The Truth about the Habs Organization: Financially Desperate Molsons and Investors

Analysis by BruinsUnite

As Douglas Flynn at NESN reports, things are going to be getting a little weird after this first week of playoff activity because after Thursday’s Game 1, Saturday’s Game 2, and Monday’s Game 3 in Montreal,  “the clubs have to wait until next Thursday for the second game in Montreal, with Game 4 pushed back a day because the Bell Centre is occupied on Wednesday for a Rush concert.”

The strange scheduling situation might be indicative of a hidden layer in this program, or it might just be a pleasant coincidence for the Canadiens. If foul play has occurred, the greatest beneficiaries will be already hurting investors with a great deal to lose if the Habs go down. This will be revealed in what follows.

First, let’s look at the weird series of Bell Center events that lie ahead.

Playoff Schedule Weirdness
You would think that the Bell Center is more than capable of scheduling a Rush and Lady Gaga concert around its all-important hockey team. Maybe that’s exactly what Geoff Molson has done.

The playoff scheduling situation seems beneficial for the Habs because the Bruins will have to spend an unusually long period of time in the hostile environment of Montreal. The hostility includes the fans and the media, both of which will no doubt be doing their best to discourage and distract the players. But “the Bruins aren’t likely to stay in Montreal between those games.”

They may not return all the way home to Boston, but they will look to escape some of the glare of the Montreal spotlight. Bruins general manager Peter Chiarelli mentioned that possibility during his conference call on Monday afternoon, while also downplaying the significance of the odd scheduling for the series.

“I’m not really concerned with it,” Chiarelli said. “I’ve been part of different schedules where it’s not the traditional every other day. The two-day gap between Games 3 and 4, we may bring the team somewhere else just to get out of the Montreal milieu, so to speak, the frenzy there. We’re not sure if we will or we won’t, but we’re looking at it. But as far as the two-day gap and the back-to-back following that, it’s just something that you deal with. You tailor your practices, you tailor your game plans accordingly.”

If the series goes further than the last Bruins-Habs encounter and reaches game 5,the Bruins are looking at another 2-day gap between Game 5 in Boston Saturday, April 23 and Game 6 in Montreal on Tuesday, April 26 “because the Bell Centre is booked on Monday, April 25 for a Lady Gaga concert.”

Perhaps more disconcerting, however, is that Game 7, if necessary, will be back in Boston the very next night on Wednesday, April 27.

Here is the breakdown:

Thursday, April 14 at Boston, 7:00 p.m.
Saturday, April 16 at Boston, 7:00 p.m.
Monday, April 18 at Montreal, 7:30 p.m.
Thursday, April 21 at Montreal, 7:00 p.m.
*Saturday, April 23 at Boston, 7:00 p.m.
*Tuesday, April 26 at Montreal, TBD
*Wednesday, April 27 at Boston, TBD

Flynn rightly points out that

The idea of forcing these bitter rivals to play a deciding Game 7 without a day off after what is sure to be an intense and exhausting first six games seems like exceptionally poor planning, even for the NHL.

It would be a shame to see the latest chapter in this rivalry decided by a miscue caused by fatigue. Both sides are sure to be beat up enough if it goes the full seven games without forcing them to settle it with no rest.

…The final matchup in Montreal featured Zdeno Chara hitting Max Pacioretty into a stanchion between the benches, leading to outrage across Quebec that has barely subsided a month later and a criminal investigation by Montreal authorities that remains open.

Geoff Molson, owner of both the Bell Center and the Montreal Canadiens, is no stranger to the Pacioretty incident.  He even took it upon himself to write a letter to Habs fans– a call to arms of sorts. The letter suggested that he would “play a leadership role in coordinating [a] group effort” with the other 29 team owners to finally put an end to hockey violence.

Friends with Benefits
How convenient is the current scheduling mess for the Bell Center? For the Molson family? Surely there’s no conspiracy here. After all, the Molsons don’t have pull with Lady Gaga, do they? As it turns out, they just might. A little history will help.

As Forbes will tell us, the $575 million that the Molsons rounded up to buy the Montreal Canadiens “was the most was the most ever paid to buy a hockey franchise.” Former owner George Gillett Jr. also threw in the Bell Center in the deal, as well as “a side entertainment promotion business.” The deal “made George Gillett Jr., the man on the other side of the deal, into one of the most profitable hockey investors ever.”

