Kingerski: Latest Penguins Bombshell Doesn’t Sit Right

Hearts and thumbs were aflutter Wednesday afternoon after reports appeared that Mario Lemieux, Ron Burkle, and David Morehouse were investigating the possibility of re-acquiring the Pittsburgh Penguins.

Of course, Lemieux is the closest thing to royalty in Pittsburgh since the 1970s Steelers or Andrew Carnegie, and he certainly earned that distinction by saving the Penguins franchise not once but twice, first as a player and then as the first owner-player in NHL history.

His tenure as the owner, at least in the salary cap era beginning in 2005, was largely one of success and improving the Penguins’ organizational image to one of first class because of their treatment of players and business success.

The team was co-owned by Lemieux, Burkle, and some minor investors until 2021, when the sale to the Fenway Sports Group was completed, and Lemieux set sail on his life after hockey.

Until Wednesday.

Whomever leaked that news certainly had timing, as it quickly overshadowed both the Penguins’ introduction of new coach Dan Muse and the arrival of Jaromir Jagr. One might even pessimistically think the timing was intentional.

Pittsburgh Hockey Now was able to confirm Lemieux was interested, but the news stopped there. There has been no official attempt, and there is nothing in process for Lemieux to return as an owner.

Unfortunately for the hopeful, there are a myriad of complications to the story, not the least of which is that a powerful sports marketing and ownership firm already owns the team, which is seeking a minority investor but is not otherwise for sale. After all, the Fenway Sports Group does not just dabble in sports ownership with minority stakes and secondary leagues. FSG owns the most powerful soccer club on the planet, Liverpool FC, a NASCAR team, and one of the two hallmark major league baseball teams, the Boston Red Sox.

And the Pittsburgh Penguins.

FSG is not a boys club of billionaires tossing monopoly money around for giggles, but a group of shrewd and successful investors from multiple walks of life. In January, they opened the door to taking a minority investor as they seek to develop acres of uptown land surrounding PPG Paints Arena. Restaurants, a convert venue, and office buildings are on the agenda.

Of course, none of that precludes FSG from selling out to Lemieux, who led the ownership group that cashed out to the Boston-based FSG for about $900 million in 2021.

Big $$$$

Regardless of Lemieux’s interest, FSG has no reason to sell out completely. In fact, they have hundreds of millions of reasons to stick around.

Not only will the land development significantly increase the value of the franchise, but the NHL is entering an unprecedented period of financial prosperity. The league excised the terminal money pit known as the Arizona Coyotes. The Florida Panthers have become a viable franchise, no longer begging fans to attend with $44 specials that include four tickets, four hot dogs, four Cokes, and free parking.

The Sunbelt teams that were once and seemingly forever a laughingstock to accountants are now viable. New billion-dollar TV deals are putting tens of millions in owners’ pockets.

And most importantly, the NHL is on the verge of expansion, and it won’t be cheap for the mega-rich to get their hands on a pet ice-hockey project. The Vegas Golden Knights paid $500 million expansion fee in 2017\6. Then, the Seattle Kraken had to pay $650 million in 2021. Last summer, the league shook Ryan Smith’s pockets for about a billion dollars to purchase and move the Coyotes to Salt Lake City. One figures the next round of expansion will be far more expensive.

NHL Commissioner Gary Bettman recently opined that the range for the next expansion fee was $1.7 billion to $2.5 billion.

CHA-CHING!

Owners do not have to split expansion fees with the players, so if the expansion fee is $2 billion, each ownership group would receive $62.5 million. Importantly, a group in Atlanta cleared the final hurdles this week for an arena and is expected to submit its expansion proposal soon. And if the league expands to 33 teams, surely they will soon expand to 34.

Correction: The correct number is $62.5 million, not $625 as originally published.

Tell me again why FSG would sell now?

Hard Math

It doesn’t matter how badly fans might want Lemieux to ride into town on his white horse for the third time in his life. This is business, and the last business dealings between Lemieux and FSG left Lemieux with a bitter taste. The view from here is that the Penguins’ savior would not be keen to invest in FSG only to be their minority owner, and FSG has no reason to sell.

Former team president David Morehouse’s inclusion in the reported potential ownership group was also curious. He certainly wouldn’t be the first person to leave politics far richer than when he arrived, but political consulting and being the CEO of an NHL team doesn’t pay that well. Internet searches for his net worth put him in quite respectable territory, but like most of us, far below the billionaire class who invest heavily in professional sports franchises.

Burkle’s net worth is reportedly in the $3 billion range.

Various publications have listed Lemieux’s net worth in the $300 million range.

Now, for the purchase price: If the NHL is setting expansion fees at $2 billion, perhaps as high as $2.5 billion, that means the owners are setting the valuations of their franchises in that realm, too. In 2024, the Penguins were valued at about $1.5 billion, but that was before a new $7.7 billion TV deal in Canada and being two years away from a new U.S. TV deal.

Combined, the Penguins’ potential owners are worth about “only” $3.5 billion, maybe a bit more.

As the final nail in this fairytale, FSG also put out a statement affirming their earlier position that the team is not for sale but seeking small investors.

“FSG is currently engaged in a process to explore a potential minority investment in the Pittsburgh Penguins. The focus is on identifying a small, passive partner, and that is the current framework under discussion with potential investors.”

Given the tidal wave of cash that FSG can expect over the next five years from expansion, league growth, and real estate, a full sale would seem to be a bad business decision. Unless Lemieux can bury the hatchet with FSG and form a group to take over day-to-day control while being a minority owner, this just doesn’t seem in any way realistic.

Sorry.