Bid won 'a lot of support'
But owners who wanted to sell held less than required two-thirds of shares
John MacKinnon, The Edmonton Journal
Published: Sunday, May 06, 2007
EDMONTON - The Oilers are not for sale, says Edmonton Investors' Group (EIG) board chair Cal Nichols.
But pharmacy magnate Darryl Katz remains a motivated buyer.
The 45-year-old billionaire has offered to purchase the team for $145 million.
Cal Nichols, chairman of the board of directors of the Oilers' ownership group, addresses a 2001 press conference.View Larger Image View Larger Image
Cal Nichols, chairman of the board of directors of the Oilers' ownership group, addresses a 2001 press conference.
Ed Kaiser/Edmonton Journal
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The offer -- for 100 per cent of the 7,492 shares held by the 33-member EIG is well above the club's own "retirement value" of $96 million, Nichols said Saturday.
The retirement value is the fluctuating price tag the club sets annually for EIG members buying or selling their shares, either to each other or to third parties.
"We're flattered by that," Nichols said of the bid, which was first communicated verbally in discussions between lawyers for the EIG and Katz on March 23. "I guess it's another indication that our franchise is very well managed and has some appeal.
The bid was rejected last week.
"We have no formal offer, only an inquiry. But the majority of our shareholders ... have no interest in selling."
Nichols acknowledged that some of the owners would be interested in selling the club at $145 million. But under the Alberta Business Corporations Act, an outright sale of a corporation's assets requires approval of investors whose holdings total two-thirds of the issued shares.
If Katz, or any other interested buyer, could entice Oilers owners whose shares total a two-thirds majority to sell, the remaining investors would have no choice but to do the same.
Nichols said that on the 10-member EIG board alone, owners whose shares total more than one-third are not interested in selling.
He said 25 of the Oilers 33-member investor's group met Monday to discuss the offer. The consensus was not to sell, a message that was relayed to Katz, whose Rexall pharmacy chain is the titleholder on the team's home arena.
When Nichols was asked if that means the matter is closed, he replied: "I would say, at that price, at this point in time, that's probably correct.
"There wasn't enough interest in a sale."
This is the first time since the group was established that anyone had expressed interest in buying the Oilers outright, and Nichols said the owners set up an ad hoc committee to respond to Katz's inquiry.
As well, Katz had two discussions with NHL commissioner Gary Bettman about buying the club.
"Ultimately, the franchise is controlled by the league," Nichols said. "They need to know our process."
Josh Pekarsky, a spokesman for Katz, said their hope is that the process will be ongoing.
"We made a good-faith offer that we believe represents excellent value for the club, and we've received a lot of support from a number of the owners," Pekarsky said. "The offer was for 100 per cent of the club because that's what the board requested.
"We fully recognize everything Cal Nichols and the rest of the owners have done for the Oilers and they should be applauded for that, but we also understand that many of the original owners now wish to move on.
"We remain optimistic that this can be worked out, but it's not our intention to negotiate through the media."
When EIG was established in the spring of 1998, the governance structure was set up to ensure shares could be bought, sold or transferred in a quasi-democratic fashion.
It was also set up to protect against an owner buying the club and moving it out of Edmonton
That's not an issue with Katz, who built a $20-million home overlooking the river valley last year.
Katz's bid does have the effect of setting a target price for those EIG members who would like to divest. But Katz's price is only available to them if the ownership group approves a sale of 100 per cent of the shares.
Any EIG member who wants to sell his shares must obtain the approval of 60 per cent of the other shares to do so. If that doesn't work, the governance structure calls for a so-called "round-robin" series of bids around the board table. And if that still doesn't satisfy the sale request, the investor can then take his shares to the open market.
"The reason it was done this way was so you could pick your partners," Nichols said. "And to have some fairness in the buy-sell part of it.
"Because, on any given day, any of us could be on the side of buying or selling."
The EIG originally had 38 members in 1998, when it bought the Oilers from Alberta Treasury Branches for $60 million, saving the franchise from being sold to outside owners and moved out of Edmonton.
Nichols views the group as custodian of Edmonton's No. 1 cultural icon, for which he and his partners have invested far more than money.
"It's a question of, philosophically, what serves the community best?" Nichols said. "Is a larger group of networks better able to sell Oilers tickets and product than one person?
"And, I guess, the same applies to the building."
He was referring to the much-discussed possibility of a new downtown arena, whose price tag has been estimated as high as $500 million. Nichols is a member of a committee struck by Mayor Stephen Mandel to study the feasibility of such a facility.
jmackinnon@thejournal.canwest.com
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