Rooney's pals among NFL owners could block sale
By Carl Prine and Scott Brown
Tuesday, August 5, 2008
http://www.pittsburghlive.com/x/pittsbu ... 81142.html
In his battle to keep control of the fabled franchise his father founded 75 years ago, Steelers chief Dan Rooney might have the ultimate trump card up his sleeve -- the ability to persuade at least eight NFL team owners to scuttle a sale.
Five sons of the late Art Rooney Sr. combine to control 80 percent of Pittsburgh Steelers Sports Inc. stock, and their McGinley relatives hold the rest. New York billionaire and rabid Black & Gold fan Stanley Druckenmiller has been sniffing out a McGinley sale since 2006 and recently announced that he's talking to the Rooney brothers about finalizing a deal for their stake.
Steelers President and Chief Executive Officer Dan Rooney has acknowledged that he's retained PNC bank and Wall Street finance house Morgan Stanley to try to keep control of a team he manages alongside his son, Art Rooney II. Druckenmiller is talking to Dan Rooney and to his brothers, who hired the analysts at Goldman Sachs to help them navigate a potential sale worth an estimated $700 million to $1.2 billion.
Even if he boxes out Dan Rooney, Druckenmiller would have to jump more hurdles to buy the team, including a vetting of his financial bonafides and character by the National Football League front office, the scrutiny of the NFL Finance Committee and garnering at least 24 votes from 32 franchise owners.
"Has a prospective owner been rejected? Yes. Several times," said NFL spokesman Greg Aiello, pointing to the failed 1998 bid for the Vikings led by novelist Tom Clancy and the 1999 pursuit of the Redskins by New York developer Howard Milstein.
"Often the rejection is somewhat informal. In other words, it becomes clear that there will not be sufficient support or that there are insurmountable hurdles to approval, and the prospective owner withdraws prior to a formal vote being taken."
According to Article III of the NFL Constitution and Bylaws, if the Rooneys have proposed "to retain an investment bank, broker or similar agent" in connection with a sale, a meeting must occur among the family, their agent, Commissioner Roger Goodell and New Orleans Saints owner Tom Benson, chairman of the NFL's Finance Committee.
NFL's Aiello said this hasn't happened -- yet. But he said that Goodell has agreed "to meet with the Rooney brothers within the next few weeks" to discuss an apparently ongoing dispute over a looming sale.
Dan Rooney declined to comment for this article.
Dan Rooney is uniquely respected throughout the NFL. Inducted into the Pro Football Hall of Fame in 2000, Rooney's biography at Canton boasts of his five Super Bowl wins, his patient and moderating role in negotiating collective bargaining agreements with the players' union, and his leadership on crucial committees that led to making the NFL into a multibillion-dollar business.
Rooney helped sculpt blockbuster television contracts and pressed for greater minority participation in the coaching ranks. That's the sort of pedigree that gives Rooney a bit more leeway when it comes to delaying or destroying a rival offer for the team -- as long as it can be justified economically and legally.
"The Packers, this organization and as myself, we would support him. Just knowing what he's brought the league is enough. But we don't know the whole picture yet. A new owner would need to show a strong case for us to vote against Dan Rooney," said Green Bay Packers President and Chief Executive Officer Mark H. Murphy.
Because about 112,000 cheeseheads actually own the team -- but get no royalties from revenues -- Murphy represents the only publicly traded nonprofit club at NFL owners' meetings. During those confabs, Dan Rooney sits with two chums -- John Mara of the New York Giants and Jerry Richardson of the Carolina Panthers.
How tight are they? Mara insists his loyalty to Rooney "extends to just about anything." When Rooney, Richardson and Mara gather for league meetings, the first to arrive saves seats together for the trio. Not that it's all that necessary. During the past 15 years, other owners have learned to leave three seats in a row for you-know-who.
Through a spokesman, Richardson declined comment. Mara said NFL owners wanted Dan Rooney to retain control but refused to telegraph how he would vote if his pal asked.
"There isn't one person in the league who wants this to happen. Everyone wants it to work out. Dan Rooney is the most respected owner in the league," said Mara, the grandson of Hall of Fame Giants founder Timothy Mara and eldest son of Hall of Fame Giants boss Wellington Mara.
Other owners also are taking a wait-and-see approach.
"There's no man in that room who has more respect and pull than Dan Rooney. That's period," said Indianapolis Colts owner Jim Irsay.
"At the same time, the game's bigger than all of us, and no one is going to do something that isn't consistent with what is in the best interests of the National Football League and the sort of rules and different things that are set up.
"There's always a way to tailor-make something if it's reasonable. You're going to try to make it work, but you have to understand that no one is going to do anything that blocks something that would be out of sheer friendship that would go against business practices and the good of the game and the league."
Vowing to do everything he can to help the Hall of Fame Steeler keep a team his family has held since 1933, Irsay said he spoke to Dan Rooney in the middle of July about the potential sale. Irsay said he found the eldest of The Chief's sons "optimistic," but also "pragmatic enough to know that he's got his hands full."
"You do the best you can. It's like anything else if you're facing 4th and 19, you try to come up with a play and you try to execute it. It's a tough deal, but I think he's looking at every avenue, and I'm sure that there's a lot of moving pieces and things to make it work," Irsay said.
The Trib canvassed investment bankers, deal makers, and tax and probate attorneys across the continent to gauge the likelihood of Dan Rooney blocking a Druckenmiller bid for majority control of the team, if his brothers sold. Consensus: Slim chance.
