While Torontonians can continue to shrug their shoulders, Buffalonians can finally exhale and rejoice.
Terry and Kim Pegula are the new owners of the Buffalo Bills, pending league approval.
And The Great Toronto Threat? It indeed proved benign, for reasons Sun Media has been reporting since April.
The trust of the late Ralph Wilson on Tuesday morning reached a tentative agreement to sell the NFL club to the Pegulas, as the Buffalo News first reported. The team confirmed the news by mid-afternoon.
And the couple smashed the previous record price for an NFL franchise purchase. A Sun Media source confirmed what Lauren Brill of Buffalo’s WIVB-TV first reported, that the couple paid $1.4 billion for the Bills.
“Kim and I are humbled and honoured that the Wilson family has chosen us as the second owner of the Bills,” Terry Pegula said in a statement.
“Ralph Wilson left an indelible mark on our community and we still strive each day to honour his legacy … Our interest in owning the Bills has everything to do with the people of Western New York and our passion for football.”
Kim Pegula, born in South Korea, was raised in Rochester, N.Y., by Canadian-born adoptive parents.
The long-beleaguered Toronto bid group, led by rocker Jon Bon Jovi, was not informed until midday of the bad news. Ditto for the only other known bidder before Tuesday, celebrity real-estate mogul Donald Trump of Manhattan.
Two other bidders emerged by Monday’s binding-bids deadline, Kaplan reported.
Terry Pegula, an oil and gas multi-billionaire who owns the NHL’s Buffalo Sabres, and wife Kim had vowed to keep the locally beloved Bills in Western New York. They are spearheading a downtown Buffalo renaissance of sorts.
New York Gov. Andrew Cuomo was first to confirm the deal in a mid-day news release, which read in part:
“From Day 1, keeping the Bills in Buffalo has been one of our administration’s top priorities … As the team’s new owners, the Pegulas will ensure that the Bills remain at the core of the region’s identity — just as the late Ralph Wilson Jr. did for 54 years.”
Wilson died on March 25 at age 95.
New York State Sen. Chuck Schumer also congratulated the Pegulas.
Wilson’s widow, Mary, said in a statement: “Ralph would have been pleased with the sale of the team to the Terry Pegula family, who has been so committed to Buffalo and the Western New York region.”
The Bills thus won’t be relocating to Canada’s most populous city, the prospect of which surprisingly few Torontonians seemed to give a buffalo’s butt about since the spring.
By contrast, that prospect shot up the collective blood pressure of Western New Yorkers by about 50 points over the past five-and-a-half months.
Here’s a deeper look into the sale, what’s next, and why the beleaguered Toronto group’s fate was sealed long ago:
1. WHO BID WHAT?
That the Pegulas won this estate auction within hours of Monday’s 5 p.m. EDT binding-bids deadline might lead one to think that many balls were rolling on the deal in advance.
Don’t be it on it, sources say.
So how did the Pegulas wind up paying so much — $1.4 billion — for one of the NFL’s least prestigious, lesser-profitable, but most fervently backed teams?
First, let’s look at what their two known rivals bid.
Sun Media reported on the weekend that the Toronto group would bid somewhere between $1.0 billion and $1.1 billion — in the precise range of the group’s resubmitted, non-binding bid more than a month ago. That it did, if at the low end.
Bon Jovi and his Toronto partners bid $1.0 billion, or $1.0 billion and change, sources said.
As for Trump, Sun Media learned Tuesday he had submitted a first-round, non-binding offer in late July of about $1 billion. Upon perusing the team’s financial books in August, however, Trump on Monday submitted a much lower binding, specific offer: $800 million.
So why did the Pegulas pay $1.4 billion so quickly — almost $400 million more than the Toronto group, $600 million more than Trump, and $300 million more than ever had been paid for an NFL franchise?
One of three reasons:
1. The Pegulas asked the trust Monday night what number would end the sale process, were told “$1.4 billion,” and they said OK, sure. Bam.
2. The trust told the Pegulas Monday night they could end the sale process on the spot by upping to $1.4 billion, and they said OK, sure. Bam.
3. Or this. SportsBusiness Daily’s Daniel Kaplan reported that the investment bank conducting the sale for the trust, Morgan Stanley, indeed recruited two more bidders at the last moment. If one of them submitted a best offer of around $1.35 billion, the Pegulas quickly beat it to end the sale.
2. HOW IT BECOMES OFFICIAL
The NFL now must approve the sale. It’s a two-step process, and probably just formality. If there remained a trace of doubt, news of Tuesday’s tentative agreement would not have been released.
First, the league’s finance committee must review and approve both the Pegulas and their purchase agreement with the Wilson trust. Only then can the other 31 owners vote on approval.
