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Rams deal critical to the NFL

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  • Rams deal critical to the NFL

    The success of the agreed upon deal to sell controlling interest of the St. Louis Rams to Illinois businessman Shahid Khan is going to be a leading indicator of the relative financial health of NFL franchises and a barometer of the future health of the league as a whole as it heads into a year of labor strife. The deal, which will not be formally presented to ownership until the owners’ meetings in late March, will clearly be the second biggest business issue, after the state of labor relations themselves.

    Khan, the 55-year-old president of Flex-N-Gate Corp., a manufacturing company that makes pickup truck gates, is offering a deal, according to informed sources, that puts the total value of the Rams at around $750 million. That’s less than the franchise’s Forbes valuation of $913 million but more than what other bidders have offered to date for the franchise. The Rams do not own their own stadium, but they have a favorable lease with St. Louis, are considered moveable and need to be sold to pay inheritance taxes.

    Death and taxes

    Khan needs only to acquire the 60 percent of the Rams that had been owned by the late Georgia Frontiere and is now held by her children, Chip Rosenbloom and Lucia Rodriguez. The other 40-percent share is owned by Stan Kroenke, who is currently prohibited by NFL rules from taking control of the franchise because of his ownership of the Denver Nuggets and Colorado Avalanche. Kroenke has been quiet on his intentions, but for the moment, he’s believed to be standing pat.

    Chip Rosenbloom and Lucia Rodriguez APChip Rosenbloom and Lucia Rodriguez currently own 60 percent of the Rams franchise.

    For their part, Rosenbloom and Rodriguez have been dealing with an inheritance-tax situation since the January 2008 death of their mother. Sources say the IRS valued the Rams at $800 million at that time. This would have presented Frontiere’s heirs with a potential taxable estate of nearly $400 million based on the increase in value of the Rams during Frontiere’s nearly 30 years’ ownership. Frontiere took control of the Rams after the death of her sixth husband, Carroll Rosenbloom, in 1979. In other words, the two Frontiere heirs have a tax bill of nearly $200 million.

    Very few people have the kind of wealth to absorb a $200-million tax hit and keep control of their football team, and Rosenbloom and Rodriguez aren’t among them. They reportedly pursued loans and sought other investors to maintain control and perhaps sell the team at a more advantageous moment. But with last year’s financial crisis and the downturn in the economy that followed, the Frontiere heirs have no real choice but to sell now rather than wait for a recovery that may be slow in coming. While Rosenbloom and/or Rodriguez will not get to keep the team, both will walk away very well off from its sale, pocketing about $100 million each.

    Lower franchise values bonus in labor talks, problem in the future

    Having a franchise decrease in value is never a good thing for a league with so many interrelated business and financial practices. But during labor talks, having a team sell under prior estimates probably isn’t the worst news for the other owners to hold over the heads of the players. It also underscores that individual franchise owners have borne most of the burden of both the slowed economy and increased labor costs.

    Khan’s purchase, however, is considered by some knowledgeable insiders to be less than a sure thing. His approval by the league is not assured, and there are doubts about his overall financial resources. The league usually wants a primary owner to have about $300 million in cash and about $700 million in fairly liquid assets to be approved as a primary owner. And this is perhaps the most worrisome thing for everybody. The Rams need to sell, and Khan’s offer is far and away the best out there. If his deal falls through -- or he’s not approved – there’s a chance the price may drop more than the league or its owners are comfortable with. Remember, every day a team doesn’t sell is bad for the seller and good for the potential buyer these days.

    While the folks at the NFL Players Association may not be pleased to see the Rams sell for less than prior evaluations, they should be terribly worried if the deal doesn’t go through at all because the team might not sell for some time and then perhaps for even less. There are a number of teams thought to be quietly on the market and still more that may have to be sold in coming years to pay potential inheritance tax bills in a league where 18 of the owners are older than 65 and eight are over 80. The pool of potential buyers is small, and logically, when supply outstrips demand, price is likely to be negatively impacted. And the loss of franchise values could have a devastating impact on labor relations and labor -- now and for years to come.

