Monday September 8th, 2014

When NHL Commissioner Gary Bettman shot down rumors of imminent expansion to Las Vegas and three other sites last week, he did not seemed offended at having to comment on what amounted to nothing more than informed gossip, but instead by the reported cost of a new team.

“The part of the story that I found particularly difficult is suggesting that we would sell four franchises for $1.4 billion—that's way too low,” Bettman said. “It undervalues our franchises.”

NHL
Ranking the NHL expansion options

Now we have a better idea of what he sees as fair value. According to a report from TSN's Rick Westhead, the league could command an expansion fee for a second Toronto franchise of as much as $1.2 billion.

Let that number sink in for a moment.

Even if the price includes indemnification for infringing on the territory of the Maple Leafs, it's pretty staggering. The $1.2 billion fee wouldn't just be the highest price ever paid for an expansion franchise, smashing the $700 million that Robert McNair forked over for the NFL's Houston Texans back in 1999, it would be more than one estimation of the value of the Leafs. For an expansion team to even be in the price range of hockey's most valuable franchise—Toronto sold last year for a record-shattering $1.4 billion—almost beggars belief.

Bettman also stated that the league hadn't seriously considered expanding recently, but that's about to change. More from Westhead:

While Bettman has insisted the league is not currently considering expansion or relocation, several senior NHL team sources said expansion—along with the league's strategy to grow international revenue—would be key topics during the NHL Board of Governors meetings on Sept. 30 in New York.

Five investment bankers who advise NHL team owners on the sales of franchises said it would only be a matter of time before the league entertains offers for another team in Toronto. The bankers, who collectively have advised both buyers and sellers of NHL teams, as well as owners who have sought new limited partners, said bidding for a new team in Toronto would begin around $800 million. Opinion was split on how high the bidding might go. Three of the bankers said they could see the auction reach $1.2 billion. The other two doubted the bidding would eclipse $1 billion.

"I know at least a dozen guys who would want to talk about bidding for an expansion team in Toronto, and at least six who have the money to do it," said one investment banker, who said several billionaires have asked him to advise them when the NHL gets serious about a Toronto expansion club. "If the NHL does it right, it would attract interest from investors around the world."

Would the league demand a similar cover charge from potential owners in other cities? The TSN report doesn't touch on that topic, but it's safe to assume that the NHL would not. Much in the same way that some teams have taken to pricing tickets higher for certain marquee match-ups, the league would capitalize on what's regarded as the most intense and under-served market by upping the fee exclusively for Toronto. Would-be owners in Quebec City, Seattle and elsewhere would likely pay somewhere in the vicinity of $500 million—still a sizable fee in a league where an established team in New York just sold for somewhere around $485 million, and where the last two expansion teams, the Wild and the Blue Jackets, were bought for $80 million each in 2000.

Charles Wang had secret third deal to sell Islanders

With a solid collective bargaining agreement in place and a massive new Canadian TV deal about to kick in, the league is in better financial shape than ever. But at the same time, revenue streams are maxed out almost across the board. Expansion would prove to be a massive windfall for the NHL's 30 owners—who get to split the entire haul amongst themselves—and, at these prices, provide great prestige for the league. And with the possibility of new jobs to be had with one, two or even four new franchises, the NHL Players' Association would be on board as well.

Are there significant hurdles? Absolutely. But with buyers lined up and money to be made, expansion is inevitable. We'll know soon how close it is to happening.

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