CHAPTER 6: The Summer of the Sale
It was evident during the 2006-07 WHL season that something was going on behind the scenes with the Kamloops Blazers Sports Society, the non-profit organization that operated the Kamloops Blazers.
River City Hockey Inc. (RCH), the four-man group headed by Vancouver businessman Tom Gaglardi, had been rejected in its attempt to purchase the franchise for $6 million in June and July of 2006.
RCH wasn’t just rejected; it was told to get lost.
RCH made its offer but was never able to meet with the society’s board of directors. Nor were any of RCH’s principles – ex-Blazers players Shane Doan, Mark Recchi and Darryl Sydor were involved with Gaglardi – allowed to attend a July 11, 2006, meeting at which the society’s members voted that the assets weren’t for sale. None of the five was a member of the society and requests for permission to attend were rejected.
And then, at that July 11 meeting, the nine-man board of directors never accorded the membership the opportunity to look at RCH’s offer.
Then, during the ensuing season, Stan Mah, the son of Vic Mah, owner of the legendary Blue Willow restaurant in Edmonton, phoned a Kamloops sports journalist. Vic Mah’s longtime dream had been to own an Edmonton WHL franchise. It was a dream that would never come to fruition. Still, Vic Mah owned 10 shares in the Blazers.
Stan Mah was calling to find out why there was sudden interest in his father’s shares.
The answer was that Gaglardi still was extremely interested in owning the Blazers. And not unlike a rejected suitor, he had decided to take a different tact.
In July 11, 2006, there were 194 members of the society, each of them owning at least one share, some, like Vic Mah, owning more than that. Each share was worth $1,000. These weren’t investments; they had been created in the early 1980s in order to, first, keep the franchise in Kamloops and, second, to purchase the franchise from Nelson Skalbania.
Having been rebuffed, Gaglardi decided to buy up as many shares as possible. By the time he was done, there were 254 members in the society, each of them holding at least one share. That’s 60 more than there had been one year earlier, so you can figure out where that new support went.
Once those shares were purchased and dispersed, RCH was certain to have more support than it had at the meeting of July 11, 2006. RCH would then make a second offer to purchase the franchise, a meeting would be held, members would vote and RCH would end up owning the team.
That was the plan. And, other than a couple of speed bumps, it worked like a well-designed power play.
--------
On July 13, 2007, The Daily News reported that RCH now was a five-man group, what with it having added Jarome Iginla, another former Blazers star, to its group. At the time, Gaglardi held 60 per cent, with each of the four NHLers holding 10 per cent. That would later change, with Gaglardi assuming 50 per cent of the ownership group and each player owning 12.5 per cent.
And now RCH was about to make another offer.
A letter stating that "River City Hockey will once again present the board of directors of your society an offer to purchase" was delivered to the Blazers' office at the Interior Savings Centre late on the afternoon of July 11.
It immediately became evident that RCH was going to be far more aggressive this time around – copies of the letter were mailed to every one of the society's members.
"He is putting each shareholder on notice that this is what he intends to do," Murray Owen, the Blazers’ president since the annual general meeting in the autumn of 2006.
Owen also indicated that the board of directors wasn’t thrilled with the way RCH was going about its business.
In fact, Owen said, he was of the opinion that because Gaglardi, as a shareholder, now was a member of the society, what he was doing was “contrary to the constitution."
"As far as our board is concerned,” Owen said, “we believe that the membership would have to change the constitution prior to entertaining offers. I don't know if Tom doesn't understand our position or (if) he doesn't care . . . he has his own ideas about where he would like to go with it."
None of which would matter in the end, though. As Owen said: "Our board is committed to the wishes of the membership. That's all there is to it. Whatever transpires is going to be pretty much whatever the membership of the society wants to do."
--------
The game was going to be a whole lot different this time around.
RCH, so passive in the summer of 2006, was going to attempt to dictate the terms of play. Besides sending a copy of its introductory letter to all members, it hired a Kamloops-based public relations firm which, among other things, set up a website and promised to post details of its offer once it was made.
Gaglardi was adamant that members would get to peruse this offer.
"The offer is a little different this year," he said, adding that while the number – $6 million – would be the same, the process in which members would receive money had been changed.
"The difference is that rather than rely on the board to repay the founding members the $1,000 per share," Gaglardi said, "this offer builds that in. What we're doing is offering each member $1,000 plus interest at the rate of five per cent simple interest from the date they bought their shares. That amount gets paid separately but it's deducted from the $6-million purchase price, so we're still paying $6 million."
Under those terms, a share purchased for $1,000 in 1984 would be worth $2,150, including $1,150 in interest.
"A bunch of guys in 1984 put up $1,000 each which was a lot of money then to keep this team here and they've held it all along," Gaglardi said. "The team has appreciated and, although it's not for profit, why shouldn't they have their money returned to them, with five per cent simple interest?"
