Forbes spotlights Molson purchase of Habs

This stuff has somewhat less of an on-ice impact in a salary cap NHL than it did before the lockout, but Forbes Magazine’s annual survey of team valuations was published on Monday and the Canadiens are ranked as the third most valuable franchise in the NHL at $408 million, behind only the Maple Leafs $505 million and the Rangers $461 million. The Canadiens were ranked third last season as well, but their franchise value has jumped from $339. That’s a 20 percent leap in value and that’s the biggest increase among all NHL clubs in the past year.

The reason for the leap has much to do with the Molson family’s $575
million purchase of the Habs from George Gillett, the most ever paid for
an NHL team. Of course, if the Leafs are actually sold by the Ontario
Pension Plan to Rogers Communications, as The
Toronto Star reported on Monday
, the supposed $1.3 billion price
would dwarf the Canadiens sale price.

As part of their package of stories on the current state of the hockey business, Forbes devotes an additional article to the Habs sale, in which Gillett pocketed $340 million, nearly seven times his original investment.

That’s a lot of money, and Nathan Vardi, who wrote the Habs article explains how an NHL team could be worth so much, selling at four times its revenue when most other teams are woth between two and three times their revenue. By comparison, he notes “a few months after Molson closed on the Canadiens, the
Tampa Bay Lightning were sold for $93 million, $113 million less than
the amount paid for them in 2008.”

Vardi explains that prior to the sale, Gillett did a superb job maximizing the Canadiens value by taking advantage of the previous neglect by Molson Breweries, from whom he bought the team in 2001. They hadn’t even bothered to sell naming rights for the arena, Vardi points out. Among Gillett’s major steps to increase revenue was forging the deal with RDS for exclusive French language TV rights and turning the Bell Centre into one of the busiest arenas in North America with concerts and other events.

Another factor driving up the price was competition the Molson family faced to buy the Habs when Gillett sought to sell them, specifically from “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.”

The Molson family upped its bid by partnering with a number of others, including BCE, which wanted to block Péladeau, and the billionaire Thompson family, who are joint owners with BCE in RDS. “These were not just financial investors,” Drew Dorweiler, president of Montreal business valuation firm Dartmouth Partners, told Vardi. “This deal
was about purchasers looking for business synergies, strategic
advantages, blocking their competitors and obtaining broadcast content.”

But the combination of the high price tag, the fact that half the purchase price was borrowed (from the Quebec Provincial government, the Solidarity Fund FLQ, and others) and that Gillett had already done a very good job developing new revenue streams, makes Vardi state, “It could be years before the deal makes financial sense” for the Molson family and fellow investors.

Geoff Molson declined to be interviewed for the Forbes story but Vardi acknowledges the strong fan support of the Canadiens, the strength of the Canadiens brand, the league-leading attendance, the steady cash flow  and the fact that they went deep into the playoffs last season and generated additional revenue are important positives in favor of the new owners.

“The Molsons are a patient bunch,” he writes, recognizing they’ve been in business since 1786. “That should help.”

There are other interesting stories in the Forbes package, including one on the NHL’s highest paid players with an accompanying slide show (Vinny Lecvalier, Roberto Luongo and Sidney Crosby being the top three; Scott Gomez ranks seventh).

There’s also a story on which GMs get the most bang for the buck, comparing success on the ice with the payrolls they are given since the salary cap was instituted. That story also has a slide show. Nashville’s David Poile is ranked number 1. The field was limited to GMs in their jobs for at least four years of the five-year
period and who remained active into this season, so Habs GM Pierre Gauthier was not considered and neither was Bob Gainey.

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