  • #2
    Re: Rams deal critical to the NFL

    Wow, I know a 100 million is a lot of money, but that doesn't seem like much for Chip and Lucia for the price of an NFL team after all is said and done.
    "The disappointment of losing is huge!"

    Jack Youngblood


    • #3
      Re: Rams deal critical to the NFL

      I think this article is going a bit overboard on just how much this means to the NFL, I really don't think that the sale of the Rams is going to shape the future of the NFL as the article suggests.

      I always found the Forbes NFL/NHL/MLB team valuations to be a bit half-baked anyway. I've loosely paid attention to their numbers over the years and they've never taken into account the recession because as a whole, their numbers for team values have never went down across the board. I know they say that sports are recession proof but that's more about bringing clients/money in, not necessarily for franchise value.

      I thought the total value for the Rams would have been even less then 750 to be honest. With the recession and looming CBA (a labor strike would absolutely kill team values) it just seems like an extreme buyers market out there.

      If it's true that there's already a few other teams quietly on the market as the article suggests (and I've heard that elsewhere) and with 8 (!) owners over 80 the NFL is going to have a real mess on their hands if a few of those owners drop dead and other families are forced to sell like Chip/Lucia are now.

      Roski would probably do well to wait a couple years and he'll have his pick of the litter if he's still dumb enough to finance a billion dollar stadium at that point.


      Related Topics


      • Nick
        Rams' owners agree to sell team to Illinois businessman
        by Nick
        Rams' owners agree to sell team to Illinois businessman
        Shahid Khan is owner of large auto parts corporation based in Urbana
        By Howard Balzer
        Thursday, February 11, 2010

        The sale of the Rams took a major step Wednesday when the learned from sources close to the team that an agreement had been reached with Illinois businessman Shahid Khan to buy the team.

        Khan is expected to purchase the 60 percent of the team which is owned by Chip Rosenbloom and his sister, Lucia Rodriguez. The total value of the team has been placed at between $725 and $750 million.

        Rosenbloom would not comment on the report when reached by to the Globe Democrat late Wednesday.

        It is not known whether Khan has any other partners, but he is believed to be prepared to purchase 100 percent of the team if 40-percent owner Stan Kroenke elects to sell his shares.

        Khan is the president and owner of Urbana-based Flex-N-Gate Corporation (FNG), which has more than 9,500 employees at 48 manufacturing and nine product development and engineering facilities not only in the United States but four other countries. Company revenues are estimated at between $500 million and $1 billion annually.

        The company has numerous products, according to its website, that includes large body and chassis structural assemblies; full bumper and fascia systems, brackets, receiver hitches; interior plastic panels and pillars; exterior trim components, running board systems; scissor and screw jacks, tools, spare tire hoists, hinges, checks, pedals, parking brakes, and latch systems.

        Khan was an engineering student at the University of Illinois when he started working for FNG in 1970. He graduated in 1971 and helped develop a one-piece bumper starting in 1972. He stayed at FNG until 1978 when he started his own company. Two years later, he bought FNG.

        A sale would have to gain approval of 75 percent of the league’s owners.

        There is a question of how the owners will view tax issues Khan has had with the IRS. Over a period of several years, Khan and his wife Ann were investigated for allegedly sheltering hundreds of millions of dollars from income tax.

        In January, 2009, Khan told The News-Gazette in Champaign-Urbana he and his wife paid about $68 million that was in dispute and added that he would seek to get the money back in litigation.

        In fact, the Khans filed two lawsuits last July, claiming they were misled by financial advisers who knew the government was investigating similar tax shelters as being potentially illegal, but told the Khans what they were doing was legal.

        Ironically, some motions in the cases are scheduled to be heard in Champaign County Circuit Court on March 23 at the same time NFL owners will be in Orlando for their annual meeting.

        It is possible some in the...
        -02-11-2010, 10:01 AM
      • Varg6
        Proposed Rams buyer has had IRS issues
        by Varg6
        Per Mike Florio...

        The mere fact that Rams owners Chip Rosenbloom and Lucia Rodriguez have found a buyer for 60 percent of the franchise doesn't mean that the proposed buyer ultimately will acquire control of the team. Ultimately, 24 of the league's 32 owners must approve the transaction.

        And there's already cause for concern regarding the viability of Shahid Khan's bid.

