Ownership began as off-the-cuff remark

 

EDMONTON - Over the years, Edmonton billionaire Daryl Katz was approached many times to either buy an NHL team outright or to become a partner in one.

 
 
 

EDMONTON - Over the years, Edmonton billionaire Daryl Katz was approached many times to either buy an NHL team outright or to become a partner in one.

But he always said he wasn't interested.

"I had no interest in being involved with any team other than the Oilers," he says.

Recently, his old friend Mark Messier, the Oilers Hall of Fame centre, talked to Katz about the pride of being an Oiler and the honour of wearing the copper and blue uniform.

"There's something special to the Oilers, in my view," Katz says. "Something special that not a lot of franchises have."

Katz won't be wearing an Oilers sweater, but he will be buying them for his very own Oilers players. His 15-month pursuit of the Oilers franchise is now over. The cheques are being delivered to the old owners. The deal has closed.

Katz, 47, is now the sole owner of the franchise.

He grew up in Edmonton as a keen hockey fan, tuning in every Saturday night to Hockey Night in Canada.

He played hockey as a kid, making it to pee wee team in his Rio Terrace neighbourhood, but then things got a bit too serious.

"I remember one weekend my parents took us away to go skiing and that didn't sit well with the coach, and he insisted that I make a decision between hockey and skiing. That was the last year I played organized hockey. I chose skiing."

As an adult he played intramural hockey while at the University of Alberta, where he earned a law degree. He has also played in a men's league. But his biggest tie to the game has been as an Oilers fan.

In the 1980s, he was a diehard, a season-ticket holder, his seats just one row behind the Oilers bench. "I went to every game and it was kind of a surreal time to see all the talent on the ice, such an amazing group of young guys who were able to gel and accomplish what they were able to accomplish. I think everybody was moved by it."

At the time, he travelled in the same social circles as players like Messier, Wayne Gretzky and Kevin Lowe, who are about his age. "We were kind of hanging out in a smaller city, so I got to know them all."

He struck up a friendship with them that has lasted close to 30 years. "The guys were all bigger than life."

Katz liked the spirit of those old Oilers. "They really had fun. They really enjoyed each other and the sport."

In his own business career, Katz started to move quickly in the early 1990s, opening his first two pharmacies in 1992 with his pharmacist father, Barry.

Katz saw an industry full of independent regional chains, some of them inefficiently run, ripe for takeover. His plans were boosted by Canada's aging population with its ever-growing appetite for medications, which saw revenues in the pharmacy industry grow by more than 10 per cent each year.

Katz stuck to this plan of acquiring regional pharmacy chains and it worked, so much so that his Rexall Drugs now controls more than 2,000 pharmacies.

"You go through a deal and it has its ups and downs throughout the process, but we have a great team that works on these transactions together -- lawyers, accountants, investment bankers," he said in a 1999 interview. "We have a group of very tenacious individuals, and I think that's what leads to success."

As the years passed, one takeover started to seem like the last one to Katz and he looked for new challenges, which led him to more philanthropic work and now to the Oilers.

TALKED FIRST WITH NICHOLS

He first talked with Cal Nichols, chairman of the team's old owners, the Edmonton Investors Group (EIG), about maybe buying a piece of the Oilers at a luncheon to announce Rexall Drugs' sponsorship of the arena in November 2003.

What was Katz thinking, making such an offer?

"I don't think I was thinking anything. It was more of an off-the-cuff remark."

Things remained stalled until 2007. At that time, it became common knowledge in Edmonton business circles that a number of EIG owners were looking to liquidate their shares. In March 2007, several owners approached Katz and asked if he wanted to buy the team.

"I didn't set out to buy the Oilers," he says. "It all kind of materialized.

"I said I would be interested in it, looking at it to the extent that the current ownership group wanted to sell."

He had no interest in becoming part of the EIG, nor was he asked, but made a number of ever-increasing bids last spring and summer. The EIG emphatically turned down his $187-million bid for the franchise last August, with 32 out of 34 owners voting against the sale. But Katz says he never gave up hope.

"I didn't think it was the end. ... I kind of thought it was all part of a process, a negotiation. If you've been through a lot of transactions, they kind of take on a life of their own, and kind of happen at their own pace."

A turning point came in September 2007, when the EIG board turned down Nichols' recommendation to immediately extend Kevin Lowe's contract as Oilers GM.

The majority of board members were pleased with Lowe, but they didn't want to upset fans already angry over the Ryan Smyth trade and the 2-18 losing streak at the end of the 2006-07 season. They felt it was best to wait to extend Lowe's deal, to see if the team first turned it around in the fall of 2007, and then extend his contract.

