NEWSMAKER

SHUT OUT OF THE NHL

Twice in six months, Jim Balsillie has failed in an attempt to buy an NHL team. Has the league got it in for him or for Canada?

CHARLIE GILLIS,JOHN INTINI July 23 2007
NEWSMAKER

SHUT OUT OF THE NHL

Twice in six months, Jim Balsillie has failed in an attempt to buy an NHL team. Has the league got it in for him or for Canada?

CHARLIE GILLIS,JOHN INTINI July 23 2007

SHUT OUT OF THE NHL

Twice in six months, Jim Balsillie has failed in an attempt to buy an NHL team. Has the league got it in for him or for Canada?

NEWSMAKER

CHARLIE GILLIS

JOHN INTINI

Jim Balsillie, Research In Motion’s billionaire boss, didn’t have the physical skills of a great touch football player back in his college days. “He wasn’t fast,” recalls Malcolm Gladwell, the bestselling author who lived across the hall from Balsillie at the University of Toronto’s Trinity College in the early ’80s. “In fact, he was quite slow. But he was the type who would lurk back, play possum, and pick the ball off at the last second. He’d get so much joy out of playing the game a little more cleverly than anybody else.”

To Gladwell and others who’ve kept in touch with their former school chum, this was Balsillie. Smouldering ambition, adroit judgment and an uncanny ability to exploit an opponent’s weakness: the hallmarks of an outsider who, as his BlackBerry empire grew, attained legendary status in the business world for helping turn RIM into a company worth nearly $40 billion. But even as his loyal army of thumb-warriors continues to increase, Balsillie’s stalled—and, in all likelihood, failed—attempt to buy the Nashville Predators for an astounding US$238 million has raised questions. What went wrong? Is he responsible for the failure of the deal? Or was he outsmarted by the NHL’s top brass?

Last week, with his name slipping from the headlines and other suitors lining up for a shot at the suddenly desirable Predators, Balsillie found himself frozen out of the NHL, and the loser of an auction that the laws of arithmetic suggest he should have won handsdown. The 46-year-old’s offer for the team came in nearly US$50 million higher than the next richest, making Nashville owner Craig

Leipold’s decision to walk away from it all the more puzzling. NHL executives chalked the whole debacle up to sloppy paperwork. “We didn’t have a completed application for purchase,” said NHL vice-president Bill Daly when asked why Balsillie’s proposal never made it to a vote before the league’s board of governors.

But Leipold’s cold feet, according to sources, had a lot less to do with bureaucracy than hard-line opposition from within the office of NHL commissioner Gary Bettman to Balsillie’s bid—particularly his plan to relocate the

franchise to Hamilton. One source with knowledge of the transaction claims that Bettman made it clear to Leipold that no purchase contingent on relocation would receive NHL consent; the result, said the source, was that Leipold balked when it came time to sign a binding agreement. Either way, the events have raised questions that Canadian hockey fans and league owners alike might wish to ask the NHL brain trust: whose club is it anyway? And more importantly to the future of the league, if a man with a quarter of a billion dollars to spend,

a ready market to support the team and an abiding passion for hockey isn’t good enough to join their number, who is?

The answer to that last one may be a while coming, as the NHL ownership circle remains immune to the teachings of Groucho Marx. Pleased to belong to an organization that would have them as members, the billionaires, investors and corporate factotums on the NHL’s board constitute a closed society, where boyish fandom intersects with wealth and self-satisfaction. For a certain type of

businessman, the draw of this world can be irresistible. Putting aside the growth in book value of sports franchises over the past 10 years, NHL ownership offers entree into an orbit of legends, stars and potentates, from Wayne Gretzky to Sidney Crosby to George Gillett, the Montreal Canadiens owner who, along with fellow billionaire Tom Hicks, recently laid out US$ 340 million for England’s storied Liverpool Football Club. NHL governors’ meetings, while covered faithfully by Canadian sports media, bear an uncanny resemblance to group golf junkets.

