw the line at rape? What's next - a place on the team for the Hillside Strangler? As a result of these actions, Georgia got slapped with four years of probation, although the team is eligible for tourney play. Thanks to Jim, the program is a wreck and that eligibility allowance is irrelevant. Thanks for the memories Jim!

What is this fascination people have with former Jet running back Lamont Jordan? For the past four years, Jet fans have pined for this guy, flooding radio shows with praise for the former Terp. The chorus to this song reads as follows: the Jets are squandering a great asset by not getting the multi-talented Jordan on the field more often. Like a Kelly Clarkson single, I thought this was a catchy tune although a bit overplayed. The book on Jordan is he is a big guy with a great burst. In limited time over the past two years, he has shown an ability to make big plays and hold on to the football. The same cannot be said for at least half of the League's starting running backs. Jordan's only problem is he played behind Hall of Famer Curtis Martin and there is no telling when Martin is going to slow down. The Jets finally ran out of time this year since Jordan's contract expired and he expressed an intent to test free agency. Fearing his departure, Jet fans clamored for the team to slap a "franchise" tag on Jordan, which in essence would have kept him in New York for another year at $6 million dollars. The thought here is that Martin may be done in another year and Jordan could then be handed to the keys to the car. Are these fans serious? Six million dollars for a backup running back is crazy. Sure, Jordan is the perfect candidate to replace Martin, but who knows when Curtis will be finished. That could take a couple years and there is no way under today's salary cap rules you can pay a guy $6 million a year to carry the ball a hundred times. So despite the misguided outcry from many fans, the Jets did the smart thing and let Jordan go. And who was there to pick him up? It looks like Al Davis and the Oakland Raiders. While not finalized yet, the Raiders are reportedly offering Jordan $27.5 million over the next five years to play in Oakland, with about 15 million guaranteed over the next three years. This is a pretty staggering contract for a running back who has never cracked a hundred carries in a single season. The Raiders are obviously enamored by Jordan's size and speed, but is he an every day back? Can he handle the wear and tear of a 300 carry season? He just may turn out to be a stud, but $15 Million is a lot to pay for a look. The Raiders, meanwhile, have now thrown a ton of money into their skill positions. In less then a month, they brought in Randy Moss and his huge contract, signed Jerry Porter to a big contract and made this deal with Jordan. Plus, they have a guy at corner who is guaranteed $10 million this year and wants nothing to do with the team. And what is the downside to this largesse. Well, it means that there are few resources available to improve a defense that was just about the worst in the league last year. Congratulations Al, you have just constructed a slimmed down version of the Indianapolis Colts. But Davis doesn't care since this is going to be the most exciting six win team in history. Commitment to Excellence? Commitment to fiscal lunacy is more like it.

If you like bad basketball, you should have tuned into the Hornets-Bobcats game last night. These teams have collectively won 24 games, a figure that does not exceed that of the lowly-Kincks. The question I pose is what would happen if you could merge these two teams into one, move them to Birmingham and rename them the Birmingham BumbleCats. This is what the team would look like. I guess Speedy Claxton would get the start at point, although Dan Dickau would have a word to say about that. Man child J.R Smith would get the default start at the shooting guard spot. Up front, you would have Brezec, Okafor and P.J. Brown. Perhaps Brown comes off the bench and the BumbleCats go with journeyman George Lynch. Gerald Wallace is probably a better player then Lynch, but I can't have a black guy named Wallace start for a team based in Alabama. That could cause some problems. Could this team play .500? I think its unlikely. In order to cross that threshold, I think you would have to throw the third leg of the Southern stool into the mix. If the BumbleCats had access to Atlanta Hawk Al Harrington, I think they could be a playoff team. Harrington and Okafor isn't a bad forward tandem. In case any of you care, the Hawks lost by 22 last night to the Jazz. That is not a misprint. For God's sake, its time for the Hawks to move back to St. Louis. The South just wasn't made for the NBA.