The finance committee next meets Sept. 17, which Sun Media first reported. The quick sale wrapup gives ample time now for the committee’s review and approval to take place.
Owners next meet Oct. 8 in Manhattan. At least three-quarters of them (24) must approve any team sale. Team-sale approval votes are conducted only in person.
3. TORONTO GROUP’S GLUM DEMISE
The Toronto group’s defeat is no surprise if you’ve been reading our reports since late April, but especially since mid-summer.
The so-called Toronto group comprised rocker Jon Bon Jovi of New Jersey, Maple Leafs Sports & Entertainment chairman Larry Tanenbaum and Rogers Communications Inc. deputy chairman Edward Rogers, the latter representing his family’s financial interests.
The past six weeks proved a slow crawl to the glum finish line for the group.
From late July (after first bids went in) right up until Monday, no one in the group professed any optimism they’d wind up getting the NFL team, according to multiple sources in the position to know.
The group’s management presentation meeting in Manhattan on Aug. 12 with all the sale principals (the trust, Bills officials, Morgan Stanley and the trust’s law firm Proskauer Rose) went so poorly, the trio cancelled a scheduled tour of Ralph Wilson Stadium a week later, something expected of all bidders.
They didn’t think there was any point, sources said.
“They’re hanging on by the skin of their teeth,” one source said. “The bid’s on life support.”
Sun Media reported Aug. 21 that Bon Jovi and his Toronto backers would take a step back and reassess whether even to continue in their pursuit of the NFL franchise.
A New York Post report on Aug. 29 claiming Bon Jovi had been kicked out of the group was false. After Labour Day weekend, the trio ultimately decided to proceed with a bid, although one source described the finish-line effort as “half-hearted.”
4. THE IMPORTANCE OF THE TORONTO THREAT
It was surprising that the Wilson trust and the transaction team it hired were successful in keeping the Bon Jovi group around to the bitter end.
The trust’s mission surely was to keep The Great Toronto Threat alive, if only to help to drive up Pegula’s price had no other bidders emerged.
This was not lost on the Toronto group principals.
They knew, too, that for some local and state politicians and other principals involved in the sale, one cannot be regarded by the masses as a saviour if there’s nothing to save.
Think of how this whole sale might have played out differently had there been no Toronto bid group.
The Great Toronto Threat among fans had been its own captivating melodrama in the Buffalo region for years, but especially since late March, when Wilson died.
Locals would have been devastated had their 55-year-old symbol of cultural unity been relocated to Toronto, a 90-minute’s drive away. You cannot blame them for nervously over-analyzing every miniscule development in the sale process, as so many did.
Torontonians, by contrast, generally could not have cared less about the possibility of gaining an NFL team, even in recent weeks as the process ramped up. It was as surprising as it was disappointing, frankly, and casts legitimate questions moving forward as to whether Toronto can be regarded as a legit football city anymore, especially in light of the paltry crowds the CFL’s Argos now get.
Fact is, outside of a few Bon Jovi headlines, the Bills-sale story seldom punctured even mainstream sports coverage in Ontario, whereas in Buffalo the story topped TV and radio newscasts for months.
5. WHY TORONTO WAS CASH SHORT
That the Toronto group’s financial wherewithal proved insufficient with Bon Jovi in the lead is no surprise.
Sun Media raised that as a potential issue as early as last November, when reports of his partnership with Tanenbaum first leaked.
Sun Media reported in late July that the group could not ultimately bid as high as the $1.3 billion that Pegula at first was reported to have submitted in the first round of non-binding, indicative offers on July 29.
Whatever he might have bid in the first round, Pegula could afford to pay significantly more than the Bon Jovi group ever could, however constituted.
The Toronto group first offered an indicative range of precisely $800 million to $900 million on July 29, Sun Media has reported. Upon being informed by Morgan Stanley that that amount was uncompetitively low, the group resubmitted with a range of exactly $1.0 billion to $1.1 billion.
In allowing the Toronto group to rebid, the Wilson trust also wanted more definite assurances the group would not relocate the Bills to Toronto. After more unsuccessful back-and-forths regarding this non-relocation promise, the frustrated trust and its transaction team on Aug. 9-10 weekend finally advanced the group to the final phase.
A source told Sun Media weeks ago that the Toronto group’s ultimate bid limit would be, at most, just under $1.2 billion.
It’s not that the Toronto principals, combined, aren’t rich on paper. Together they are worth as much as $10 billion.
But Bon Jovi, by far the least rich of the trio, was the group’s prospective controlling owner, and that necessarily put the lowest ceiling on the group’s ability to bid.
To meet the 30% controlling-owner threshold the NFL demands, the native of New Jersey would have had to come up with, as an example, $300 million cash in a $1.2-billion sale, after maxing out the league’s $200-million financing limit.
