Tuesday, August 14, 2007

A long story short

The purpose of what follows is not to pick and choose between the two offers that have been made for the Kamloops Blazers, but rather to attempt to shed some light on the situation for those who may not be familiar with it. Just remember that this is only part of the story; there isn’t room on this blog for the whole story . . .

You have to have lived in Kamloops to understand what the Blazers franchise has gone through in recent years. Which still doesn’t mean you’ll understand it all.
It is enough to make you slap your forehead with the heel of a hand. Time after time after time . . .
As someone who moved to this area in the spring of 2000, I can only wonder if someone did a deal with the devil: Memorial Cups in 1992, 1994 and 1995 for all that has followed.
It all began two weeks after the 1995 Memorial Cup, a championship that the Blazers won on home ice. That’s when then-president Colin Day and lawyer Barry Carter walked into the office of general manager Bob Brown and fired him.
They had, Day said, decided to go in a different direction.
That turned out to be one of the great understatements in sporting history. No one could have guessed exactly how far the organization would go in a different direction.
Some of the things that followed all but defy belief, from the decision not to renew head coach Marc Habscheid’s contract after his Blazers lost the 1999 WHL championship final in five games to the Dean Clark-coached Calgary Hitmen, to the removal of Day as president after it was revealed that he had written cheques to himself from team accounts (the money was later repaid), to the firing of long-time office manager Maxine Patrick, who later pleaded guilty to defrauding the team of nearly $1 million, to the exits of general manager Mike Moore (he has an MBA but neither Day nor Patrick would let him near the books) and coaches like Dean Evason (a local hero in a hockeytown that lives on memories, he was hired with minimal experience and allowed to try and learn to coach here), Troy Mick (the pressure literally ate him up and he resigned for health reasons), and Mark Ferner (another local hero).
Which brings us to the summer of 2006 when a newly formed group calling itself River City Hockey Inc. (RCH) dropped a $6-million offer to purchase on the Blazers’ board of directors.
The Blazers are a non-profit society operating under the terms of the province’s Society Act. The society is owned by its shareholders, or members. One team official told me last week that there are 262 members; one of the directors told me later the same day that there are 256 members. Why the discrepancy? Well, it apparently was discovered that a couple of members had died, and there were various unstated reasons for the inclusion/exclusion of the other four.
Anyway . . . the members elect a nine-person board of directors and the board elects its officers, forms its committees, etc.
So in June 2006, an offer to purchase arrived in the team’s office. The offer came from a group headed by Vancouver businessman Tom Gaglardi and including ex-Blazers players Shane Doan, Mark Recchi and Darryl Sydor. (Jarome Iginla, another ex-Blazers player, would join RCH a year later.)
Despite the fact that the society’s board had been told well in advance that an offer was expected from somewhere, it appeared totally unprepared for its arrival.
RCH was quite low key through the weeks that followed, apparently believing that the society’s board of directors would peruse the offer and make it available to the members, who would then vote on whether to accept it.
Instead, after weeks of behind-closed-doors machinations, the board held an extraordinary general meeting on July 11, 2006, at which time the members were told that they first must decide if the society’s assets were for sale. At the time, there were 194 shareholders eligible to vote. (It’s worth noting that no matter how many shares a shareholder has, he/she gets one vote.) The motion was made -- Are the assets of the society for sale? -- and the vote was 49-38 against. Of the 194 shareholders, only 96 registered for the meeting. When 49 voted not to put the assets up for sale, it meant that 25.3 per cent of the shareholders carried the day.
And just like that it was over. RCH’s offer was rebuffed without ever getting into the hands of the members.
You may have noticed that there were 194 members in July 2006 and now there are more than 250 -- and yet there aren’t any more shares than there were a year ago. So . . . how did this happen?
Many of the 194 shareholders held multiple shares. That no longer is the case. Among the new shareholders are Gaglardi and various members of the Recchi family. When RCH made another offer on July 18, 2007, Doan, Iginla and Sydor were in the process of becoming members. Most, if not all, of the new shareholders are RCH supporters, believed to have been steered into place by RCH.
