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Q&A: What we know about the Fenway Sports Group’s effort to buy the Penguins

Lots of questions about the Pens’ rumored sale to the Boston sports group. Let’s get some answers

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New York Yankees v Boston Red Sox Photo by Jim Rogash/Getty Images

The Penguins are heavily reported to be trending towards having new ownership. The Athletic has reported the deal could be completed as soon as tomorrow for the Fenway Sports Group to finalize an agreement to purchase the Pens.

This news can be jarring, even for a team that had regular negotiations with other groups (never forget the Jim Balsillie days!) up until getting a new arena agreement in 2007. And the Pens were almost sold in late 2015 as well before a deal fell apart.

However, now all signs are pointing towards FSG finalizing a purchase this time around. There are many questions, some answers are known, and some is still up in the air. Let’s get up to date—

What is the Fenway Sports Group?

Formed in 2001 to purchase the Boston Red Sox, Fenway Sports Group (FSG) is made up of a collection of partners. Chief among them is John Henry, 72, who controls 40% of the stock. There are 20+ partners, including an equity group that have shares in the group. Most recently NBA star Lebron James and his business partners bought into the group earlier in 2021.

FSG is a very large group, valued at over $7 billion dollars, but not a face-less giant telecommunications corporation like Rogers or Comcast that is also in the sports business. For FSG, sport (along with some real estate involving their teams) is their major business interest.

In addition to the Red Sox, FSG purchased Liverpool FC in 2010 and own both legendary stadiums of the two clubs (Fenway Park and Anfield). FSG has a stake in a NASCAR racing team and has bought into the minor league teams of the Red Sox over the years.

Why would the current owners sell the team?

The simple answer: money. COVID has changed the world, but the Pens have been available for purchase for a while. This team really was an investment by Ron Burkle, and more or less a favor to contribute some money. That bet paid off heavily and his investment will be returned many times over, but Burkle was always fairly keen to cash out when the time and price was right. With the prices of NHL expansion teams going through the roof (Vegas was a $500 million fee, Seattle was a $650 million fee), it’s a very good time to sell an NHL team in a climate where team values are at all-time highs.

What will the price be?

That is currently unknown, but will be a massive windfall for Burkle, and Lemieux. The NHL has been keen to drive up franchise value and prices with their expansion clubs, and the Pens have been valued at $650 million by Forbes in 2020. Sportico has the team at $845 million. The price paid well depend on just how much of the team that Fenway buys, but likely have a valuation around that range, if not higher considering some reports are saying the purchase price could be as high as $900 million. Considering Burkle’s investment was believed to be about $22 million in 1999, and Lemieux funded his stake of ownership through the deferred revenue the team owed him from the 1990’s but was unable to pay, both the primary owners will see a tremendous return on investment.

What will Mario Lemieux’s future role be?

That remains to be seen. Fenway will likely buy all of what Burkle owns of the team, and likely some of Lemieux’s share. But Lemieux is not expected to divest completely. NHL Insider Pierre Lebrun said in The Athletic:

The deal, if it gets finalized, would see owner Mario Lemieux remain involved in a similar capacity, which is to say he would retain a minority ownership stake and have a say in hockey matters as per usual.

It makes sense for all parties that Lemieux be involved with the Pens moving forward. Fenway won’t want to be seen as totally replacing or ushering out Mario Lemieux, who basically is the Penguins with his contributions to the franchise over the last 37 years. Given American owners aren’t popular in English soccer, they have some experience dealing with delicate take overs. But Penguin fans should be easier to win over, if the ownership invests in the product and is presenting a winning team, the fans will be happy.

As the Post-Gazette reported about Lemieux:

“He’s not run­ning away. He’s go­ing to make sure the Pen­guins are do­ing what they should do,” said a source close to the Pen­guins. “He’s very proud of what he and [co-owner] Ron Bur­kle have built in Pitts­burgh, and he’s stay­ing on be­cause he’ll al­ways be a Pen­guin.”

Are the Penguins going to move?