Sources peg Bon Jovi’s net worth at more than $400 million, an amount appreciably higher than Forbes’ often-reported valuation of about $300 million. For NFL-sale purposes the musician had liquidity issues to boot.
What’s more, the league ideally prefers that a principal owner possess another $200 million of liquidity, to ensure future financial stability. In this sale, with either a new stadium or a massive upgrade to Ralph Wilson Stadium to pay for soon enough, another large outlay of cash is a virtual certainty. Bon Jovi would not have had anything approaching that kind of financial reserve.
Whereas the Pegulas sure do.
For months, sources have said — and insisted into this week — that Bon Jovi had zero interest in being anything but the lead bidder in this initiative, even though the bid group could have reconstituted itself at any time.
Bon Jovi long has had a burning desire to become an NFL principal owner. Even though it likely dawned on him by late spring that bidding for the Bills might well surpass his ability to meet the 30% threshold, sources said switching to a background investment stake in the bid never was an option for him.
By NFL rules, only the controlling owner of a team has any power or prestige, even if he or she has a smaller piece of the ownership pie than background investors. Tanenbaum and the Rogers family understood and accepted that this would be their role behind Bon Jovi.
Tanenbaum chairs the MLSE empire, whose sports properties include the NHL’s Toronto Maple Leafs, NBA’s Toronto Raptors, MLS’s Toronto FC, AHL’s Toronto Marlies as well as the Air Canada Centre, where the Leafs and Raptors play.
The Rogers family controls Canada’s largest telecom empire, as well as TV stations, radio stations, magazines and baseball’s Toronto Blue Jays plus the stadium they play in, the Rogers Centre (nee SkyDome).
Sources say Tanenbaum is worth nearly $2 billion, and the Rogers family more than $7 billion, although a complicated trust structure controls large outlays of the latter’s money.
The Rogers family had the liquidity to take their NFL group’s bid somewhat farther as controlling partner, but not as far as people think. Some $6.5 billion alone of the Rogers family’s wealth is tied up in company stock.
It is not believed Tanenbaum could have taken the bid much farther than Bon Jovi. Tanenbaum and the Rogers had roughly equal shares in the endeavour behind Bon Jovi, probably 35% apiece, sources say.
6. QUID PRO QUO
The Toronto trio’s formation in the first place seems odd, but the parties saw it as mutually beneficial.
Tanenbaum and Edward Rogers – his family’s point person in the bid and the deputy chairman of Rogers Communications Inc. — gave Bon Jovi not just all that supporting cash he needed to fill out his bid, but pro-sports franchise and stadium management experience.
In return, Bon Jovi gave their bid star power and, most importantly, someone who is friends with — and has earned the respect of — many of the NFL’s most important power brokers.
The theory was that Tanenbaum and Rogers would take Bon Jovi to the door, and Bon Jovi knew the password to get in.
Bon Jovi must have been convinced the Bills’ future lay in Toronto. Whether his high-level NFL connections nudged him in that direction might never be known. In any event, it proved a disastrous miscalculation.
7. THE RELOCATION ISSUE
Beyond finances, the next gargantuan problem facing the Toronto group was the spectre of relocation.
Almost immediately after Wilson’s death on March 25, speculation ramped up in Western New York as to whether the trust had been empowered by Wilson’s posthumous wishes to not sell to a relocation aggregation.
While no specific directive might have existed, in the end it didn’t need to be. The trust — comprising Wilson’s widow Mary, his niece and Bills senior executive Mary Owen, Bills CFO Jeff Littmann and another lawyer — clearly had no intention to sell the Bills to a buyer with even previously expressed relocation intentions. Period.
Wilson lived in the Detroit area but famously refused any offers over the decades to sell the Bills, or to relocate the team to a richer market — for which Buffalonians now will ever adore him.
When Wilson signed a deal with the late Ted Rogers — founder of the Rogers empire — to relocate one Bills home game per year to Toronto’s Rogers Centre, starting in 2008, many Bills fans feared it signaled the first step toward the franchise’s eventual move to North America’s third largest megalopolis.
The Bills-in-Toronto series ran until this past December and proved an utter flop everywhere but in the NFL team’s coffers. Ostensibly the series is set to resume next year, but behind the scenes no one believes that will happen.
The Rogers Centre might not even be able to accommodate an NFL field come 2018, once its lower-level stands are locked in place after a grass playing surface is installed for the Blue Jays.
Wilson and the NFL last year approved a new 10-year lease for the Bills to play games at the 41-year-old stadium in Orchard Park, N.Y., which bears the founding owner’s name.
The lease’s partner legal document, the novel non-relocation agreement, makes it practically impossible to move the team through the 2022 season, except for a one-time out after the 2019 season for $28.4 million.
These legal documents furthermore prevent the team from being sold to a new owner “who, to the Bills’ knowledge, has an intention to relocate, transfer or otherwise move the team” before 2023.