Gaglardi also promised that the four ex-Blazers players would be more visible and much more involved than they had been a year earlier.
"Absolutely," Gaglardi said. "Mark has bought a home (in Sun Rivers, a Kamloops development) and is going to spend a good chunk of his summer there. Darryl and Shane are there now.
"These guys are serious . . . they always were."
--------
In the meantime, it was business as usual for the hockey club as it continued preparations for the 2007-08 season.
On July 18, The Daily News reported that the coaching staff – general manager/head coach Dean Clark, assistant GM/assistant head coach Shane Zulyniak and assistant coach Andrew Milne – had agreed to terms on new contracts.
The newspaper reported that all three – along with Dave Chyzowski, the former Blazers star who had signed on as marketing director midway through 2006-07 – had agreed to three-year extensions that would take them through 2009-10.
According to the newspaper, each of the contracts called for two years with the club holding an option on a third season. However, a clause in each contract called for the third year to be guaranteed should the franchise be sold.
Gaglardi told The Daily News: “It's a poison pill. There's no other way to look at it."
The Daily News also reported that “the signing of Clark to an extension has caused some consternation” within RCH.
The Daily News reported that sources had told it that a letter from RCH, which had yet to present its offer to purchase, was delivered to the Blazers' office at Interior Savings Centre on July 17. That letter was said to have expressed concern over the deal with Clark.”
"We have a hockey club to run," Owen said, "and we are doing our job. I've seen how they work. I've seen the dedication and effort they put into our hockey team. I'm absolutely 100 per cent behind the type of coaching that we have. I can't say enough about the (coaching) team that we have here.
“We want stability. This is how we plan on doing it."
After The Daily News reported that the contracts, in fact, were a form of poison pill, the Blazers board met and changed the deals. One source said that, on the advice of lawyer Barry Carter, the team’s legal counsel from the local firm Mair Jensen Blair, the third year in each contract was change to a club option.
In the end, Clark, Zulyniak, Milne and Chyzowski got contracts calling for two years with a club option for a third season.
--------
RCH’s offer arrived at the Blazers’ office on July 18. It was, as promised, posted on RCH’s website and was for $6,100,176 "less sums payable to the shareholders of Kamloops Blazers Holdings Ltd."
The $100,176 represented the value of a debenture held by Kamloops Blazers Holdings Ltd., something that would be paid off by RCH.
And already the two parties were embroiled in a legal battle over whether the society had the constitutional right to sell the franchise.
According to Gaglardi, RCH got an opinion from Alan McEachern, the retired Chief Justice of the Supreme Court of B.C., "on whether the constitution of the Blazers would permit the sale of the club."
"He gave us an unconditional opinion without reservation that the team could be sold without any changes required to its constitution," Gaglardi said.
The board was expressing concern that Gaglardi and Recchi, who were members, were working to privatize the organization.
"I'm not a lawyer," Owen said, "however, when you read the constitution and members take action in such a way that would ultimately give them benefit, I think they should look at their motives."
While RCH had gotten a legal opinion, the board hadn’t bothered.
"We haven't taken it to that level," Owen said. "The legal advice we got was centred around us having a constitution that we are obliged to uphold. The only way we can change that is through our membership."
Gaglardi, meanwhile, said RCH hadn't done anything wrong.
"It's disappointing to us . . . to have to read in the paper that our acts may be illegal," he said. "We've done our homework to make sure that they're not.
"This is a desperate measure by the board. Hiding behind the constitution is a joke."
The fight would end up in the Supreme Court of B.C.
--------
Things heated up even more on Aug. 8 when the Blazers received a second offer.
This one came from Mike Priestner, the 52-year-old owner of the Edmonton-based Mike Priestner Automotive Group (MPAG).
Priestner, who played for the WHL's Kamloops Chiefs in 1974-75, also is the father of James Priestner, 16, who would come out of training camp as the club’s backup goaltender.
Mike Priestner told The Daily News that he was in this alone and then referred questions to Kamloops lawyer Dev Dley, a former WHL commissioner.
"The crucial thing for (Priestner) is that he doesn't want to rock the boat," Dley said. "He thinks on the hockey side of things they're going in the right direction. He likes their approach."
Whereas the RCH offer involved purchasing 100 per cent of the organization, Priestner proposed buying 55 per cent.
"He wants to keep the local shareholders involved so he will keep the shareholders intact," said Dley, adding that shareholders would be left owning 45 per cent. "The end result is that the community continues to own a portion of the team and there is a guarantee of money flowing into the (Kamloops Blazers Sports Foundation).
"It's the best of both worlds . . . it's the absolute best of both worlds."
--------
Also on Aug. 8, the society and RCH met in B.C. Supreme Court in Vancouver.
