´ Steel Curtain Rising: Steelers Sale/Ownership Restructuring Still Muddled

Screwed by Bloggers Polling, Again

Folks, it looks like Blogger's polling has decided to stop working. We had a good poll on the Steelers draft which suddenly got dropped to zero.

Guess you get what you pay for on these free platforms. Thanks to all those who voted.

Saturday, October 18, 2008

Steelers Sale/Ownership Restructuring Still Muddled

The Steelers ownership restructuring was in the news again last week, and although new facts came to light, the situation is as muddled as ever.

Dan Rooney gave a presentation to the NFL Finance Committee at the league’s spring meetings, but was reticent to comment on what he disclosed.

The Tribune-Review scoped the Post-Gazette and secured an e-mail interview with Tim Rooney, who indicated that the sale/restructuring might very well carry over into 2009, despite the fact that NFL commissioner Roger Goodell has said that he wants a fast-time table for resolving this issue.

There's a reason why the news coverage of the Steelers ownership restructuring has been so convoluted -- the Rooney brothers themselves do not know what they want to do.


What a Long Strange Trip Its Been

News of the Steelers ownership restructuring took Steelers Nation by storm in early July, and has captivated its attention through a series of meandering shifts, twists, and turns.

In late September it seemed like the story might be moving to a close. Wall Street billionaire Stanley Druckenmiller, who had been approached by the four Rooney brothers about buying their shares, had given the brothers an unofficial deadline of September 19th to accept or reject the offer. It seemed like things were coming to a head: Either Dan Rooney was going to buy out his brothers or Stanely Druckenmiller would.

Then came word shortly before the meeting that Art Rooney Jr. was "not ready to vote." Then sources indicated that the Rooney brothers "might" be interested in shopping their shares to other buyers. The four brothers held a conference call on the September 18th, and there was "not sufficient support" for Druckenmiller's proposal.

Neither was there sufficient support to accept Dan Rooney's counter offer, although that offer had not been rejected (reports conflict, but Rooney has made at least one other offer to his brothers.)

Family Differences...

Significant differences exist between the Rooney brothers over what they want to do. It is known that John Rooney, the youngest of the five, pleaded for his brothers to accept Dan's offer. Art Jr. is about the only brother who has spoken regularly to the press about this matter, and he has said he does not know what he wants to do, although the Tribune-Review reported that he was having difficulty with selling the team to an outsider.

That leaves Tim and Pat, both of whom have resigned their positions on the Steelers Board of Directors. Tim reportedly torn up Dan's initial offer. The Tribune-Review reported that:


Tim Rooney said the brothers won't sell to a buyer outside of the family before giving Dan Rooney a chance to match the offer made to them. It quoted Rooney as saying, ‘I believe Dan has a right of first refusal with all my brothers,
whether he has one legally or not.’
One does not have to look too closely to read between the lines here. Tim is all for keeping the team in the family, as long as he doesn’t have to accept less money from Dan.

He said, She said

One of the interesting things about this story has been trying to dissect who is saying what. Art Rooney Jr. is the only party that speaks to the press regularly, although Tim has answers questions via email. The McGinley family has also spoken with the press, but generally only to confirm that they're on the sidelines.

The stories about this issue have generally fallen into two categories. Ones that say that the Rooneys are going through a difficult process, but still remain committed to family's historic role in the team.

The second variety of stories talk about "a family feud," playing up family rivalries and seemingly petty tensions.

Steel Curtain Rising suggested a number of weeks ago that Stanley Druckenmiller was responsible from this disparity.

It appears Steel Curtain Rising was wrong. After the Rooney brothers rejected his offer, Druckenmiller spoke with the press, and his comments indicated that he was sensitive to the desire to keep the team in the Rooney family.

It now seems clear that the source of the conflicting stories are coming from inside the Rooney family itself.

What about the Race Tracks? (Again)

The most attention-grabbing piece of news emerging this week was the fact that Dan Rooney still controls his shares of the family racetracks. In late August it was reported that Dan Rooney had divested his shares in the race tracks, and this piece of news signaled that the pieces were moving toward an end-game.

The Tribune-Review reported that Dan Rooney only offered assurances to Roger Goodell that he would divest his shares of the racetracks should he win control of the team.

One of the maddening aspects of this story is the fact that no reporter has put together any sort of an estimate on the net worth of Dan Rooney’s shares of the race tracks, although it has been reported that the Yonkers track has revenues of upwards of a billion dollars a year, and that the race tracks are far more profitable than the Steelers

This would perhaps be a key component of any restructuring deal. The more Dan’s racetrack shares are worth, the more cash he has to buy out his brothers. Could Dan simply swap equity in the race tracks for his brother’s equity in the team?

We don’t know, and the press has been remiss in reporting on this possibility from the get-go.

Perfect Storm

When the story broke during the summer, Art Rooney Jr. dubbed the ownership restructuring “the perfect storm.” At the time he was referring to the NFL’s mandate to separate Steeler assets from gambling related-assets, and need for aging Rooney brothers to get on with their estate planning.

Little did he know when he made that statement that the stock market was about to crash, and the US was about to plunge into its greatest financial crisis since the Great Depression.

One of the things that made Druckenmiller’s offer so appealing was that he was prepared to pay each Rooney brother $134.4 million. In cash, at once.

If one or more of the Rooney brothers really did nix the Druckenmiller deal in hopes of finding a better offer, he’s really got to be kicking himself now. There were never too many people out there who can simply write checks for 537.6 million dollars, and suffice to say there are fewer of them today than there were a month ago.

Dan's Dilemma

The financial crisis also puts Dan Rooney in a crimp. He has said that he and Art II have lined up partners to help finance the deal, implying that Dan’s objective was not to put 80% of the team under his and Art II’s ownership. He said at one point that his partners would “have names that you recognize.”

Yet he has not named any of those partners, not even to the NFL. This could be due diligence on his part, but that fact that no reporter has uncovered any information on who Dan’s potential partners might be is interesting.

One has to figure that the value of the racetracks plus whatever cash Dan and Art II have set aside bring them fairly close to being able to buy out one of their brothers. So if Dan’s goal is to reach 51% that would mean he’d need at around 160 million more, (plus partners willing to put up and the other 243.6 million for the remaining 29% of the team.)

Under normal circumstances one would have to figure that Dan and Art II could secure financing for the remaining 160 million.

These are not normal circumstances.

Steel Curtain Rising has second hand knowledge of a non-sports related company that has a BILLION dollars in cash (that’s billion with a ‘B’) that was denied a short term loan for a million dollars (that’s million with an ‘m.’) And while there still are plenty of rich people in the world, in this climate how many of them are going to plunk down 243.6 million to be a minority owner in a low-yield investment into an NFL team based in a shrinking market….?

Beyond that, these back of the envelop calculations are based on the 840 million that Druckenmiller assessed the team at, but we know that at least one of the brothers, probably Tim, wanted more.

Roger Goodell might want a fast timetable for resolving the Steelers ownership restructuring process. Given the discord between the Rooney brothers and the current financial climate, it appears unlikely that he will get what he wants.

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