Phoenix Coyotes: How the Thrashers Sale Affects the NHL's Sale of the Coyotes

With the recent sale of the Atlanta Thrashers (now Winnipeg Jets) to the True North group, the spotlight is once again put back on the uncertainty over the Phoenix Coyotes' sale. The Thrashers sale took a matter of weeks, while we are now approaching the ten month anniversary of Chicago investor Matthew Hulsizer’s bid to purchase the Coyotes from the NHL.

Along the way, there have been numerous roadblocks, most notably from the Goldwater Group, a conservative watchdog that has threatened to sue the city to block them from issuing the bonds that would apparently get this deal done. For most of the past year, this was the biggest obstacle until Hulsizer recently announced he would guarantee the bonds.

After Hulsizer guaranteed the bonds, it appeared as though the chances of a deal being completed had improved significantly, but a month after his announcement, and still there is no movement on the deal. Perhaps there is another obstacle no one is talking about, one that would appear to be a bigger issue than Goldwater’s obstructions—the league's asking price for the Coyotes.

The last three NHL franchises that were sold were the Thrashers, Buffalo Sabres, and Tampa Bay Lightning. The Thrashers sale price was $ 110 million. While the league also charged True North a $60 million relocation fee, it is not considered part of the sale price.

The Sabres were sold for $189 million, and the Lightning were sold for $93 million in 2010.

In comparison, the $170 million the league is asking for the Coyotes seems excessive at the very least.

The Thrashers and Lightning were both distressed franchises when they were sold. Both had been plagued by weak attendance, poor team performance, and millions of dollars in annual losses in the years leading up to their sale.

Meanwhile, the Sabres are the model of small market success in the NHL. They have sold out every game for the last five seasons, and made the playoffs three times in the last five years, including back-to-back appearances in the Eastern Conference Finals.

In other words, the Coyotes value would seem to be more in line with that of the Thrashers and Lightning franchises than the Sabres.

So the big question here is why is the asking price of the Coyotes so much closer to the sale price of the Sabres than it is to that of Lightning and Thrashers?

For one thing, the league spend $ 140 million to purchase the franchise in 2009. While they likely do not want to take a loss on the franchise, they may need to do so in order to keep the franchise in Phoenix, as they claim is their top priority. However, the league probably realizes they could easily get $170 million or more for it after the sale price and relocation fees should they sell it to an ownership group that would move it to another market. After all, the Thrashers went for $ 170 million if you include such fees.

When the Coyotes were originally on the market in 2009, ownership groups from Seattle, Houston, Las Vegas and Kansas City expressed interest. So, if the NHL decided to entertain offers from groups that would move the team, they would certainly have no shortage of interest and could get a similar relocation fee for the franchise. However, if that is the NHL’s train of thought, then it would question their commitment to the Phoenix market.

If the NHL is pricing the team based on its value should it relocate, than perhaps Matthew Hulsizer is questioning its value should he keep it in Glendale. You don’t become as wealthy as he is by overpaying for things by tens of millions of dollars.

If the Coyotes franchise is worth $170 million in another market, then the league needs to realize that they simply cannot demand that much from an owner willing to keep the team in the league's preferred market of Phoenix. If you look at what franchises in similar situations have sold for, the league should be asking no more than $120 million for the team, which would represent a minimum of $ 20 million in losses for the league on the Coyotes. By comparison, the Lightning ownership group headed by Len Barrie and Oren Koules lost $ 100 million in one year after purchasing it for $ 206 million in 2008 and selling it for less than half that in 2009. So maybe a loss of $ 20 million or so on the Coyotes isn't that bad, especially when the league has the relocation fees from the Thrashers in their coffers to cover the loss.

It is safe to say that if the league lowered their asking price to the more reasonable amount of $ 120 million, they would have much less trouble finding an interested buyer. Hulsizer alone is reported to have $100 million of his own money in the deal, and another $30-40 million in financing lined up.

Even if the league dropped it to the $ 140 million they paid for it in 2009, it is still less than the $134 million Forbes valued the team last year. By comparison, the Thrashers sale price of $110 million was 20% less than their Forbes valuation of $135 million.

At the end of the day, if the league wants the Coyotes to stay in Phoenix, they are going to have to put their money where their mouth is. They need to decide whether or not they want to sell the team at a price that is indicative of its worth in Arizona, even if it means taking a loss, or at the price they could command should they sell it to a group that would relocate it out of the desert. Until they make that decision, expect further uncertainty over the sale and future of the Coyotes.