And RCH won in a rout.
At issue was a clause from a special resolution to the society's constitution that was passed June 27, 1989, stating "the purposes of the society are to own, manage and operate the Kamloops Junior Hockey Club and to promote amateur and junior hockey in and around the City of Kamloops."
The society's opinion, which came from Carter, was that it needed to change its constitution in order to entertain offers and would need a special resolution to do so, something that, under the Society Act, would need a 75 per cent majority.
RCH disagreed and, following the B.C. Society Act, had gotten at least 10 per cent of society members to sign a petition requesting an extraordinary general meeting to hear and vote on the group‘s latest offer.
Madam Justice M. Marvyn Koenigsberg ruled that the society didn't need to change its constitution and that, if it came to a vote, a simple majority – 50 per cent plus one – would do it.
"We are pleased that the B.C. Supreme Court has confirmed this position," Recchi said in a statement issued by RCH.
"We're disappointed," Owen said. "We're still going through the process of looking after the interest of the Blazers. The vote still has not been taken. We're in the process of trying to get together with (Carter) and we'll move forward from there."
And RCH was applying pressure in hopes of sitting down with the board for the very first time.
"(Gaglardi) did say a few words to me afterwards," Owen said, "indicating to me that he wanted to sit down and do some negotiating. I have a copy of his proposal and I'm not sure if there's room to move there at all."
The board had its accounting firm, KPMG, review RCH's offer, which is why Owen said he didn't know if there was room to negotiate.
However, according to RCH's statement, "The KPMG review presented no issues that could not be resolved through normal dialogue between the two groups."
"We have once again asked the directors of the society," Recchi said, "to sit with us to discuss our offer so that the society members have confidence that our offer has been fully reviewed when they vote at the membership meeting the week of Aug. 20."
That meeting would be held on Aug. 23.
--------
A couple of days later, Priestner upped the ante.
The Daily News reported Aug. 11 that Priestner had changed his offer. It now placed a value of $7.110 million on the franchise.
Under terms of the second offer, he would purchase 51 per cent for $3,626,100. That would leave members holding 49 per cent, valued at $3,483,900.
"The Blazers," Priestner wrote to the board, "are a storied franchise that we would be thrilled to be affiliated with. Creating a partnership now between ourselves and the society will secure the future of the franchise and ward off any unwanted threats of a hostile takeover . . ."
Priestner's offer called for the nine-member board to be retained, with it reporting directly to Priestner. The shareholders would elect the board, with the board electing a president for a three-year term. All of the board's committees would be retained.
And the board had decided to meet with Gaglardi and Priestner.
“It will be an information session," Owen said.
--------
Those sessions took place on Aug. 13, with each group meeting with the board for 90 minutes.
Priestner, who was up first, was accompanied by his son, Jared, who works with MPAG, and Dley.
Gaglardi, Recchi and Sydor represented RCH.
"It went pretty well," Owen said. "We heard their stories and we were able to explain our position. I thought it was a good exercise."
"I think it was a productive meeting and we were able to do what we set out to accomplish," Gaglardi said. "It was a long-time coming and it was a pretty good meeting. We had a chance to outline (our offer) . . . we've been asking for a meeting for 14 months and finally had it."
Recchi added: "We weren't asking them to sell us the team right there. We just wanted to talk to them."
"It was a great meeting," Mike Priestner said. "It went well. (The board) seemed very open-minded to the idea. They were asking the right questions . . . good questions."
--------
As incredible as it may seem, things got even more interesting on Aug. 17 when The Daily News reported that the Jim Pattison Group might be interested in taking a run at owning the Blazers.
Rick Arnish, the president of the Kamloops-based Jim Pattison Broadcast Group, told The Daily News: "If there was an opportunity for the Jim Pattison Group to look at the options, if there was an opportunity to purchase . . . we would be interested."
However, Arnish was quick to point out that the society’s board of directors hadn’t yet said the franchise was for sale.
If the franchise was put up for sale, Arnish said, and if it was a fair and open process with offers being accepted, the Pattison Group definitely would look at the situation.
"I can't speak for the (society) directors," Arnish said, "but if they do go that route, we would be interested."
According to Forbes magazine, the Pattison conglomerate, which includes billboards, grocery stores, automobile dealerships, packaging and broadcast interests, was worth about US$4 billion.
It turned out that Arnish had first expressed an interest in the Blazers at least three years earlier in a conversation with Gerry Bell, who spent the 2005-06 season as the franchise's CEO.
Bell had spent one year with the organization, examining contracts and business deals involving the franchise. He said it was important that the potential sale of the franchise be dealt with like a normal business deal, that the value of the franchise be established before it was sold.
"The team could change hands without the shareholders even looking at the (Priestner) offer," Bell said.
NEXT (Feb. 11): The Dawning of a New Era
Posts