"I don't think legally you can force other members of the family to hold onto ownership. I don't think that would pass legal muster," said New Jersey MZ Sports CEO and President Mitch Ziets, an investment banker focusing on the sports industry.
"Here's the way it would work in the real world: They would find another buyer, and another buyer, and another buyer and another buyer. You can't keep shooting people down. The league would get sued at some point. You can't just thwart a sale."
The NFL was alleged in Milstein's lawsuit against the Cooke estate to have conspired to have tampered with the bidding process, the NFL was not named as a defendant in the civil action. Although there was an offer made by NFL to return Milstein's multimillion-dollar deposit if he agreed to sign a full release of the NFL and its member clubs, he did not sign the release. He later was unsuccessful in winning his case against the Cooke Estate.
The Redskins and their stadium eventually transferred to marketing services billionaire Daniel Snyder, an estate sale triggered by the death of legendary owner Jack Kent Cooke in 1997.
The same issues that drove the Cooke family to eventually sell to Snyder are bedeviling the Rooney brothers and other scions of professional football families who want to pass teams to the third and fourth generations. Seventeen of the 32 franchises were purchased before 1990 and some, like the Bears and Cardinals, have been in the hands of relatives since early in the 20th century.
Top worry: State and federal estate taxes will gobble up half the team's value in the event of a death. Rocketing franchise values mean that it's hard for minority owners like Dan Rooney to raise the capital necessary to buy out the other partners to pass the franchise to his heirs.
Each of the Rooney brothers holds a 16 percent stake in the franchise. Their investments in increasingly lucrative casino gambling operations in New York and Florida are at odds with NFL rules against wagering, but that's not their only problem.
NFL bylaws mandate that a controlling owner hold at least 20 percent of a team's stock. Some clubs owned by longtime football families, like the Steelers, are grandfathered in -- a "controlling owner" must hold at least 20 percent of the franchise stock, with another 10 percent kept by his or her immediate family.
Just to comply with the NFL's rules, Dan Rooney must convince his brothers or their McGinley relatives to let him increase his stakehold, while praying they don't sell more to a rival offering more cash. Then, he must convince a brother to retain that crucial 10 percent cut.
Depending on the market value of the team, that means Dan Rooney first must find between $28 million and $48 million.
"The problem is that if you're a minority shareholder, you believe you deserve a minority discount," said Schneider Downs managing partner Donald A. Linzer. "But the others might not agree."
If Rooney can't find that kind of scratch or fails to persuade his relatives to help him keep the club, he reaches what Linzer calls a "strategy by default" -- one or more white knight investors must arrive to buy shares at high prices and let him or his heirs keep running things.
"Find someone you can live with," said Linzer.
Al Davis finagled that in November when he sold 20 percent of the Oakland Raiders to three East Coast investors for a reported $150 million. Druckenmiller declined to comment on whether he wants a little of the Steelers or a whole lot.
He apparently can live with Dan Rooney. The hedge fund billionaire publicly has praised the Steelers' exec and vowed if he buys the Black & Gold to keep Rooney in the front office.
When it comes to living well with investors, NFL owners and franchise execs pointed the Trib to two franchises they admire for doing just that -- the Packers and the Giants.
Green Bay Packers, Inc. isn't held to the same rules. While there are nearly 112,000 shareholders in the franchise, they don't earn a dividend because the team is really a public nonprofit corporation. Four times in its history, fans have been asked to invest to save the team. They always came through and today hold 4.2 million shares.
With about $240 million in annual revenues and very little debt, the Pack "would be up there" as one of the most expensive transactions if it ever sold, Green Bay CEO Murphy said, but the team can't be traded without all the proceeds going to charity.
"Our shareholders never benefit financially from it," Murphy said.
The Packers took $21 million from a 1998 stock offering to help revamp Lambeau Field. Since the $295 million facelift finished in 2003, new revenue streams from expanded club seating, luxury boxes, pro shops and retail outlets flooded Packer coffers. That kept the team competitive enough vying for players that the Packers won three NFC Division North titles since the renovation.
A former star safety for the Redskins and member of the players' union, Murphy said the Packers are churning profits into a special "preservation fund" in case of labor strife after the collective bargaining agreement with players ends in 2010.
If the NFL families could raise cash by selling shares of non-voting stock to diehard fans like the Packers and three Canadian Football League teams do, small-market franchises could stick around for a long time. Or at least that sort of "hybrid community ownership" is what U.S. Rep. Brian Higgins, D-NY, has asked the NFL to allow Buffalo to pursue to keep the Bills in town, instead of bolting to Toronto in case 89-year-old owner Ralph C. Wilson dies.
NFL rules forbid the practice, except for Green Bay. So that leaves the Giants' model. In 1991, Bob Tisch was a billionaire whose conglomerate included holdings in finance, hotels, resorts, real estate, oil, luxury brands, tobacco manufacturing and insurance.
The Maras were one of the founding families of professional football and ran the reigning Super Bowl champs "like a mom and pop operation," recalled CEO John Mara. Tisch bought half the team and the end result was "a good marriage" that strengthened the franchise by mixing institutional football know-how with modern business practices, according to Mara.
Tisch revamped the team's budgeting and purchasing procedures, brought his expertise in travel and insurance to bear on the Giants' bills and instilled financial discipline. Three Tisch relatives remain on the Giants' board.
"It worked out very, very well. It's been a great relationship with the Tisch family and one of the reasons I think it has been so successful is because it's based on a mutual friendship and a great deal of mutual respect," Mara said