        Howard Balzer of reports that Khan and his wife have been investigated by the IRS for allegedly sheltering "hundreds of millions of dollars" from income taxes.

        Last year, Khan and his wife reportedly paid roughly $68 million to resolve the claims, and the couple has since filed two lawsuits claiming that they were misled by financial advisers regarding the tax shelters.

        As Balzer points out, legal proceedings in the cases will occur on March 23, just as owners are convening in Orlando for their annual meetings.

        The impact, if any, on the approval process isn't known. But it's safe to say that the league will look closely into the situation before giving the green light to the transaction.

        -02-11-2010, 02:49 PM
      • r8rh8rmike
        St. Louis Rams Owners Weighing 3 Offers
        by r8rh8rmike
        St. Louis Rams owners weighing 3 offers

        By Jim Thomas

        St. Louis Rams owners Chip Rosenbloom and Lucia Rodriguez are closing in on a decision to accept one of three offers to purchase the team or walk away from the bidders and keep the franchise, league sources told the Post-Dispatch on Tuesday.

        A decision could be reached before the NFL draft in late April, not because of any kind of firm deadline, but simply to avoid uncertainty surrounding the team and its future entering the 2010 season.

        All three offers, described as "acceptable" by the sources, are comparable to what the Pittsburgh Steelers franchise recently sold for — which was in the range of total franchise value of $720 million to $800 million.

        The only known bid for the team is from a group of investors headed by St. Louis Blues hockey chairman Dave Checketts. The identity of the other two bidders remains unknown, although one was a relative late-comer in the process.

        The three bidders are committed in varying degrees to keeping the franchise in St. Louis, and that may have an impact on any sale decision.

        Rosenbloom and Rodriguez own 60 percent of the franchise, which they inherited from their late mother, Georgia Frontiere. Frontiere died on Jan. 18, 2008 — two years ago Monday — after a long battle with breast cancer. It is that 60 percent of the team that is for sale.

        Stan Kroenke owns the other 40 percent of the team.

        But at least one of the bids is for the full 100 percent of the team, in which case Kroenke's share would be bought out as well. But if Rosenbloom and Rodriguez end up selling only their 60 percent of the team, Kroenke could potentially scuttle the deal by saying he wants to "cash out," or sell his share of the team as well. If that's the case, the 60 percent investor may not have enough money to buy the full franchise.

        Those close to Rosenbloom say he has yet to get any indication from Kroenke on what he will do, although there have been signals from the Kroenke camp that he will simply hold his 40 percent share of the team if Rosenbloom and Rodriguez sell their 60 percent.

        Kroenke also has matching rights on any outside offers for the team. But under current NFL cross-ownership rules, he would not be allowed to exercise that right as long as he owns majority shares of the Denver Nuggets NBA team and the Colorado Avalanche NHL franchise. Kroenke also owns 29.9 percent of the English soccer club Arsenal, a team valued at $1.2 billion.

        Some clarity could be added to the issue this week. The Rams' brain trust is meeting in Los Angeles today and Thursday for the team's annual end-of-season summit meeting. Kroenke is expected to attend at least one day's worth of the meetings. If Kroenke indicates that he's on board with any...
        -01-19-2010, 10:48 PM
      • RamWraith
        Rams not for sale
        by RamWraith
        By Bill Coats
        Tuesday, Jul. 15 2008

        Rams owner Chip Rosenbloom confirmed Monday evening that the team has hired a
        Baltimore firm that specializes in sports investments. But not, Rosenbloom
        insisted, for the reason that was reported earlier in the day.

        Rosenbloom said Moag & Co. is not seeking prospective buyers of the team, as
        the weekly SportsBusiness Journal reported, citing unidentified sources.
        Rosenbloom explained that Moag was employed to field the many inquiries that
        had been swamping him and Rams president John Shaw.

        "We finally said, 'You know what, this is not how we want to spend eight hours
        a day. We need somebody to handle them,'" Rosenbloom said. "It would be totally
        inaccurate to say (Moag) is searching for buyers. ...

        "We did not authorize (Moag) to go out and say, 'Hey, the team's up for sale.'

        simply returning these people's phone calls."