For the first time in his years as chairman, Nichols lost a major vote.

But just one week later, after a blow-up between Nichols and his opposition on the EIG, the board did a flip-flop, granting Lowe a four-year extension.

Katz made his new bid to buy the team in November 2007, just as all this turmoil over Lowe's contract and other matters was festering.

Katz says his timing was coincidental, that he had no idea about this internal EIG warring. "I really was not privy to everything that was going on on the inside."

But it's no shock to Katz that the EIG board would disagree about matters such as Lowe's contract extension. "You have 32 strong-minded guys, and 10 or 11 guys on a board, all of them successful in their own right, and they all have different opinions, and you will have some guys who say, 'Yes,' and some guys who say, 'No.' "

Katz says Nichols had a tough job as EIG chairman, with so many partners to handle. "He's a man that has an awful lot of patience to go through what he went through, that's for sure. I could see how it could be very difficult."

In November, when Katz again contacted EIG shareholders, he started to feel the majority were now in favour of the deal. Many of them encouraged him to pursue his bid, he says.

In mid-November, he met with Nichols to spell out his vision for the team and the new arena. Two weeks after that meeting, Nichols decided it was best for himself, the franchise and the city if he sell his shares to Katz.

DIRECTLY TO EIG

Though Katz went around the EIG board and took his offer directly to EIG shareholders, he says it was not a hostile takeover. Every EIG partner had the right to hear his bid, he says. "Every shareholder should have the opportunity to make up his mind."

The most emotional time came in late January and early February 2008, as the EIG owners made their final decision, Katz says. "There was a lot of anxiety over which way it was going to go. I was anxious. ... We wanted to be successful."

He was in no way certain the shareholders would pick him to run the team, as opposed to an EIG faction led by Bill Butler and Gary Gregg, he says.

"This wasn't an easy transaction."

Katz campaigned hard, meeting with many of the shareholders personally to explain his vision to them. "I think that kind of helped a lot."

More than anything, Katz says, there were succession issues within the EIG. "Guys had been in the deal for 10 years and had stepped up to save the team, but I don't know that they saw liquidity in the foreseeable future and many of them were getting older and wanted to achieve some degree of liquidity."

Katz says this deal with the Oilers was a different kind of business transaction for him.

"There is a personal element to owning a hockey team and owning the Edmonton Oilers. There's something that is a lot more tangible to me than owning a bunch of drugstores. And it's also more emotional because you're a fan of the sport and a fan of the team."

Katz says he has yet to celebrate the deal. "A lot of people have been working really hard to get it to this point. So (today) there will be an exchange of funds and the transaction will close, so then it will be time to celebrate."

One issue that came up during negotiations with the EIG was the so-called location agreement, a proposed deal between Katz and other parties that would essentially say before he ever moved the Oilers from Edmonton, he would first have to offer the team for sale to local buyers at a set price.

The EIG bought the Oilers in 1998 under the terms of such a location agreement, but it lapsed in 2004. But Katz says he has been advised that there is already a location agreement in place. "It's called a lease, and it goes until 2014."

There will be no separate piece of paper signed called a location agreement, he says. Katz says it's ridiculous to suggest he would ever move the team.

"There's no better hockey market than Edmonton ...

"Why would you leave a city that supports the team, that is crazy about hockey, that has a legacy? Why would you go anywhere? Where would you go? It makes no sense to me. This whole location agreement thing, to me, was just absolutely arbitrary."

Katz says he will keep a low profile as owner. There is a public side to owning a hockey team, he recognizes, but he's going to leave the operation of the business to management. "I'm going to leave management of the team to the guys who are the professionals."

It will be up to Lowe to manage the complexities of the NHL's salary cap, but he will be able to spend to the top of the cap. "He will have the flexibility to do whatever he wants."

NHL owners can help out by spending extra millions, either by buying out contracts or by being willing to pay major-league salaries to players who don't pan out and are sent to the minors. The salaries of players in the minors don't count against the NHL team's cap.

Katz says he is open to such moves. "That will be up to Kevin. If it's in the best interests of the team and he feels like we should do it, then we'll do it."

It's all about winning, Katz says. "I've told all the guys we're going to do whatever we have to do to make the Oilers a competitive, elite team in the National Hockey League.

"We will run the business to be a winning team, because if you're a winning team, everything else takes care of itself."

dstaples@thejournal.canwest.com

 
 
 
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