The Montreal Canadiens Just Cross the $1 Billion dollar Valuation

The Forbes’ list of the 2014 NHL team value is out. The top three spots remain the same: Toronto, NY, and Montreal. A combination of new national lucrative TV licensing deals, labor peace, and growing popularity helped push the value of the teams upward.

Here’s a few observations, the valuation of the:

  • 1- Toronto Maple Leafs is up to $1.3 billion, +13%
  • 2- New-York Rangers is up to $1.1 billion, + 29%
  • 3- Montreal Canadiens is up to $1.1 billion, + 29%

The recent sale of LA Clippers helped fueled higher valuation to all the professional teams. I’m pretty sure in a private transaction, except for maybe the Florida Panthers, any of the NHL teams could fetch more. Unlike a traditional asset, owning a sport professional team is similar to owning a luxury piece of art. Factors other than income, such as ownership prestige and status, help drive prices up.

At the bottom of the list you have the

  • 30- Florida Panthers – $190 million, down 21% this year and the only team that lost value. I believe the Panthers don’t own the BB&T Center either, so you are pretty much buying a team with 20 guys wearing the Panthers’ jersey. If the Panthers, the Coyotes, and the Hurricanes were traditional private businesses, they would be close. But sports team are a different breed of business. You can be cash flow negative for many years and the league will bail you out or some bored rich guy will buy the team of you eventually at some insane metrics.
  • 25- I’m surprised to see the St-Louis Blues holding the 25th spot with a $235 million valuation. I am surprised that I expected them to be worth more. The good news is that they are trending upward. They were 30th in 2012 and 28th last year. The team was bought in 2012 for $130 million, that’s an 80% return already. With the team’s recent success and long history in the league I expect team to be valued higher.

This article on the Montreal Gazette, George Gillett Jr. helped turn Canadiens into a billion-dollar team, motivated me to write this post. As a valuation guy and sports fan, this topic highly interesting to me. The story goes that Mr. Gillett bought 80% of the Habs for $185 million in 2001. This was a dark period for the Montreal Canadiens, they just missed the playoffs for three straight years and your main offensive star was Richard Zednik. At the time nobody wanted to buy that “toxic” asset.

The lesson here is that you get the best price when the outlook is the most miserable. George understood this and took advantage of the fire sale. Eight years later George flipped the team for a nice $575 million. That’s $575 million on the top of the estimated $50 million he withdrew in dividends each year. The circumstances surrounding the transaction were much different in 2009. That time, instead of a dark outlook, the weather was sunny and everybody wanted a piece of the action. You had one seller and many buyers pushing the price higher and higher. I’m sure that if the Habs were on the market today, their would be a bidding war to own this prestigious team.

It took a long time for the NHL to get on par with the other big 3 sports (NFL, NBA, MLB). In the 80s the NHL apparently rejected a national TV right deal because the setting up cameras would have eliminated seats, therefore less revenues. That decision turned out to be costly since it left the sport behind and their first national TV right didn’t come around until the 90s with Fox. Fox had the opportunity to put “modernize” hockey and to make it a first class sport like the other big three. As we know, first impressions are huge. But viewers were complaining they couldn’t follow the puck action. The geniuses at Fox came up with a great solution: Let’s add a glowing puck, laser beam sound effect, and a glowing red tail after a shot. Fox made hockey look like an absolute joke, a cross between roller-derby on ice and American Gladiators. The experiment was a disaster and was eventually dropped. It took many years after that to get a decent TV deal and the respect it deserves.

 

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ValueX Berkshires 2014 Presentation

Valuex berkhisre
This is my ValueX Berkshire 2014 presentation. If time allows me, I intend on writing a full review of the conference in a later post. It was the first time I attended a ValueX conference and I wasn’t disappointed. Value investing can be very lonely at times, so it was great to exchange with other like minded people. It doesn’t hurt to be surrounded by people smarter than you.

My presentation wasn’t a particular stock pitch idea, but pieces of advice on how to navigate frontier markets. It’s pretty long, so I included the powerpoint deck without the narration and the full presentation on youtube.

Powerpoint Presentation – Valuex Frontier Markets Presentation by Brian Langis
Youtube (narration included)

Capitalism Explained

I saw this floating on Facebook, I don’t know who to give the credits too but its pretty good.

Capitalism explained