Balsillie, a long-time Habs fan who named the conference rooms of RIM’s corporate headquarters after retired greats like Guy Lafleur, Bobby Orr and Gordie Howe, saw himself as a natural fit. On the surface, at least, he is. With a 10 handicap, Balsillie can hold his own on the links. And with an estimated $1.6 billion, he has deeper pockets than many currently in the club. Just last month, he pledged $17 million in support of the Centre for International Governance Innovation (CIGI)—a think tank he founded in 2001—and $33 million to create the Waterloo, Ont.-based Balsillie School of International Affairs.

Quick to spread his fortune, Balsillie isn’t one to flaunt it. In fact, until a couple of years ago, Balsillie, his wife, Heidi (the couple met around the time Jim was heading to Harvard to do his M.B.A.), and their two kids, lived

modestly in a home they bought in Kitchener before he joined RIM in 1992. Friends say Balsillie’s far-ffom-flashy lifestyle is the result of a middle-class upbringing in Peterborough, Ont. His father, Raymond, was an electronics technician. His mother, Laurel, was a stay-athome mom. And though Balsillie now lives in a somewhat more billionaire-like 5,200-sq.foot pad on 1.5 acres in Waterloo (equipped with a tennis court and an indoor wave pool), he isn’t above taking his dog for a walk.

And like a lot of middle-aged men, he still plays hockey. Unlike most of them, he hires a guy to train him. In 2001, Balsillie, a right winger in a men’s rec league, enlisted former Kitchener Ranger forward Brad Sparkes to get him tuned up for the season—he’s continued this regimen nearly every August since. The two-a-week, hour-long practices, which include skating and shooting drills, start at 5:30 a.m. Sparkes said his student showed his competitive grit by scoring a goal at a charity game in March against a team of former NHLers—including former Detroit Red Wing heavyweight Bob Probert. “Jim was in there digging the corners and often came out with the puck. He’s a real mucker.”

Balsillie is just as competitive on the golf course. But, say his friends, he’s not above the occasional prank—be it rattling change in his pocket or blowing cigar smoke in the face of a buddy before a big putt. “He’s a guy’s guy,” says Ron Foxcroft, a Burlington,

Ont.-based entrepreneur who golfs with Balsillie a few times a year. But Balsillie rarely sticks around afterwards for a drink. He often hurries off to watch, or coach, one of his kids’ games. And though he loves talking about sports between shots, he’s guarded, even among friends, when it comes to his own sports-related business—including his efforts to buy the Penguins and Predators. Getting him to even mention it, says Foxcroft, is “like opening a can without a can opener.”

Although Balsillie declined to be interviewed for this story, it’s clear he was unfazed when his attempt to buy the Pittsburgh Penguins last December was blocked by Bettman’s insistence that he not relocate the team for seven years. Six months later, he was back in the commissioner’s New York offices with a letter of intent to buy the Predators for US$238 million. (Forbes estimated the team’s value in 2006 at US$134 million, which ranks 27th out of 30 teams.) “You make me want to cry,” a happy Bettman is reported to have said, so pleased the Pittsburgh experience had not soured the Canadian billionaire for good.

But the bonhomie didn’t last long. In addition to submitting what they thought was a sufficient application for purchase, Balsillie’s team sought approval from the NHL board of governors (which is to say, the owners) to move the team out of Nashville. The reasons, the group now says, were obvious. The club’s flagging attendance had already cost Leipold US$70 million over the 10-year lifespan of the team. The numbers had scarcely improved during the squad’s best season of 2006-07 Moreover, Leipold had triggered a provision that would void the Preds’ arena lease next year should average attendance fall below 14,000 per game. “It was important to us to know what happens to Jim’s investment in the event the lease terminates,” says a source in Balsillie’s camp. “When you’re throwing all this money on the table, I don’t think that’s unreasonable.”

At the same time, the Balsillie group also set about making a new home for the team in southern Ontario. Even as Bettman claimed that Balsillie told him he wished to keep the team in Nashville, Balsillie was signing a 20year lease with Copps Coliseum in Hamilton, and racking up deposits for season’s tickets— some 14,000 at last count. The NHL’s bylaws, they pointed out, stipulate that an owner wishing to relocate a team must provide a year’s notice, and he must prove that he’s moving it to a viable market. To Balsillie’s group, all they were doing was preparing the ground in the seemingly likely event that the lease in Nashville becomes void.

