An Offer They Couldn’t Refuse
In November of 1998 the team was forced to declare bankruptcy. And who held the bulk of the team’s debt?
It turned out that Mario had been deferring millions of dollars from his contracts during his playing career to be compensated in retirement, à like Bobby Bonilla.
The Penguins owing Mario at the time the bankruptcy was filed.
Mario also requested $5 million in cash for running costs in addition to his offer to convert $20 million of the debt into team equity.
He also wanted the opportunity to put together a new team of investors to buy out the entire franchise. Additionally, he pledged to keep the group in Pittsburgh.
The Penguins were then purchased by a group of investors, lead by billionaire Ron Burkle, who contributed $20 million, after Mario went out and found them.
In exchange for converting his $20 million compensation and putting the deal together, Mario Lemieux came out of the negotiations with a 25% ownership stake in Penguins. Burkle held 19 percent, while the remaining 80 percent was divided among a few dozen smaller investors.
Lemieux’s ownership eventually reached about 40%, while Burkle’s share rose to 25%.
Mario was the first retired NHL player to hold a majority ownership position in a business.
The team’s fortunes dramatically turned around over the following two decades. The Penguins suffered a $16 million loss the year before he took control. The Penguins reported a $47,000 profit in his first season as owner. In recent years the team has earned over $160 million in revenue.
Three further Stanley Cups were won by the group under Mario’s direction in 2009, 2016, and 2017.
Mario continued after that.
The team still owes other creditors $60 million. Mario and the team could have used the bankruptcy proceeding to negotiate the debts down to pennies on the dollar.
Mario is about to receive recognition for his great governance and good acts.
A Huge Windfall
The minimal book value is that.
Although the terms of the agreement have not been made public yet, most media sources predict that the sale will be for about…
For $20 million twenty years ago, not a terrible deal!
Before you go, I should mention that Mario wasn’t the only professional player who considered turning his deferred income into team ownership in the late 1990s. Back in 1998, NFL quarterback John Elway was given the option to convert $21 million in deferred salary plus $15 million in cash into a 25% stake in the Denver Broncos. At the time the Broncos were valued at $180 million.
Elway opted out.
The Broncos are currently valued at $3.75 billion.
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