By August, 2013, most thought any relocation conversation about the Arizona Coyotes’ destination was done.
That’s when the NHL finally found a buyer for its forlorn Coyotes and new ownership foreshadowed economic viability and stability. Previously speculation that the franchise would move to Kansas City, Seattle Las Vegas, Hamilton, Quebec City or parts unknown was dispelled and buried.
Along came a newly-formed corporate identity, trading by the name of IceArizona and under the control of Canadian ownership, and bought the Coyotes from the NHL for $175 million. Immediately, two Canadians, George Gosbee and Anthony LeBlanc, the driving force behind IceArizona, began to structure the Coyotes’ financial house. New corporate partners were found, long-term agreements were entered, naming rights to their home rink changed and generated additional income, season tickets sales expanded and a new television deal with FoxSports Arizona was finalized.
All appeared good until it came time to deal with the IRS.
As foreigners owing an American company, IceArizona came under a high tax obligation between 15 and 30 percent as well as gift and estate taxes. At the same time, IceArizona was prevented from participating in some tax advantages under the corporate NHL banner. If the Gosbee-LeBlanc/IceArizona contingent continued to hold the majority stake in the Coyotes, the tax burden could likely drive them from control. Worse for Coyotes fans in the Phoenix area, the tax situation could likely be the catalyst for movement of the franchise.
The latter would not sit well with the NHL. That’s because the league had emphatically said over the past number of years that it wants a franchise in the Phoenix market. While neither party will admit, it would seem to be a reasonable assumption that action moved on two fronts.
First, the league saw the commitment and viability of the Gosbee-LeBlanc team running the Arizona franchise, and second, as a result, sought to give tax relief.
Enter Andrew Barroway, who twice-failed attempts to buy the Islanders and Devils, and now skates into the Coyotes’ picture.
The scenario parties like to tell that Barroway’s bankers and Gosbee-LeBlanc bankers meet and “happen” to discuss the future of the Arizona franchise. A more likely depiction is that the league brought the parties together to an effort to bring tax relief to IceArizona and keep the franchise in the desert. The bottom line was that Barroway would be able to acquire a majority stake in the Coyotes, “a life-long dream,” he says of directing an NHL team, and the league retains its desire to keep a franchise in the Phoenix market.
On Wednesday, the final day of 2014, the NHL board of governors finalized the transaction and Barroway became the majority stake-holder of the franchise with a 51 percentage take. For that 51 percent, Barroway reported paid $155 million, or 51 percent of the reported $305 million value of the franchise. That means Barroway, a Philadelphia lawyer by trade and hedge-fund manager who controls a reported $1 billion in assets, takes over the franchise. The Coyotes now have an American holding a majority stake and that will ease the tax burden considerably.
The realistic advantage to Gosbee-LeBlanc is that the transaction was made during the calendar year of 2014. At a Friday news conference to announce the transaction, LeBlanc was asked whether the Dec. 31, 2014 date was significant because this allowed tax relief for the year 2014. “Yes,” was his one word response.
everyone is satisfied
In the end, all parties appeared to get what they wanted.
Gosbee-LeBlanc continue to call the shots, to a certain limit, on the economic direction of the franchise, the NHL gets longevity on a franchise in the Phoenix market and Barroway realizes his desire to own an NHL team. With 51 percent of the majority stake, Barroway will be the final decision-maker and said he will sit down, in the near future, with general manager Don Maloney and coach Dave Tippett to discuss personnel and budget for the future.
A sizable portion of Barroway’s influx of $155 million will go to two critical areas.
“Upgrading scouting and player development will be a priority,” said Tippett. “Other teams have spent huge amounts of money in these areas and because we had very little budget over the last few years, these areas did not receive much attention. We have some ground to make up in this area.”
Despite the addition of the $155 million from Barroway’s pocket and a renewed spirit, not much will change in the locker room. Veterans like captain Shane Doan, defenseman Keith Yandle, center Antoine Vermette and others have transitioned between NHL ownership, IceArizona and now Barroway’s presence over the past few years. The bottom line remains winning games on the ice.
“This team has gone through a great deal of adversity in the past,” said Vermette after practice Friday and prior to the news conference. “We’ve seen quite a bit and I think the change can be good. This gives us more stability but the change itself really does not effect the players all that much. We still have a job to do on the ice and it’s up to each players to do his job.”
into the future
When summon back to Phoenix for the Barroway announcement, Maloney was in Montreal watching Coyotes’ prospects in the World Junior Tournament.
Though on site for five days, Maloney reported a dramatic change in two top draft picks, Max Domi,(a first round selection and number 12 overall in 2013) and Christian Dvorak, a second round pick in 2014 from the London Knights.
While Tippett told reporters after Friday’s practice Domi “is driving the team,” Maloney pointed out that Domi, the son of former NHL enforcer Tie Domi, was more direct.
“Max has changed dramatically from when we last saw him in training camp in September,” Maloney said. “He is more of a dominant player and makes something happen on every shirt. He’s directing the power play, killing penalties, directing teammates. He is doing everything we hoped when we drafted him.”
follow Mark Brown on twitter, @journalist193
I find it hard to believe that this bunch of Canadians didn’t know about the tax consequences prior to their purchase of the Coyotes. Something smells a little funny with this whole story.