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Old 10-29-2008, 11:34 PM   #1
mesaSteeler
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Default Sacked by the Market

Sacked by the Market
By STEFAN FATSIS
http://www.nytimes.com/2008/11/02/sp...ts&oref=slogin

In 1933, a boxing promoter and horse-racing handicapper from the North Side of Pittsburgh named Art Rooney paid $2,500 for a franchise in the young National Football League. The team wouldn’t play for, let alone win, an N.F.L. championship in its first 40 years.

But then came Franco Harris and the “Immaculate Reception,” Terry Bradshaw and Lynn Swann and four Super Bowl titles in six seasons. The Pittsburgh Steelers earned a national following and a reputation as an elite organization. The year before his death in 1988, Rooney composed a letter on team stationery to his five sons. “Time is starting to run out on me,” he wrote. “I would like to reach some kind of an understanding so that there will be no questions or complications regarding my estate.” Rooney left each son $200,000 and an equal share of his 80 percent stake in the team.

This structure served the Steelers well. But as the N.F.L. became richer and its franchises more valuable, the league decided to begin holding its old-line families to the same standards as the newcomers who had paid hundreds of millions of dollars to join the club. The Rooneys didn’t have a single shareholder with at least 30 percent — violating a league rule enacted to ensure that owners have their own money on the line and teams have one main decision-making voice. The brothers’ interests in racetrack casino operations ran afoul of the N.F.L.’s strict anti-gambling guidelines. And they were in their late 60s and 70s and needed to plan their estates.

After months of meetings and negotiations, four of the brothers — Art Jr., Tim, Pat and John — participated in a conference call on Sept. 18. Lawyers and investment bankers outlined two proposals. One was from Stanley Druckenmiller, a billionaire New York financier who has ties to Pittsburgh and loves the Steelers. He offered to pay about $540 million in cash for the brothers’ 64 percent stake, establishing a price of $840 million for the franchise. The other proposal was from the fifth and oldest brother, Dan, the Steelers’ chairman and the only one involved in team operations. Dan proposed borrowing money and recruiting investors to buy 10 percent of each brother’s share. The proposal didn’t identify investors or supply bank commitment letters. It valued the Steelers at about $800 million.

When the four brothers convened on their conference call, however, the financial markets were imploding. Earlier that week, Lehman Brothers had gone belly up, and the government had bailed out American International Group. The brothers’ advisers warned them that the market for sports franchises might be depressed for six months to three years. They noted that capital-gains taxes were likely to increase under an Obama administration. In short, if the family didn’t sell now, it might pay later.

MAKING BIG DECISIONS in the sports business is a perilous enterprise these days. Want to sell a team? Forget what Forbes says your franchise is worth. Want to buy a team? Good luck getting the financing. The gold-plated N.F.L. recently had to pay a premium to renew its credit line for stadium construction and other debt. Formerly high-flying companies are — surprise, surprise — reconsidering their roles as Nascar billboards and underwriters of PGA Tour events. That luxury suite that seemed indispensable just a few months ago doesn’t look quite so essential now.

Professional sports have tended to weather economic troubles well. Games are an escape for fans, in person and on television. But the sports business wasn’t nearly as big or as sophisticated or as leveraged during the Depression or the 1970s as it is today. The Internet bust and post-9/11 economic turmoil were short-lived affairs; to the industry, they were little more than a glancing blow to the chin. Though sports still have safety nets — multibillion-dollar TV contracts and the perpetual allure of owning a team, to name two — the business finds itself, like the rest of the economy, in uncharted territory.

“I suspect we’re in a position where we throw out all of the old sayings and perceptions, and probably all of the old behaviors as well,” says Rick Horrow, a consultant to sports teams and leagues for more than 20 years. What might that mean? Across-the-board cost-cutting. Steady, perhaps lower, ticket prices. A decline in corporate spending and, hence, revenue, which could lead to smaller player payrolls and — uh, oh — labor tension. Some owners might have trouble meeting debt payments on acquisitions and stadiums. No one would be shocked to see a big-league franchise in bankruptcy court.

It was against this backdrop that the Rooneys were trying to make a decision. But the brothers couldn’t reach a consensus. Some didn’t believe that Dan’s offer was tenable — or adequate. Some weren’t ready to sell to an outsider, even one offering to cut each of them a check for $135 million. Some weren’t sure the N.F.L. would approve Druckenmiller as an owner if Dan didn’t endorse a sale. Some wanted to wait for the economy to recover and shoot for a higher price. So, to use a football term, the Rooneys punted.
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Old 10-29-2008, 11:34 PM   #2
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Second half of article

IF SPORTS ARE different from other businesses, football is different from other sports. A total of six franchises in the National Basketball Association, Major League Baseball and the National Hockey League combined have had the same ownership since 1980. The N.F.L. boasts 14 such teams, including five whose ownership traces to the dawn of the league: the Chicago Bears (1920), the Green Bay Packers (1921), the New York Giants (1925), the Arizona Cardinals (1932) and the Steelers.

