PITTSBURGH — When Mario Lemieux and Jim Balsillie first met at a charity event in Toronto a couple of years ago, they played a round of golf together and Lemieux won.
The two met again this week to shake hands on a deal that will see Balsillie buy the Pittsburgh Penguins for about $175-million (U.S.) from a group led by Lemieux. Just who came out ahead this time isn't clear yet.
But Balsillie, the billionaire co-chief executive of Research In Motion Ltd., has paid what many consider to be a sizable sum for a club that's been mired in financial trouble for years and still has no idea where it will be playing next season.
The Penguins have been in and out of bankruptcy protection twice in their 40-year history and the club has spent the past eight years wrangling with local politicians over plans for a new arena. On the ice, the team finished near the bottom of the league last year despite having one of the brightest young stars in Sidney Crosby.
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Even Lemieux, a hockey legend and one of the city's best known athletes, couldn't make the team work after he led the effort to buy the Penguins out of bankruptcy in 1999. During a news conference this week, he gave Balsillie a taste of what life has been like as a co-owner of the club. Selling the team "is something that I've been looking forward to for a while now," he said. "It's money that I should have been paid years ago."
When asked if he felt bitter, Lemieux said: "I've been disappointed a little bit but I understand politics now. Everybody lies and then you go along with it."
Balsillie's interest in buying the team began last spring when he was asked if he might be interested in making a bid. A passionate hockey fan all his life, Balsillie, 45, jumped at the idea and began working on an offer with a team of advisers that included a law firm in Los Angeles and financial experts from Citigroup.
Lemieux's group had put the Penguins up for sale late last year and the auction was run by Allen & Co. out of New York. It was not an easy process to manage. Lemieux had nearly a dozen partners, all of whom had different interests. And, then there was the arena issue.
Lemieux and his partners had been pushing for a new building to replace the 45-year old Mellon Center since they bought the club. They'd recently struck a deal with a company called Isle of Capri. Under that deal, if Isle of Capri won a licence from a state agency to run slot machines, the company would contributed $290-million toward construction of a new facility for the Penguins.
But Isle of Capri was one of several companies bidding for a slots licence and none of the others planned to contribute to a new hockey arena. So if Isle of Capri didn't get the licence, the Penguins were back to square one.
To help solve that problem, Pennsylvania Governor Ed Rendell came up with a complicated proposal, called Plan B. Under his idea, if Isle of Capri didn't win a licence, a new arena could still be built with funding coming from a variety of sources, including the Penguins and other gaming revenue.
While the arena debate dragged on this summer, Allen & Co. sifted through at least four offers for the Penguins. Balsillie was among the last to submit a bid, a fully-funded offer worth $175-million. By July, Lemieux and his partners decided to go with a rival offer led by developer, and former Torontonian, Sam Fingold. It looked like a done deal but negotiations broke down in early September and the Lemieux group turned to Balsillie.
He immediately submitted a letter of intent, based largely on his previous offer. After a few weeks of back and forth, a final deal was signed last Wednesday. The next evening, Balsillie flew to Pittsburgh to announce the purchase and attend the Penguins' home opener against the Philadelphia Flyers.
During a news conference, Balsillie was all smiles, vowing to return the Penguins to their glory years and promising to work with local officials on building a new arena. "I want to get it done quickly," he said.
But it didn't take long for him to get peppered with questions about the club's future. The state agency hasn't awarded the slots licence yet and Plan B has come under criticism from some local politicians.
Balsillie said he was committed to the Isle of Capri proposal and he side-stepped questions about what he will do if the company's bid fails. He is not obliged to follow Plan B, which has been rejected by Lemieux mainly because it would require the club to kick in $8.5-million initially and make annual payments.
Sources say Balsillie has pondered moving the Penguins out of the city, but only if an arena deal can't be worked out.
Pittsburgh Mayor Luke Ravenstahl has pledged to work with Balsillie on an arena deal and he said this week that he remains confident an agreement will be worked out.
But many observers say the mayor's position is weak. Only 26 years old, he became mayor last month when the incumbent died of a brain tumour. Another key politician, Allegheny County chief executive Dan Onorato, has also expressed confidence that a deal will be reached to keep the team in Pittsburgh.
For now, all eyes are on the state's gaming authorities who are expected to make a decision on the slots licence in December. If Isle of Capri loses, the future of the Penguins could be thrown into doubt.
"It's very simple," said a source familiar with the arena issue. "You put an arena there, team stays. You don't, team moves."