All new members have to be approved by the society’s board, so the directors had to have recognized what was happening at some point over the preceding year.
On July 18, after months of intensive work behind the scenes, RCH dropped a second offer on the Blazers. This one is for $6.1 million. The offer, which is very similar to the one that appeared just over a year earlier, immediately showed up on RCH’s website.
Shortly after making its offer, RCH unveiled its website -- rivercityhockey.ca or kamloopswins.ca. This, as it turned out, was an indication of what was to follow -- a much more intense and more aggressive drive towards ownership of the Blazers.
By now, Iginla was part of the group. Should RCH end up owning the Blazers, Gaglardi, in the beginning, will own 60 per cent with the four players sharing the remaining 40 per cent. But where Doan, Recchi and Sydor had been all but invisible a year earlier, they raised their visibility level this time and even held a meet-and-greet with the Kamloops media.
As well, RCH hired a Kamloops public relations firm to manage the website, attend news conferences, pump out press releases and generally keep in contact with the local media.
While all this was going on, the Blazers board was meeting behind closed doors, as it always does, and keeping very quiet. It was decided that Murray Owen, the president since September 2006, would be its spokesperson. Owen, a congenial gentleman, was a pretty fair hockey player in his day, and now is in the plumbing and heating business. He would prove to be a mostly guarded spokesperson. Other board members would refuse to speak on the record.
With no one speaking on behalf of the team, former Blazers CEO Gerry Bell took it upon himself to write a couple of letters to the editor of The Daily News. The crux of his message was this: If the time has come to privatize the Blazers, then the franchise should be appraised and placed on the open marketplace, after which all offers should be studied before a decision on a new owner is made.
Whenever a Bell letter appeared, RCH supporters were quick to write their own letters to the editor in which Bell and his ideas were held up for ridicule.
In other words, RCH has had little trouble getting its message across. Here’s a snippet off the RCH website:
“The four NHLers and business partner are all financially secure and have many different investment opportunities. Their primary reason to invest in the franchise is not motivated by money. Instead, they are motivated by a desire to rebuild their former team, the Kamloops Blazers, so that it may provide a very successful hockey experience to young players -- and be a source of pride for the community of Kamloops.”
Some people in the community, noting that the team won 40 games last season and, after some dry years, is again a force in the B.C. Division, have taken exception to RCH’s statements about wanting to “rebuild their former team.” The franchise, they say, has been rebuilt and again is providing a solid playing experience for its young players.
Gaglardi has admitted that perhaps some of RCH’s statements could have been better phrased and that his group is more concerned with rebuilding the franchise’s business side.
Gaglardi and his partners have said that, should they be successful in purchasing the Blazers, they will continue to employ everyone who is presently with the organization. There is a clause in their offer to purchase that reads, the society “will terminate all of its employees as it sees fit other than Dean Clark, the player contracts and the coaching staff at or prior to closing and shall be responsible for all severance pay.“ Gaglardi has said RCH then would rehire those employees should they wish to stay.
Anyway . . .
The society’s board, which had to have known for a year that RCH would make a second offer, again acted as though it had been caught off-guard when that offer arrived on July 18. It began attempting to hold off what it obviously feels is a hostile takeover by declaring that it had received legal advice claiming that, under the terms of the Society Act as well as its constitution and by-laws, it didn’t have the authority to sell the franchise. And, furthermore, if it was to receive that authority it would need to change its constitution, something that would have to be approved by 75 per cent of its members.
(The society is guided legally by Barry Carter of the Kamloops firm Mair Jensen Blair. Dennis Coates, another MJB lawyer, is the society’s treasurer. Coates has done work in the past for Northlands Properties, the company headed up by Gaglardi.)
As it turned out, RCH disagreed vehemently with the society’s opinion. RCH promptly got its own opinion from Alan McEachern, a retired chief justice of the B.C. Supreme Court. Gaglardi told the media that opinion was that a constitutional change wasn’t needed and that a simple majority (50 per cent plus one) would carry the vote.
