Canadian billionaire and hockey fanatic Jim Balsillie pulled a deal to buy the Pittsburgh Penguins Friday night after the National Hockey League imposed severe restrictions on his ability to control the team's future, sources said.
Balsillie, who co-runs the company that makes the popular Blackberry device, announced an agreement in October to buy the club for $175-million (all figures U.S.). Balsillie, who plays twice a week near his home in Waterloo, Ont., said at the time that owning an NHL team made him "feel like a kid again, quite frankly."
But his purchase hinged on plans to replace the city's 45-year-old Mellon Arena, where the team plays.
Balsillie left open the possibility of moving the Penguins if a company he backed to build a new arena did not win a state licence to operate slot machines. That company, called Isle of Capri, has committed $290-million toward constructing a new facility, but only if it gets the slot machines. A state gaming agency is expected to award the licence to one of three finalists on Wednesday.
Sources say that earlier this week NHL officials imposed several conditions on Balsillie's purchase of the Penguins that would have made it impossible for him to move the team if Isle of Capri wasn't chosen. Under those conditions, the NHL could have forced Balsillie to give up management or ownership of the club.
One source said Balsillie was surprised by the conditions and terminated his agreement, leaving the Penguins' future in turmoil.
Not even the resurgence of the lowly Penguins and their roster of young stars, led by Sidney Crosby, were enough to persuade Balsillie to stay in Pittsburgh.
Balsillie, the 45-year-old chief executive of Research in Motion Ltd., is known as a tough negotiator who rarely backs down from a good fight either in the boardroom or on the ice.
He was unavailable for comment and the announcement of his withdrawal came from hockey legend Mario Lemieux, who co-owns the franchise.
"Jim Balsillie delivered a notice of termination today, and it is our understanding that he has stopped negotiating with the National Hockey League to get the necessary consent to buy the Pittsburgh Penguins," Lemieux said in the release. "While these developments create significant uncertainty, the Penguins organization will re-evaluate our situation after the Pennsylvania Gaming Control Board makes the decision on the awarding of the Pittsburgh gaming licence."
Until Friday, Balsillie had planned to negotiate an arena deal with state officials if Isle of Capri was not chosen for the licence. Pennsylvania Governor Ed Rendell proposed what he called Plan B, under which the state would build a hockey venue with financing coming from government and the Penguins. Under that plan, the club would have paid $8.5-million immediately and around $4-million in rent for 30 years. The plan also called for the state to issue bonds to finance construction, but it was not clear how much that would raise.
Sources say Balsillie saw the plan as a concept that required further discussion. However, his ability to negotiate had been undermined by the NHL's new conditions because they made it impossible for him to move the team if a deal couldn't be struck. "His hands were tied," said one source.
It is not clear if Balsillie will consider making a second bid for the team if Isle of Capri wins the licence next week. The current owners could invite him back.
League commissioner Gary Bettman said in a statement last night that the "development was unfortunate." Balsillie's bid had been given unanimous approval by the NHL board of governors only a couple of weeks ago and everything seemed to be on track until this week.
"I've been around a long time, so it takes a lot to shock me, but we're disappointed," said Penguins chief executive Ken Sawyer.
Sawyer said he spoke to Balsillie on Wednesday in Harrisburg and said, "We certainly knew there were some issues with the league. We didn't know there would be a notice [of termination]today at all, no."
He added that "Isle Of Capri gives certainty to this franchise if they should win the slots licence - and if they don't, it's very uncertain. Let's hope and pray that on Wednesday, Isle Of Capri is awarded the licence and if they're not, then we'll have to evaluate where we are. But this team absolutely needs an arena on the right terms to be successful in Pittsburgh."
With reports from Grant Robertson and Eric Duhatschek