Katz Hamilton bid just business as usual

Oilers not moving anywhere, but what's going on?

Jul 2, 2010

by Paul Marck

Oilers not moving anywhere, but what’s going on?

By Paul Marck

Now that some of the hysteria has died down about the Edmonton Oilers not being on the move to Hamilton, let’s take a closer look at just what sports and drugstore magnate Daryl Katz is up to.

First off, what we know about the multi-billionaire entrepreneur (net worth approx. $2.3 billion — same as RIM billionaire Jim Balsillie) is that as a private businessman, Katz is not required to disclose anything to anybody. That’s why it’s called private business. Katz’s $7-billion Rexall empire is not a publicly traded company, so there is no disclosure obligation whatsoever. And, if nothing else, Katz is a shrewd operator. You don’t get to his level of success by spilling the beans every step of the way.

So, it really should not come as a surprise that Katz wants to expand his Rexall Sports and Entertainment division. After all, drugstores are only sexy to a point. So Katz picked up the option on Hamilton’s Copps Collosseum — with designs on the yet unbuilt Pan Am Games stadium — when Balsillie’s option lapsed when his bid to buy and move the Phoenix Coyotes fell through. It was a pretty quiet transaction at the time. Now, time to re-up on the option before it expired July 1, and this time around Katz’s move got quite a public airing — not the least of which was viewed by many Oilers fans as a pressure move and threat to move the team, at the same time that negotiations for Katz’s downtown arena and entertainment district plan appears to have hit a wall.

Now, it is a simple fact that the Oilers will never move to Hamilton, and I would say a 99% likelihood the team will stay put forever. There will never be an NHL franchise relocation to Southern Ontario, because the lodge brothers of team owners are dead-set against it. You can hardly blame them. Move a team into hockey-hungry Southern Ontario — even lots of people there hate the Maple Leafs, too — and the lodge brothers share nothing. Locate an expansion team, and the owners stand to share the spoils of an estimated $400-million new franchise fee. At 30 teams, that’s $13.3 million apiece for a team with a guaranteed success and great natural rivalry with hapless Leafs. Besides, a franchise move would open the door to a Balsillie lawsuit against the NHL and all of its owners for dealing in bad faith about the Coyotes bid, pure and simple.

So, in roundabout fashion, this brings us back to Mr. Katz’s desire to expand his sports and entertainment empire. It is a move that makes absolutely great sense from a business perspective. Unlike the U.S., which has at least one big arena in each of the 50 states, Canada only has about a dozen similar big venues. And in the U.S., companies like AEG operate many of them. AEG, owned by magnate Philp Anchutz, who also has the Los Angeles Kings among his business interests, operates 92 facilities in the U.S. and Europe, staging 3,500 events a year. A lucrative little business, no?

There is no such similar company in Canada, but there is growing opportunity. Hamilton is the second-biggest Ontario market outside Toronto — with a population of more than 5 million to draw on within a 90-minute drive. Plus, there are new arena plans in the works for Winnipeg and Quebec City. Both cities have eyes on the prize of regaining their lost NHL franchises, ambitions that NHL president Gary Bettman is nurturing. So, it’s not hard to connect the dots.

Oilers president Patrick LaForge implied Katz’s interests as a multiple-venue operator during his off-the-cuff conference call earlier this week from Hamilton, following a meeting with city council, where the Copps Collosseum option was again secured.

Asked about the purpose of the Hamilton city hall meeting over Copps — and AEG’s role as an advisor and possible partner, LaForge said: “It’s about operating this facility and hopefully convincing AEG to join us in that endeavour, in this and perhaps other places.”

That, of course, begged the question of what LaForge meant about “other places.” Did he mean operating facilities in Winnipeg and Quebec City, and possibly other venues as well? “We may be skillful enough to do two or three at one time. I hope we do, but at this time I would not predict that.”

LaForge also said Katz’s ambitions about operating other sports and entertainment venues has been part of the master plan since he bought the Oilers in 2008. Think of that what you will. But here is an interesting footnote: The first public mention of Daryl Katz in the local media goes back to an Edmonton Journal story in 1988. Katz is mentioned as a manager of local rock bands trying for a booking at the University of Alberta. So, Mr. Katz’s fascination with the footlights has a long history.

So, that’s the business case for Katz and it’s actually pretty sound. But even LaForge admitted that the timing, with delicate negotiations are underway for Edmonton’s new arena, is execrable. And, as they used to say in Vaudeville, if you want to win applause, timing is everything.