RCH and the society ended up in a Vancouver courtroom on Aug. 3 and stated their cases. Five days later, the court ruling had RCH winning in a walk.
The society, the court said, doesn’t need to change its constitution in order to sell the franchise. And, furthermore, a simple majority is all that is needed to make that decision.
And then came another offer . . .
Late on Aug. 3, the society received an offer from Mike Priestner of the Edmonton-based Mike Priestner Automotive Group. Priestner, who played goal for one season with the Kamloops Chiefs in the early 1970s, owns 10 dealerships in Alberta, the Yukon and B.C.
In Priestner’s first offer, he proposed to purchase 55 per cent of the franchise for $3.3 million, something that put a $6-million value on the franchise.
On Aug. 10, he filed a revamped “partnership proposal” with the society, offering to buy 51 per cent of the franchise for $3,626,100, something that, on paper, upped the value of the Blazers to $7.1 million.
Priestner’s proposal is at the furthest end of the spectrum from the one that came from RCH.
While RCH wants to privatize the entire operation, Priestner’s proposal maintains the status quo, leaving the shareholders and the board of directors in place, albeit with a bit of a reduced role. The shareholders would own 49 per cent and would continue to elect a board, which would elect its executive, maintain committees, etc.
Priestner’s proposal is heavy on getting the Kamloops business community involved with the Blazers, improving ties with the Kamloops Minor Hockey Association and implementing a profit-sharing plan for all employees.
(In order to grasp the situation, you also have to understand the role of the Kamloops Blazers Sports Foundation. The foundation operates independently of the non-profit society which, when it has shown a profit, has turned money over to the foundation. Although the Blazers have not made nearly as much profit over the years as one might have expected, the foundation still has put more than $1 million back into the community through grants to various and sundry organizations, most, but not all, of them having to do with one sport or another.
Were the society to accept RCH’s offer, it is assumed the money remaining after liabilities are met would be used in much the same fashion.
(Priestner’s proposal estimates that the society would have $500,000 per year to put back into the community.)
On Aug. 13, the board (Coates had a previous commitment and was the only one of the nine members unable to attend) held a morning meeting and then met face-to-face with the two groups in what were termed information sessions. Priestner was accompanied by his oldest son, Jared, and Kamloops lawyer Dev Dley, a former WHL commissioner. Gaglardi was joined by Recchi and Sydor.
It had been 14 months since RCH first requested a meeting, yet this was the first time Gaglardi and any of the players had met face-to-face with the board.
All parties agreed afterwards that the meetings were worthwhile exercises and that the right questions were asked.
The board apparently has forwarded the Priestner offer to its members and also has KPMG, the accounting firm that does work for it, preparing a comparison of the two offers.
That is something that should have been done immediately upon receipt of a second offer, especially considering that Priestner had an Edmonton accountant prepare one and tacked it on to his second offer, the one of Aug. 10.
That comparison claims that Priestner’s offer accepts various liabilities -- severance pay (there wouldn’t be any because all employees would be kept on, allowing them to maintain their seniority), education fund, debentures, etc. -- while under RCH’s offer the society is liable for all of those.
In the end, the Priestner comparison claims that RCH’s offer is worth $5,297,000 to the society, while Priestner’s is worth $7,110,000. The total value of the offers to the society after 10 years, according to Priestner’s comparison, is $7,945,000 from RCH and $12,145,658 from Priestner.
Up next, unless something happens between now and then, is an extraordinary general meeting that has been called for Aug. 23. The board, one assumes, would hope to have the members vote on whether the society’s assets are for sale, much as they did on July 11, 2006. But it could very well be that RCH, through a special requisition, will force a vote on its offer.
While all of this has been going on, the Blazers have been the talk of the town and, really, it’s for all the wrong reasons. While that Aug. 23 meeting is taking place in the Sports Action Lounge at the Interior Savings Centre, Blazers’ prospects will be on the ice in the same building.
Yes, it’s the first day of training camp.

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