No. Not any time soon, at least. The team is locked into their lease at PPG Paints Arena until 2040 and that will not be affected by a change in ownership. Further, conditions of getting league approval for ownership have stipulations where new owners are barred from proposing relocation for the first seven years. The Pens are absolutely staying in Pittsburgh.

Will there be personnel changes?

Probably not at first. All key executives from David Morehouse (CEO, Team President) to Kevin Acklin (COO) and Brian Burke (President of Hockey Operations) are expected to be retained, per several reports. Down the ladder that also applies to GM Ron Hextall and coach Mike Sullivan too. New ownership is not expected to come in and sweep through what has been a very successful organization and replace central figures in the short-term.

Will the new owners have any incentive to care about Pittsburgh?

They will! One of the unique aspects of the Pens is their interests in the 28-acre site across the street from the arena, where the Civic Arena once stood. The Pens imagined redeveloping it and creating a more bustling area with retail, places to live, eat, drink and work. There have been a lot of stops and starts on these projects over the last decade. Ground has recently been broken on a 26-story tower for FNB, but new ownership has a real ability to further maximize the area. They will profit from it, but so too will the city and its citizens (hopefully) with new opportunities.

The FSG is expected to “add mus­cle” to the Civic Arena redevelopment, as the PG put it. The Athletic had another comment along the same lines:

“This is a great thing for that development and everyone involved,” a source in the organization said. “These people coming in, they’ve done many deals like this in the past. They know what they’re doing and they know how important it is from a financial standpoint and for the city in general. Things are going to get done.”

What does FSG’s past say about how they operate?

Liked how Josh Yohe had it written up, so let’s go with that:

Henry’s ownership of the Red Sox and Liverpool have hit similar notes: They’ve won big. They’ve spent big. They’ve made savvy moves. They’ve stayed on the cutting edge, technologically speaking. They’ve also, to the distaste of fans, passed on big splashes — and made unpopular decisions — that they didn’t feel made ultimate financial sense.

This is far from lip service, it’s easy to search and find articles such as: “Liverpool become first club to use revolutionary new stats analysis” or “How the Boston Red Sox win with data analytics”.

So it’s no stretch to say John Henry has been keen in the fields of data, in and out of sports as he has a history in investing in commodities prior to buying sports teams. Henry hired Bill James (of Moneyball fame) when the sports analytic craze really entered the public eye in the early 2000’s. The following season, the Red Sox broke the 86-year “Curse of the Bambino” and have won three more World Series championships.

Liverpool similarly has experienced success in the era of Fenway Sports, capturing the Premier League title in 2020 and taking the European Champions League in 2019 and are one of the top teams in their sport as well.

Is the Boston-based group going to make the Pens change their colors from black and gold?

Come on now. No. They’re not going to make the Pens change their name so that the “Boston Bruins” are more unique for their alliteration either, let’s not be silly. Also Henry, while the owner of the Red Sox and who named his group after the iconic stadium they play in, actually grew up a St. Louis Cardinals fan. He’s not a dyed in the wool New Englander or lifetime defender or native of all things Boston, despite the connotations.

What happens next?

If reports are to be believed, the deal is all but done and undergoing the final points now and it could be announced tomorrow. FSG is expected to take an internal vote to approve the still unknown terms of the sale.

The NHL would have to approve the change of ownership at a future Board of Governor’s meeting, which would generally be expected to be a simple rubber stamp process at this point, given the respected and well-known nature of the FSG. The NHL will surely be happy to have one of the leading sports ownership groups involved and a part of the ownership of one of their franchises.

The Pitts­burgh-Al­le­gheny County Sports & Ex­hi­bi­tion Au­thor­ity (SEA) which owns the PPG Paints Arena and leases it to the team will also have to approve the ownership change. The SEA’s role will be to ensure that new owners can financially afford to take over the lease, which given the financial strength of the Fenway Group is not going to be an issue.

While the Pens on the ice have been extremely successful, the off-ice component of the overall business can and will be leveraged further by new ownership with deep pockets. As one of the more marquee franchises in the NHL, the Penguins are a great target for FSG to purchase and, hopefully for all parties, continue to achieve success on and off the ice.