Sunday, January 31, 2010

Pens - Pirates?

OK, the hot stove league has been pretty quiet so far, and with camp right around the bend, something needs to stir up the fans. Hey, how about a possible sale of the club, switching hands from Scrooge McDuck personified, Bob Nutting, to the savior of the flightless fowl, Mario Lemieux?

The Post Gazette has had a field day covering the issue, with articles and columns by Dejan Kovacevic, who broke the story, Chuck Finder, Bob Smizik, and Ron Cook. Also chiming in are the Tribune Review's Rob Biertempfel and Kevin Gorman. It appears that Mr. Nutting better hire himself a PR man by the tone of the columnists' prose.

But whassup, besides open season on Nutting, as far as we know? In September, he had a sit-down with Lemieux and money-man Ron Burkle. What was discussed overall isn't known, but during the session, the Pen owners made a preliminary, maybe back-of-the-envelope, offer to buy the Buccos to start the dance.

The hockey guys apparently thought the proposed deal was at least worthy of a counter-offer; the Pirates never offered one and reiterated their stance that the club isn't for sale. They weren't biting. And hey, it makes sense for both sides to take that approach.

For the Penguins, it presented an opportunity to buy low and flex their marketing muscle; there is plenty of synergy between the two teams to potentially increase branding, sales, publicity, attendance, and ultimately revenues. Maybe they saw a pre-Sid the Kid Crosby version of the Penguins in the current Pirates.

The Pirates, according to Forbes Magazine, are the second lowest valued team in MLB at $288M; the league median is just a tad over $400M. So there's lots of room to grow that figure.

And that's likely the rub. The Igloo gang wants in while the price is right, and the PNC crowd would no doubt like to build the team's value before entertaining offers.

For the Pens to leak a no-result meeting that happened several months ago is nothing more than a hardball effort to pressure Nutting by stealing the team's pre-season Pirate Fest thunder and turning the glare of the fans and media on him instead of 2010.

And for Nutting to squelch the tale with a take-no-prisoners counterattack shows that he thinks the team is a couple of seasons away from becoming a considerably more valuable ticket. He can play hardball, too.

Hey, the value of the Texas Rangers in Forbes is $405M; the price they should reel in, when the ink finally dries, will fall between $520-550M, a 25% increase.

There are several reasons for the jump; media market, growth potential, performance, and the fact that Tom Hicks also has a piece of the Dallas Stars hockey team, and as part of the new ownership group can tap into that tie (though oddly, he didn't take advantage as the majority owner), all adding to Texas' value. And both sides in Pittsburgh are more than aware of that dynamic.

As much of a pariah that Nutting is locally, many analysts think that Pirates are on the right track; the next three years will bear out that opinion, one way or another.

Our thought? Where there's smoke, there's fire. With Burkle behind him, Lemieux has the financial clout to bring it off, not to mention the goodwill of Pittsburgh fans. But don't expect it to be a quick process; Nutting is at heart a good businessman, and won't consider selling until he's sure that the Pirates are at a stable value.

The team was worth $274M when he gave Kevin McClatchy the boot in 2007; he won't let it go now, when there's a chance it could increase a good bit over the coming seasons.

We think the matter of selling the Pirates will be revisited somewhere around 2012, when the results of rebuilding, for better or worse, are reflected in the team value.


Anonymous said...

I think you pretty much have it. It's all about the Benjamins. Not that there's anything wrong with that.

What gripes me a little bit is that Burkle/Lemieux are taking advantage of the apparently limitless sense of entitlement to a contending ballclub that manifests itself as Nutting hatred in so many blog comments. But hey, all's fair...

Interesting point about Tom Hicks' cross-ownership of the Rangers and Stars. Did he just not think of combining broadcasting rights? Did it not work in Dallas?

Lino Donoso

Ron Ieraci said...

Lino - In 2000, Hicks scratched plans of starting his own regional cable network and signed a 15-year deal with Fox that brought in $550 million in revenue for the rights to cable and over-the-air broadcasts of the Stars and Rangers.

It's like the Pirates and Pens deal now, except for the length of the deal (and amount). Though owned by Hicks Sports Group, the organizations are entirely separate entities. So he basically leveraged the threat of a new station into a long term TV deal, which may be what Lemieux plans to do.