Katz: EIG "fractured" at point of Oilers' sale
Former EIG shareholder Bruce Saville comments on Oilers owner, new arena
|Oilers owner Daryl Katz, June 2008 (Photo by Andy Devlin / Edmonton Oilers Hockey Club)
"The EIG knew and I knew that the key to Oilers' sustainability was a new model and a new arena," Katz said. "I stepped up. Nobody else would. I stepped up with two goals: to ensure the Oilers' long-term sustainability in Edmonton and to turn Edmonton's need for a new arena into something unbelievable for the city."
Recent reports have suggested, however, that Katz's recollection is inaccurate, that public record indicates the EIG was not looking to sell and was united in its stance to protect their original multimillion dollar investment from when the team was purchased from then-owner Peter Pocklington in the late '90s.
Bruce Saville, one of the EIG's largest shareholders of the Oilers at nearly 10 percent, spoke with 630CHED's Bob Stauffer Friday on Oilers NOW to clear up the latest reports' inaccuracies and provide some insight into the EIG's world when the Oilers were sold to Katz a little more than four years ago.
"He used the term that it was 'fractured,' and it was," Saville said without hesitation. "Not in public, but behind boardroom doors and shareholder meeting doors, it was fractured.
"There was a key problem. There were 37 owners -- we got together for one purpose, and that was to save the team until we could get a new CBA and sell the team or fold it if the new CBA wasn't comfortable. We thought we got a pretty good CBA and then it seemed everybody lost their appetite to follow through and sell the team; but we didn't need to fold it then because we had a good CBA. Then it was exasperated by another problem, which was that the bylaws of the corporation were struck in such a way that it was very, very difficult -- in fact, impossible -- for anybody to sell their shares.
"The EIG valued the team each year and set an artificially low value for a number of reasons. The problem was if anybody wanted to sell, they had to sell to the EIG first at the artificially low value."
Because the EIG had valued the Oilers themselves and ultimately owned the rights to buy or sell by committee, Saville's nearly 10 percent was much lower than the club's true market value. If someone had interest in some or all of his shares, Saville would have been forced to sell them to the Investors Group.
"...at some ridiculously low price," Saville said, scoffing at the very idea. "I had to commit to that and they would take them. Nobody could get out."
The problem was, they didn't know what the Oilers were worth until a local billionaire emerged at the scene.
Katz originally approached the EIG in 2007 with an offer of C$145-million to purchase the team. On public record, Cal Nichols, Chairman of the Board of Directors of the EIG, said repeatedly the Oilers were not for sale; Katz then upped his offer by $5-million and was turned down again, but made a significant increase to his bids throughout the remainder of the year. Eventually in early-December, Katz' fourth offer came in at C$188-million with another $100-million commitment to kick-start the planning and construction of a new downtown arena.
"As Daryl starting making offers and we started having a realistic vision of what the team might be worth, that was real money (to us)," Saville said. "People started seeing the result of their shares, so we started seeing who wanted to get out and who would stay in."
Saville, 64 at the time of the sale, began to ponder his options -- and in realizing he'd been in the ownership business since 1998 and was getting older, priorities began to change. He and other investors had reached the point where they felt it was time to move on.
"The old guard was pretty shocked by the number of people said 'out' and each time Daryl's offer went up, the number of people that said they'd get out went up.
"The only alternative for the 40 percent that didn't want to sell was to go out and borrow $120-million to pay out the guys that wanted out. And what would they would left with? You'd have the same shareholders, they'd have more shares each; same situation, identical situation, but they'd have a debt of $120-million. That made no sense at all and it was at that time, I believe, that Cal Nichols changed from one side to the other and said, 'I don't think this will work.'"
Nichols indicated at that time that he would sell his shares, resigning as the Chairman of the Board of Directors. Slowly over the next several months, more shareholders stepped down and agreed to sell their shares. The sale of the Oilers was approved in June of 2008 for C$200-million.
From the EIG's standpoint, it was time to move on. Recognizing that it was in the Oilers' best interest to have a new arena built to ensure the club's future in Edmonton, Saville says the group "saw the writing on the wall."
"There was no appetite -- no appetite -- for anyone in the EIG to step up with the money for a new arena," he said. "We thought we'd done our part. We'd stepped up with $70-million US in 1998 and we were done. There had to be a new arena and we would have been out lobbying for it, but we wouldn't have been out writing cheques."
With the arena deal currently facing challenges four years later, Saville's concern is obvious.
"If this arena doesn't get built, the team's gone. I would bet my life that in five years from now, if there's not a new arena, a hole in the ground or one almost finished, the team will be gone and there won't be any team coming along behind it to replace it -- other than, perhaps, an AHL team.
"We have an opportunity right now," he added. "Construction costs are starting to rise again, but they're still lower than they were four or five years ago when we started talking about it. Let's get a quote, let's get it signed and get on with it.
"We've got to get this thing done and we've got to get it done right. Now."
-- Ryan Dittrick, edmontonoilers.com with files from Bob Stauffer