        Since taking over the Rams after the death of his mother in January, Rosenbloom
        has been steadfast in declaring his desire to keep the Rams in St. Louis. But
        he never has dismissed the possibility of a sale, and he reiterated that stance

        "It's the same as it's been," Rosenbloom said. "If the right person at the time
        right time with the right price came, I suppose that you might sell your house,
        right? So, I don't say never. ... If we get a phone call today from somebody
        who says the right things, we would listen. And that's why Moag is there."

        Said Shaw: "If (Rosenbloom) received an offer he couldn't refuse, he'd have to
        consider it."

        Moag & Co. did not respond to a phone message or an e-mail Monday.

        The Rams have at least one past tie to the firm: Marketing executive Max
        Muhleman is a member of Moag's board of advisers. Muhleman introduced the
        concept of personal seat licenses, or PSLs, to pay for stadium construction
        when he was with the Charlotte Panthers. Later, he assisted the Rams in
        developing a plan to use PSLs revenue to pay off their stadium lease in
        Anaheim, Calif., and help with their relocation costs when the team moved here
        in 1995.

        Rosenbloom and his sister, Lucia Rodriguez, split the 60 percent ownership they
        inherited when Rams owner Georia Frontiere died Jan. 18 at age 80 after a
        lengthy battle with breast cancer. Stan Kroenke retained his 40 percent share
        of the team. The NFL requires all teams to designate a managing partner, and
        Rosenbloom is filling the role.

        In an earlier statement, Rosenbloom noted that "when a team is passed from one
        generation to another, it becomes a calling card that the team must...
        -07-15-2008, 04:53 AM
      • MauiRam
        New Ram Owners Want to Do What's Right ..
        by MauiRam
        owners want to do what's right
        By Bernie Miklasz

        Sports Columnist Bernie Miklasz

        If the Rams and the NFL were pieces of a movie plot, Chip Rosenbloom would utilize his talents as a screenwriter, producer and director and script a happy ending. And as the credits roll, the St. Louis audience would stand in applause.

        But this isn't a movie.

        This is reality.

        There are no heroes or villains, either. Just two sincere people — Chip and his sister, Lucia Rodriguez — who are struggling to do the right thing for everybody, including the fans of St. Louis.

        I had the chance to speak with Rosenbloom about the brush fire of rumors of a possible Rams sale. He was trying to make it to his young daughter's soccer party but had to experience another lesson on what it's like to be an NFL owner.

        Privacy and family time are compromised, and it's the price he'll have to pay for being the Rams' managing partner. Does he need it? Does he really want it? Rosenbloom has a fulfilling life in Los Angeles, with his wife and two children and a burgeoning film career. There will be many more Rams-sale rumors to deal with, and a bunch of other headaches. And Rosenbloom must determine if it's all worth it.

        Rosenbloom didn't want to be quoted, but after our conversation, the situation seems clearer to me. So I'll share what I think I know based on our discussion:

        — Are the Rams for sale? Answer: no — and yes.

        Chip and Lucia aren't seeking a buyer. Rosenbloom stressed that repeatedly. Nothing has changed, he insisted. Ideally, they'd like to hang on to the Rams for a long time, in part to honor their late mother, Georgia Frontiere. Chip isn't in any hurry to sell, but tax-related issues related to their mother's estate are complicated, and selling the Rams may be the one sure way of settling everything.

        If a credible figure expresses interest in buying this team, Frontiere's children will listen. And if that potential buyer is an excellent fit, they'll be inclined to sell. But Rosenbloom and Rodriguez want to be careful. If they sell, they want to place the Rams in good hands. There is no timetable, but this franchise will eventually be sold. I have said that all along; I just think it will occur further on down the road.

        — But what about Rosenbloom's pledge of allegiance to St. Louis? Was that a flagrant example of a phony sports owner telling the locals what they wanted to hear? Answer: no.

        Rosenbloom has never said he wouldn't sell. He feels a strong connection with St. Louis, because of the support given to his mother, and because of the family's NFL history. But again, it isn't that simple, because of the taxes owed. And as Rosenbloom indicated: Suppose an impressive buyer surfaces? Other than shooting down speculation...
        -05-22-2008, 02:49 PM