Posted on 04/28/2007 7:34:49 AM PDT by canuck_conservative
VANCOUVER, B.C. - This city is in the throes of playoff hockey ecstasy, and agony. The Vancouver Canucks are in mortal secondround combat with the powerful Anaheim Ducks. Unbeknownst to many Canucks fans, there is another battle brewing, with more at stake than bragging rights and silver trophies. On the line are family connections, closely guarded business secrets, and a $250-million prize: Control of the 35-year-old NHL franchise itself, and the 18,600-seat, profit-churning arena where the team plays.
A bitter ownership dispute between two wealthy Vancouver families goes to trial on Monday in the Supreme Court of British Columbia. In one corner is the Gaglardi clan. It claims to have been betrayed by former friends and business associates, the Aquilini family, during a protracted attempt three years ago to purchase the Canucks from reclusive Seattle billionaire John McCaw Jr.
The Aquilinis deny they benefited from confidential information -- allegedly obtained from the Gaglardis -- when they successfully and very quietly negotiated a deal for the Canucks.
No one saw them coming. The Aquilinis shocked Vancouver's tightly knit business community, announcing in November, 2004 that they had purchased a 50% share of the Canucks and the GM Place arena.
This, when the Gaglardis seemed within a whisker of closing their own deal, for full control of the franchise.
The Gaglardis and a local business partner, Ryan Beedie, are suing Aquilini Investments Group, Inc. and its principal, Francesco Aquilini. Also named as a defendant is Mr. McCaw. Rarely seen in public, he is expected to testify at the upcoming trial, something he cannot relish. Information gleaned from supporting court documents suggests the proceedings will be long, complex, and intensely personal.
According to the documents, Mr. Mc- Caw decided to sell the Canucks and GM Place in 2003, after losing "many tens of millions of dollars" since acquiring the enterprise in the mid-1990s.
His timing, however, was strange. The team's fortunes had improved by 2003, thanks to a more robust performance on the ice, and a stronger Canadian dollar that helped the club meet its US$42-million player payroll obligations. Forward Todd Bertuzzi, then a roster star, alone pulled in close to $8-million a year, including signing bonuses.
Court documents filed provide a rare glimpse of the team's finances. They show the Canucks posted a relatively small loss of $890,000 in fiscal 2003, when other NHL teams were in the poor house. GM Place produced a net cash flow of $14.6-million. The enterprise was profitable and even better days were on the horizon.
Nevertheless, Mr. McCaw told Canucks executives that he "was not going to provide any further funding to the team, [and that] they had to make it on their own with what they had," according to court documents. The team was reduced to "scavenging the Earth" to find replacement parts for its aging score clock.
Mr. McCaw hired a consulting firm to approach potential buyers. Ryan Beedie and Tom Gaglardi, CEO of Northlands Properties Corp., his family's privately held real estate and restaurant company, expressed interest and invited Francesco Aquilini to join them.
In their statement of claim, Mssrs. Gaglardi and Beedie allege they formed a partnership with Mr. Aquilini to buy 100% of the Canucks and GM Place.
It seemed a natural fit. The Gaglardi and Aquilini families had close business and personal ties, going back two decades, when patriarchs Robert Gaglardi and Luigi Aquilini forged a bond. What's more, Francesco Aquilini had tried to acquire a piece of the Canucks in 2001.
Negotiations with the team's holding company, Orca Bay Sports and Entertainment, began in November, 2003. Mr. Gaglardi made handwritten notes during one meeting with club executives; copies were later filed in court. They indicate that each regular season Canucks home game generated revenues of $250,000. "Playoffs are worth at least double," Mr. Gaglardi jotted on a piece of paper.
Sales of team merchandise and royalty fees produced an annual profit of $2-million, he noted.
Less encouraging was this piece of information: Former Canucks forward Mark Messier, who had played his last game with the team in 2000, was still owed approximately US$5.5-million in "deferred compensation." Payment was not due until July, 2007.
