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Penguins

Pens' future uncertain ahead of casino vote

| Tuesday, Dec. 19, 2006

Two suitors for the Penguins re-emerged Monday, even as owner Mario Lemieux refused to speculate on the National Hockey League team's future ownership.

Lawrence Gottesdiener, a Massachusetts developer involved in earlier talks to purchase the team, said he's interested in buying the Penguins after prospective owner Jim Balsillie broke off talks with the NHL on Friday. But he's not certain the deal with Balsillie is really dead.

"We've been following it closely," Gottesdiener said. "However ... I'm not really sure there is an opportunity to step in. The NHL knows what it is doing, and Balsillie is a capable businessman with the means to continue with that transaction."

Gottesdiener's interest -- and that of Toronto businessman Frank D'Angelo -- resurfaced as ownership uncertainty dogged the Penguins and the team's gambling partner, St. Louis-based Isle of Capri Casinos, and a second applicant for Pittsburgh's lone slots casino.

Cleveland-based Forest City Enterprises wants Harrah's Entertainment to run its proposed Station Square casino, but Harrah's yesterday was reported to be considering a buyout offer, which could give the world's largest gambling company a new owner before a Pittsburgh casino opens.

The seven-member state Gaming Control Board is scheduled to vote Wednesday on awarding 11 slots licenses across the state.

Five groups are seeking two licenses for Philadelphia. Five more are competing for two at-large licenses -- two from the Poconos and one each from Allentown, Bethlehem and Gettysburg. Six tracks with conditional licenses are expected to receive permanent licenses.

Board spokesman Doug Harbach said the board would not consider Harrah's pending sale when deciding to award the licenses. He declined to comment on how the board might react to the turn of events in the sale of the Penguins.

Isle of Capri, which has promised to pay $290 million for a new arena, worked to squelch rumors it had a hand in Balsillie's decision.

"This was not an orchestrated, contrived thing," Isle of Capri spokesman Les McMackin said. "The result of this transaction falling apart, we had nothing to do with that at all. It was strictly between the NHL and Mr. Balsillie."

Lemieux said he was "obviously disappointed" that Balsillie could not close a deal with the NHL to buy the team.

"I was shocked," he said during a late afternoon news conference.

In a statement, Lemieux said he was "offended" that Balsillie backed out of the deal, and that the team would keep Balsillie's deposit because it believed the Canadian billionaire breached an agreement.

"The deal with Mr. Balsillie is dead," Lemieux said in his statement. But when asked if Balsillie might become a prospective owner again, Lemieux did not rule out the possibility.

Since the $175 million offer was withdrawn, potential buyers have expressed a lot of interest, Lemieux said.

D'Angelo, CEO of Steelback Breweries, said he hoped to talk with the Penguins this week about a possible purchase. He said he would partner with billionaire Barry Sherman, owner of Apotex, a phamacutical company in Canada.

Both would commit to keeping the club in Pittsburgh, even if Isle of Capri isn't awarded the slots license.

Andrew Murstein, president of Medallian Financial Group in New York, and Sam Fingold, owner of Keyon Investments LLC in Hartford, Conn., each told the Pittsburgh Tribune-Review they would be interested in bidding again for the Penguins.

Fingold signed a letter of intent to purchase the club last June, but his bid fell through.

Another one-time prospective owner of the franchise, William Del Biaggio III, entered into a long-term lease with Kansas City's Sprint Center last month with the specific intent to bring an NHL club to that city.

Del Biaggio, a venture capitalist from San Jose, Calif., had his bid to puchase the Penguins fall through not long after the team won the rights to draft Sidney Crosby in July 2005. He declined comment when asked whether he was interested in renewing talks to purchase the team and potentially relocate it to Kansas City.

Lemieux said his ownership group "had not decided yet" whether the team would still be sold if state gambling regulators grant Isle of Capri the $50 million slots license.

Isle of Capri, Harrah's and Detroit-based Majestic Star Casino, the third applicant for a Pittsburgh casino license, had waived their right to appear before the state Gaming Control Board today. But yesterday it appeared they would use their final 15 minutes after all.

"Our only opportunity to make sure the board hears directly from us are these oral arguments," McMackin said. "We're as shocked and disappointed as everybody else (with Balsillie's decision). Don't hold that against us. We didn't have anything to do with it."

While the sale of Las Vegas-based Harrah's would not likely change the company's plans for Pittsburgh, it could hurt Forest City's bid if board members questioned the impact, industry analysts said.

A Forest City spokesman declined to comment before the deal, which values Harrah's at $16.7 billion, is officially announced. That could come as early as today.

Harrah's has agreed to a $90-per-share buyout offer from two private equity groups -- Apollo Management Group and Texas Pacific Group, said a person with knowledge of the negotiations.

It's unlikely that Harrah's would seek to get out of running the Pittsburgh casino, which would be a valuable asset, said Steven Wieczynski, a Legg Mason analyst. But the uncertainty could give gambling board members pause.

"With a little uncertainty in there, (Forest City) might get pushed to the back burner," Wieczynski said. "It's gonna take 9 to 12 months to get this deal done, looking at a little uncertainty. What are new owners going to do?"

Additional Information:

Mario Lemieux's statement on Penguins ownership

Last Friday, Jim Balsillie sent us a letter terminating his agreement to purchase the Pittsburgh Penguins. He stated that he could not come to an agreement with the National Hockey League. We were shocked and offended that Mr. Balsillie would back out of such an important deal at the last minute -- and less than a week before a decision on the funding of a new arena that will have far-reaching implications on our franchise, our city and our region. As a result, we intend to retain Mr. Balsillie's deposit because we believe him to be in breach of our agreement. We can say unequivocally that the deal with Mr. Balsillie is dead.

As you know, the long-term future of the Penguins in Pittsburgh is dependent on a new arena. That has been our stance since we purchased the team out of bankruptcy in 1999. When our group bought the team more than seven years ago, I never could have imagined that we would be standing here today, still without a new arena. But that is the reality.

We were told repeatedly during the first six years of our ownership that there would be no public money available to pay for an arena. We were told repeatedly that we would have to somehow come up with private funding for a project that would cost hundreds of millions of dollars. Against all odds, and thanks to Isle of Capri Casinos, we did that. We brought the Isle of Capri to the table with an offer to privately fund construction of a $290 million arena as part of a $1 billion-plus development plan in the Lower Hill.

We always have been encouraged by the support the Isle's bid has received from the public and many local elected leaders. In an online poll conducted by the Pittsburgh Post-Gazette, 87 percent of the respondents supported the Isle of Capri. In an online poll conducted by the New Pittsburgh Courier, 88 percent supported the Isle of Capri. Meanwhile, more than 80 elected officials, including Mayor Luke Ravenstahl, members of City and County Council, and members of the state legislature -- from both sides of the aisle -- have pledged their support to Isle of Capri. Many have asked us, in light of Mr. Balsillie's withdrawal, what we will do in the event that the Isle of Capri is not awarded the license. Will we negotiate a Plan B• Will we continue our efforts to sell the team• What I can tell you is that we are solely focused on the Isle of Capri's bid, which would ensure the Penguins' future in Pittsburgh for the long term. If the Isle is not successful on Wednesday, we will have to consider all of our options.

Our ownership group has worked very hard for the past seven years to keep the Penguins in Pittsburgh. We now have a very exciting young team with a tremendous future on the ice. If the Isle of Capri is successful on Wednesday, it guarantees that the tremendous future will be right here in Pittsburgh.

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