Winnipeg Free Press - PRINT EDITION

1,000,001 things to do before deal completed

Buying, moving team remarkably complex

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IN a boardroom far, far away -- probably in New York or Atlanta -- teams of lawyers are hashing out the final details of an agreement that would move the Atlanta Thrashers to Winnipeg.

Local business and legal executives, no strangers to multi-million-dollar deals themselves, say it's highly likely that a term sheet has been agreed to between True North Sports & Entertainment and The Atlanta Spirit Group. That would cover the big-ticket items, such as the sale price, a transfer fee, whether the payments are upfront or staggered, when the deal will close and when the ownership will officially change hands, pending approval from the National Hockey League's board of governors, of course.

But there is a laundry list of much smaller things that must be negotiated before a deal can be considered "final."

For example, what's happening with the team's employees, from marketing personnel to the sales team to clerks that aren't moving to Winnipeg? How much severance pay should they receive and will it be covered by the buyer or the seller?

How do you deal with different accounting year ends? Are any leases being broken? Do any players have no-move-to-Canada clauses in their contracts? What is the value of the Thrashers' name, logo and brand? And if True North doesn't want it, how is that factored into the purchase price?

"The tail ends of deals are disgustingly complicated but loose ends that must be nailed perfectly," said Charlie Spiring, CEO of Wellington West Capital, a Winnipeg-based financial services firm.

"It's an unfortunate part of all deals. The deal gets done and the papering drags it out. The person in the street has no idea how much it can drag. I have no doubt the (Thrashers to Winnipeg) deal is done on a term sheet basis. A definitive agreement is the next stage, that's the complicated legal document," he said.

Spiring said having three parties involved in the deal -- the NHL is the third -- further complicates things.

"Even signing off on press releases won't be easy because there are three groups," he said.

And even though the province isn't putting up any money for the team, it's a partner in MTS Centre so Premier Selinger may want to have a look at it.

"If that happens, (the closing) may go from one week to three because government lawyers are slow," Spiring said.

One absolute must is turning a pack of forensic accountants loose on the team's financials to verify its cash flow. Or, in Atlanta's case, the lack of cash flow.

"It's one thing to say the team makes money but it's quite another to have a team of accountants substantiate and verify the actual cash flow," said Glenn Crook, Winnipeg-based vice-president of commercial financial services at RBC.

It's no different than the process people go through when buying a house. The owner might say it's worth $300,000 but he's more likely to get that price if an appraiser comes in and signs a document verifying that he agrees with that value.

Lawyers on the acquisition side need to digest the league's constitution and collective bargaining agreement and use them as a check list to determine territorial, media, naming and sponsorship rights, according to Bob Sokalski, a partner at local law firm, Hill Sokalski Walsh Trippier LLP.

He said the fact that the team is being moved from one country, with its own set of tax laws, to another with a different set of tax laws, can be a significant factor in the length of time it takes to finalize the deal.

"The players are being paid in Atlanta and there will be certain obligations to the Internal Revenue Service that are different under Canada Revenue Agency. With the players' association pension, who's withholding the players' dues? Presumably, there will be a fund for union dues and the transfers will need to made," he said.

Sokalski, legal counsel to the Winnipeg Blue Bombers, described the work involved in finalizing the purchase of an NHL hockey team as "monumental" and said both sides probably have large teams of lawyers.

geoff.kirbyson@freepress.mb.ca

Republished from the Winnipeg Free Press print edition May 25, 2011 C4

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