The commissioner, however, was not amused. Speaking for Bettman last week,

Daly denied that Balsillie’s rather public relocation efforts had anything to do with the failure of the RIM boss’s application for board approval. But he acknowledged that they put the NHL in an awkward position, given that Nashville fans still have an outside chance of keeping the club in their city. “The team is under a binding lease,” says Daly. “We as a league never want to get into a position where we’re complicit in things that could be perceived as violating someone’s contractual rights.”

In theory, of course, the commissioner’s ire alone should not have stymied the deal. While Bettman is the face and voice of the NHL, it is the 30 governors who ultimately decide whether a proposed sale gets the league’s stamp of approval. They, presumably, would understand a prospective owner’s need to safeguard an investment. Trouble is, say associates of Balsillie, the commissioner generally sets the agenda of governors’ meetings—while wielding considerable power over the financial fortunes of the clubs themselves. Under the league’s constitution and bylaws, individual owners can get items on the agenda by providing notice and the necessary briefing material to their fellow governors. But Bettman controls that process too, and forcing a vote against his wishes would almost certainly be viewed as a challenge to the commissioner’s authority. The potential consequences of such rebelliousness are dire: Bettman, by virtue of his position, has input or outright control over a vast array of individual teams’ business, from the sales of their franchises to the boundaries of their broadcasting regions. As one Balsillie ally put it: “If you take on the commissioner, you’d better make sure you’re going to win.”

Were these considerations on Leipold’s mind when he first considered the Balsillie offer? The Nashville owner has declined to comment, saying he’d prefer to wait until he has a binding agreement in place. What is known is that he inexplicably took the position that Balsillie needed league consent for the purchase before Leipold would sign any such agreement. The effect was to cast Basillie into a kind of feedback loop: to get league approval for his purchase, he needed a binding agreement; to get a binding agreement, he needed league approval.

And the effect was to scuttle the deal. On June 25, Leipold notified Balsillie’s lawyers in Los Angeles that he no longer wished to pursue an agreement. By then, after all, one meeting of the board’s executive committee had been cancelled, and a June 20 meeting

of the full board had gone by without Balsillie’s proposal coming to a vote. Instead, Leipold opened talks with a group led by William “Boots” Del Biaggio, who wishes to move the team to Kansas City. Their offer of US$190 million fell far below Balsillie’s, but had the virtue of including an application for relocation—but not until the final nail goes into the coffin of Nashville’s arena lease.

At first glance, this appears an enormous loss to Leipold—almost US$50 million. But

‘TO GIVE US THE BACK OF THEIR HAND WHEN WE OFFER MORE MONEY THAN ANYONE ELSE IS, I THINK, INSULTING TO THE CANADIAN PEOPLE’

the financial logic of the move is straightforward. Further resistance by the commissioner would have left Leipold on the hook for another season—and possibly two—of losses. And Balsillie’s camp has no doubt that Bettman spelled that out to Leipold in the starkest terms. They claim to have proof in the form of “email traffic” of communication between Bettman and the seller, though they’re unwilling to disclose the material. Daly, for his part, strenuously denies any such interference.

Whatever the financial motive, the events

have summoned familiar accusations of an anti-Canadian bias at NHL head offices. Richard Rodier, a lawyer who has worked with Balsillie on both the Pittsburgh and Nashville bids, says the league’s apparent comfort with a bid that will involve moving the team to Missouri, rather than one that involves moving to Ontario, amounts to an attitude of contempt. “NHL hockey is Canada, and Canada is NHL hockey,” Rodier says. “That’s not to say there’s no room for U.S. expansion. Or that Sunbelt teams can’t enjoy what Canadian people view as the greatest game on earth. But to take the CBC’s $100 million a year in broadcast rights, to take money from governments in the form of infrastructure funding and tax breaks, to take money hand over fist and then give us the back of their hand when we offer significantly more money than

anyone else for one of their franchises is, I think, insulting to the Canadian people.” While Gladwell doesn’t think Balsillie is the type with the “patience for the stuffy, middle-aged landed gentry who rule the National Hockey League like a country club,” many friends don’t expect this latest setback to derail his dream of one day owning a team. “He’ll pick his spot,” says John English, a former Liberal MP who is currently heading up CIGI. “He’s like a good hockey player that way.” Until then, however, Balsillie will have to watch from the cheap seats. M