Negotiations continued; however, Mssrs. Gaglardi and Beedie claim that Mr. Aquilini conducted secret meetings with Orca Bay. Confronted in February, 2004, Mr. Aquilini allegedly agreed to never again discuss the proposed purchase with Orca Bay.
One month later, Mr. Aquilini complained to Mr. Gaglardi that the proposed purchase was "going nowhere." He pulled out of the partnership, allege the plaintiffs. But they continued to provide him with "confidential information" relating to their negotiating positions and strategies, just in case he changed his mind and decided to participate.
Mr. Gaglardi and Mr. Beedie claim he used these secrets to make his own deal with Mr. McCaw and Orca Bay.
In a statement of defence, Mr. Aquilini says there was no partnership.
True, he had agreed to participate in negotiations with Orca Bay, but then "lost interest."
Losing Mr. Aquilini and his family's considerable resources was a blow. Talks with Orca Bay dragged on for months. Court documents indicate that Mr. Beedie's father, Keith, a Vancouver land developer, was concerned the group lacked sports management experience, and suggested in an e-mail to his son that they seek partners. "Say a total of five, made up with someone who knows hockey business."
"Nice in theory," replied Ryan Beedie, in an e-mail, "but who has this experience?"
They forged ahead. A "term sheet" outlining their purchase conditions was forwarded to Orca Bay executives. A deal seemed imminent. Speculation about a sale to the Gaglardi group appeared in local media.
Mr. Gaglardi conducted some more "due diligence," and in September, 2004, forwarded to the Canucks a long list of questions he still had about the team's operations.
Many of the questions focused on minutiae; some seem almost trivial, considering the proposed deal was worth $250-million.
"Who pays for [forward Markus Naslund's luxury] suite?" Mr. Gaglardi asked. "Which employees get free tickets ? 405 comp tickets per game in [fiscal 2004], why?"
Meanwhile, Mr. Aquilini was back in the picture. In late October, an examination for discovery reveals, he took a boat cruise hosted by David Ho, a well-connected Vancouver entrepreneur and airline impresario. Also on board was Orca Bay's president and CEO, Stan McCammon, the man directing the Canucks sale on behalf of John McCaw.
Four weeks later, according to his own recollection, Mr. Aquilini met with Mr. McCammon at Don Francesco's, a popular Vancouver restaurant. Mr. McCammon was blunt. He told Mr. Aquilini that they were "free to negotiate" a deal for the Canucks and GM Place.
Mr. Aquilini replied that his family would like to purchase just 20% of the team. He soon increased the proposed stake to 50%, believing, he said, that this would allow his family to "write off the [team's] player contracts," which then totalled US$42-million.
"We were relying on those tax writeoffs," he told lawyers, in an examination for discovery process.
On Nov. 5, two days after Mr. Aquilini made his secret offer, Tom Gaglardi received a surprise phone call. It was from John McCaw in Seattle. All negotiations were off, said Mr. McCaw.
Twelve days later, Orca Bay announced it had reached an agreement to sell 50% of the Canucks and GM Place to Mr. Aquilini. The selling price was $124.9-million.
Mssrs. Gaglardi and Beedie were furious. "Tom Gaglardi and ourselves have been shafted and screwed," Mr. Beedie told the Vancouver Sun. They filed their lawsuit in January, 2005, alleging breach of confidence and breach of fiduciary duty.
They claim they had a deal with Mr. McCaw, and that the Supreme Court of B.C. should allow them to go back to the table and execute it.
Mr. Aquilini has since acquired the remaining 50% in the Canucks and GM Place; terms were not disclosed. He does not wish to sell his hockey franchise, which is now a Stanley Cup contender.
His former friends, he said in discovery proceedings, "were trying to negotiate a deal for a year and couldn't get it done."
He completed his deal in a matter of days. "I would be pissed off, too," said Mr. Aquilini, "but that's the way it is."
Hockey, after all, is a rough-and-tumble business.
bhutchinson@nationalpost.com
© National Post 2007
Some interesting and rare details of the business of sports here!
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Cancukistan *ping*
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There is a hockey ping list... airborne (who I have copied) is handling it.
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