As Good As It Sounds For Pegula, Temper That Optimism

31 Jul

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The Bills always ask us to BILLieve, and the report from John Kryk of the Toronto Sun breeds way too much optimism for fans that want to see Terry Pegula ascend to the top of the Bills heap.

Let’s sit here and assume the numbers are correct. $1.3B bid from Terry Pegula sounds like a Pegula-esque bid – 50% greater than the estimated value of the franchise at $870MM. Not exactly Ballmer-like, but definitely the move of a guy holding two aces and the big stack at the table.

And we can look at the math and say that Jon Bon Jovi is over his head, if that’s the case. It was pretty easy to figure before the rumored numbers were being thrown out. Whether Bon Jovi is worth $300MM or $500MM, the numbers don’t work out – with him as the primary owner.

To be the primary owner, the NFL requires a person to have at least a 30% stake in the team. The NFL also doesn’t allow much leveraged debt to be involved, only $200MM tops. If Bon Jovi is worth $500MM, how much of that net worth could actually be liquid? He could sell his stake in the Philadelphia Soul, and probably some other holdings. But seriously, who is going to put their entire nest egg into a football team?

It most likely would be a worthwhile investment, with the NFL being quite profitable and a good return on invested dollar. But it’s a place of potential peril – any negative event personally or in the life of the team could spell major issues for the individual and the franchise. That’s not a position the NFL prefers.

So Bon Jovi’s resources are limited, and even if he secured the maximum loan funding to purchase the team and liquidated half of his wealth ($250MM), that’s $450MM. That’s a 30% stake in a $1.5B bid in concert with Larry Tanenbaum and Edward Rogers.

The Kryk article above sheds light that 50% liquidation is probably farther than the rock star is willing to travel down the road of wealth manipulation. His sources give $1.2B as their max point, which you may or may not believe.

So why temper the optimism?

Bon Jovi doesn’t want to be a secondary owner, but he may not have a choice. Obviously if he pulls out, the Toronto bid doesn’t necessarily go away, but it takes a significant hit.

Tanenbaum and Rogers are executives in major corporations, but it’s not clear if they personally have the wealth to compete.They are well connected to the sports and political scene in Toronto, but may not have been personally willing to front the big money to compete.

But it could still depend upon the overall trajectory of the league, and whether they are truly copacetic with the Bills remaining a Buffalo-based franchise. The NFL’s ownership trends scream the Pegula name, but if the NFL wants a team in Toronto, they could do whatever they want. They make their own rules after all.

Let’s be real though

The Ralph Wilson trust has a person willing to pay 1.5X the market value for the Bills to presumably keep them in Buffalo. That’s huge. If Pegula has outpriced Toronto, then that’s a major development. Depending how the story ends, it is a significant moment in the history – and future – of the Buffalo Bills.

But there are still unknowns.

Could there be another bid that comes in? We assume this process is somewhat set in stone, but you never know.

We also assume the NFL is going to avoid controversy. If they turn down Terry Pegula’s bid in favor of a marginally better bid from an outsider looking to beat the lease and move the team, they will be bludgeoned in the media and in the government. Does Roger Goodell really want to get Chuck Schumer & the New York Congressional contingent angry? I doubt it.

Measured optimism is the course right now. It’s tough not to be optimistic – even for a Bills fan. What kind of party will it be at Ralph Wilson Stadium on September 14th, if Pegula is only an Owners’ meeting approval away from carrying on the legacy of Wilson?

But it’s still early…

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