To make the purchase,

the Molson family needed help to outbid several interested buyers, like a group headed by Stephen Bronfman, who had hopes of using the Canadiens to build a regional sports television channel, and another led by Pierre Karl Péladeau, who runs communications company Quebecor and was searching for content for his broadcast and wireless offerings. One of the partners in Péladeau’s proposal was René Angélil, the husband and manager of Céline Dion.

You will want to keep reading.

There’s another side to the story. Half the funds used in the buyout were borrowed, and many of the obvious tactics used to bolster the team’s value were already used by the prior owner. It could be years before the deal makes financial sense.

How can a hockey team be worth $575 million? NHL franchises are generally valued at between two or three times revenue, but the Canadiens sold in 2009 for closer to four times revenue. FORBES estimates the team is worth only $408 million…

“These were not just financial investors,” explains Drew Dorweiler, who runs Dartmouth Partners, a Montreal business valuation firm. “This deal was about purchasers looking for business synergies, strategic advantages, blocking their competitors and obtaining broadcast content.”

Hard to remember, but a decade ago no one saw opportunity in the Canadiens. The team was inept on the ice and barely breaking even financially.

Then came Colorado financier George Gillett Jr.

Montreal fans were suspicious of this outsider in 2001. Had they realized part of Gillett’s attraction to the sacred hockey franchise was its usefulness as a tax shelter for the cash his other businesses were producing, there may have been a revolt. Gillett borrowed heavily, putting down $50 million or so in a $180 million transaction for 80.1% of the team and 100% of the arena.

But that’s not all the public fails to appreciate. Talk of other investors isn’t very interesting for common folk, but it probably should be: Other investors include Canadian telecom giant BCE, which invested “an estimated $47 million.” The billionaire Thomson family also invested some $19 million. “Both were joint owners of the cable outfit that has the French-language rights to Canadiens broadcasts till 2014.”

The Habs and Bell Center have one foot on the ice and the other in the media. In light of this fact, it comes as no surprise that it was a member the Canadian press that asked concerned fans to call the Montreal Police after the now infamous (in Montreal, anyway) hit on Pacioretty. There is no real distinction in Montreal to separate hockey and the media, either financially or culturally. The city is deeply rooted in its veneration of its one and only remaining ‘real’ sports team (how many people in Montreal can name Montreal’s soccer team?). By now, this is common knowledge around the world for hockey fans.

But Montreal’s enthusiasm for sports does nothing for the reality of its debt and hurting economy. Times are at least as tough for the Canadiens and the Bell Center, once we cut out the rhetoric and take into account that its owners are barely staying afloat.

…it’s unclear how Molson will boost those financials much further, since Gillett already exploited all the obvious inefficiencies. In addition, Molson is unlikely to see the Canadian currency appreciate by another 50%, as it did in the Gillett years–a boon for the Canadiens, since the team collects revenue mostly in Canadian dollars and pays player salaries in U.S. dollars. Molson boosted ticket prices this year, but the team already has the second-highest ticket prices in hockey.

In desperate times, investors will stop at nothing to avoid financial ruin. With a legion of bankers, musicians and media heads at their disposal, the Habs still couldn’t secure home ice advantage by winning games but they might just have managed to pull a few strings this playoff season. Let’s see what other surprises Montreal holds for the Bruins.

The league is watching. Any dishonest tactics used by the Montreal Canadiens will reflect negatively upon a team that has already lost much support around the league after its owner’s emotional reaction to the Pacioretty injury, expressed in a letter that essentially lays blame on league for an incident that arose in large part due to the lack of safety measures at the Bell Center which is known to be one of the most dangerous arenas in the NHL.

Nor did the organization’s popularity benefit from the reactions of its fan base, which administered several death threats to Bruins bloggers after the infamous incident. The Bruins organization even felt it necessary to inquire into the possibility that Zdeno Chara would be called in for questioning during the series, following the embarrassing series of events that started with a suggestion (which came from a member of the Canadian press) that fans call the police to have Chara arrested.

So apart from its desperation for financial plausibility, the Habs organization is currently suffering from a more profound instability that exists at the intersection of hysteria and violence. This would appear to be ironic to anyone who doesn’t know the organization very well, or to anyone who only sees violence when it is directed at the wrong team.

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Posted on April 12, 2011, in Analysis, Analysis by BruinsUnite, Boston Bruins News, Bruin Strategy, Bruins Analysis, Habs, Hits, Humor & Fun Stuff, Max Pacioretti, Max Pacioretty, Montreal, NHL Analysis, NHL Official Rules, Opinion, Players, Zdeno Chara. Bookmark the permalink. 1 Comment.

  1. The Sound of Laughter

    Very informative.

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