Why has football’s old guard resisted the temptation to cash out? Partly because the N.F.L. has been, to put it mildly, a pretty good business. But it’s also because the league’s business model has endured. Despite occasional intramural squabbles, the all-for-one, one-for-all ethos that fueled the N.F.L.’s explosive growth remains an article of faith among owners. “The old guard is the ballast that allows new owners the time and experience to recognize the value of acting in a collective manner,” says Marc Ganis, the president of Sportscorp, a Chicago consulting firm that has worked with N.F.L. teams.

But as the old guard gets older — Ralph Wilson of the Buffalo Bills turned 90 last month — the N.F.L. faces a sensitive question: should it intervene to keep dynastic owners in place? The league waived a rule against joint control so the Mara family, in 1991, wouldn’t have to sell the Giants. The Maras are beloved for historic reasons — their 1961 decision to let the commissioner negotiate a league-wide television contract was a pivotal moment in N.F.L. history — but also because they have run a stable franchise. It’s not clear the league would bend the rules for the Bears, whose ownership structure could raise issues in the future. The team is controlled by Virginia McCaskey, the 85-year-old daughter of the N.F.L. founding father George Halas. When she dies, no single heir would meet ownership guidelines. “Rules are rules,” Bob McNair, the owner of the Houston Texans, told the trade publication Sports Business Journal last year.

THERE’S NO DEBATE over the Rooneys’ place in history. Dan Rooney began working for the Steelers as a boy and came to know the men who had gathered at a Hupmobile dealership in Canton, Ohio, in 1920 to form the N.F.L. He has helped negotiate every labor contract since 1976. He championed a rule requiring teams to interview minority coaching candidates. He forged a mutually respectful relationship with the city of Pittsburgh, not once threatening to move the Steelers if the city didn’t build a new stadium. He’s in the Hall of Fame. Plus, as Rooney himself will point out, the Steelers have the N.F.L.’s best record over the last four decades (he’s close; it’s actually since 1972).

“There is a respect for the intangibles; you need people like that,” says the former N.F.L. commissioner Paul Tagliabue, who, at the league’s request, worked with the Rooneys and their bankers on resolving the team’s ownership dilemma. “But I don’t think if the team was consistently 4-12 those other things would matter.”

The simple solution would have been to accept Stan Druckenmiller’s money. The N.F.L. could have added another titan of business to its ranks. And the Rooneys could have exited the league after 75 years, wealthy, proud and confident they were selling to an honorable man. Druckenmiller, who runs the hedge fund Duquesne Capital Management, presented his bid in February and, despite the economy’s subsequent trip south, never lowered it. He offered to let Dan Rooney, who is 76, run the team for at least two years and promised a permanent role for Dan’s son Art, 56, the Steelers’ president. Druckenmiller, though, withdrew his offer the day after the brothers’ conference call. Says Dan’s brother Art Jr.: “All you do now is second-guess yourself.”

In the end, Dan Rooney decided that he wanted to keep the team for himself and his children and had the backing of loyal league executives. Commissioner Roger Goodell, who described Rooney as a “mentor” and “a father figure” in a preface to Rooney’s autobiography last year, is now personally overseeing the effort. Rooney, along with his son Art, needs to raise nearly $450 million in debt and equity in order to acquire the majority of his brothers’ shares.

An adviser says Dan and Art Rooney are making progress. But even if they do manage to cobble together a deal, hurdles remain. Three-quarters of the league’s 32 teams would have to approve a transaction. While every owner admires the Rooneys, not every one is likely to back a highly leveraged sale of a Rust Belt franchise in the teeth of a recession in advance of an expected labor showdown in 2011.

So the Steelers and the league are left attempting, in the words of one lawyer involved, “a high-wire act in an alternative universe.” There are the N.F.L.’s rules. There’s the economy. There’s the powerful history. And there’s the family itself. The five Rooney brothers have 29 children to account for, not to mention an identity wrapped up in the franchise. For proof, try lifting “Ruanaidh” (Gaelic for Rooney), a family memoir that Art Jr. self-published earlier this year. The book runs 483 pages, or some 400,000 words.

“Your emotions are, You never want to get out of the Steelers,” Art Jr. told me a few weeks after the September conference call. “But you know the facts. The grim reaper is right down the street.”

Stefan Fatsis, a former reporter for the Wall Street Journal, is the authoer of “A Few Seconds of Panic: a 5-foot-8, 170-poundm 43-year-old sportswriter plays in the NFL.”
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Old 10-30-2008, 04:35 AM   #3
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Default Re: Sacked by the Market

Thanks nice read.
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Old 10-30-2008, 09:27 PM   #4
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Default Re: Sacked by the Market

Quote:
Originally Posted by galax steeler View Post
Thanks nice read.
You are welcome.
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