When Sun Media wrote about that clause’s importance in late April, the top political executive in Erie County, Mark Poloncarz, dismissed the report. Others piled on.
A prominent sports-relocation expert based in the East, however, was the impetus for the story. And a source positioned close to sale process throughout promised at the time that that sale clause, and others in the lease — such as one that forbids the Bills owner from so much as holding a preliminary discussion about building a replacement stadium that would open before 2023 — would prove pivotal as the sale progressed.
Those sources proved exactly right.
The iron-clad lease and NRA scared away interested bidders from Los Angeles and perhaps elsewhere, multiple sources said.
It was in these lease matters that the trust, Morgan Stanley and famously persnickety law firm Proskauer Rose had issues with the Toronto group.
The lease and NRA empower Erie County or the State of New York, or both, to go to court to block the sale of the Bills to a relocation aggregation.
For more than a year, until some time in June, Bon Jovi and his only initial partner, Tanenbaum, had been operating under the plan to relocate the Bills to Toronto at first opportunity.
But by the end of June, they flipped course and began getting word out that they intended to keep the Bills in Buffalo.
In early July, Edward Rogers convinced his mother, three sisters and others in the trust that controls his family’s wealth to join up with Bon Jovi and Tanenbaum in their bid for the Bills.
Rogers himself had for some time — and also not quietly enough, it turns out — thoroughly investigated the possibility of bringing an NFL team to Toronto.
On the first weekend in August, Bon Jovi wrote a 340-word letter published in the Buffalo News that attempted once and for all to convince Bills fans that his bid group’s recent about-face was sincere. The letter was a PR disaster and failed epically.
In the end the Toronto bid group’s intentions along non-relocation lines were not “clean” from a sale standpoint, said a source close to negotiations.
And Sun Media reported Monday that one of two factors besides money that would have “great weight” in the Wilson trust’s decision in choosing a buyer was the ability to close quickly and cleanly.
Plenty of proof existed to prove the Toronto-group principals might not be sincere in their summertime spin-arama.
For instance last November, four months before Wilson died, MLSE CEO/president Tim Leiweke spoke on the record to the Toronto Star about his close friendship with Bon Jovi and their joint NFL goal.
“We talk weekly about his NFL ambitions,” Leiweke told the Star. “And so we’re actively engaged, but I think it’s still a work in progress.”
This Star story furthermore said the group’s plan would be to relocate the Bills to Toronto after Wilson’s death, and even anointed that group as the “leading contender” to buy the Bills.
Sources say members of the Wilson family at the time were as incredulous as they were indignant over the arrogance and timing of those public pronouncements, when their patriarch was known to be in frail health.
Wilson died four months later.
In July the Associated Press’ Buffalo sports correspondent, John Wawrow, first reported that the Toronto group had conducted a feasibility study on new stadium sites in Southern Ontario.
Sun Media followed up with a report saying that in fact the study was commissioned by Edward Rogers before the Bills’ current stadium lease was even signed, more than a year before Wilson’s death and more than a year before he teamed with Bon Jovi and Tanenbaum.
Meantime, a stadium designer hired last year by Tanenbaum and Bon Jovi told Sun Media in July that the duo entertained approaches into this year by Toronto-area land owners hoping to accommodate their new stadium, for which he’d drawn up plans.
One of the worst-kept secrets in Toronto has been that the Bon Jovi/Tanenbaum duo into this year had been eyeing stadium sites that included port lands, Downsview Airport and vacant property adjacent to Woodbine Racetrack in the northwest corner of Toronto proper, in Etobicoke.
Yet other bits of evidence about the Toronto group’s relocation intentions concerned the seller and transaction team. All told, these obstacles would prove “too big to overcome” for the trust, an informed source said.
Said a source: “There was too much smoke for there not to be fire.”
8. COULDN’T HAVE LAME-DUCK HELL
Furthermore, and most crucially of all, the short-term health of the Bills franchise under this Toronto group’s ownership, even if it was sincere in keeping the team long-term in Western New York, would have eroded.
Fans vowed to abandon the team in droves if the Toronto bid had won.
Sun Media had been writing emphatically since late April that it is inconceivable 24 of 31 other NFL owners would have approved an ownership group whose presence would have created such a dangerous, unhealthy franchise existence — lame-duck hell — for either five or, more likely, eight years.
On the weekend, sources confirmed that the NFL indeed had absolutely no intention of letting that ever happen.
* * *
So in the end, the Toronto group’s bid had little chance to get anywhere near the eyes of other NFL owners. For these reasons. As we’ve been writing about since April.
If you’re looking for a great party tonight, go to Buffalo. To bastardize a U2 lyric, just throw a rock in the air. You’re bound to hit one.