• Terry Jones gets it entirely wrong

    by  • December 15, 2007 • Uncategorized • 15 Comments

    Andy kind of hinted at this at BoA but I suspect that there’s gonna be a change in the pecking order of the Edmonton media if Katz gets the team. The TEAM 1260 has been breaking a lot of the news related to Katz and have played the story pretty even while a lot of the old guard local media have been decidedly anti-Katz. It’d be only human nature for Katz to have noted who was trashing him without real reason over the course of this whole thing and for those people to find their easy access to information change in the event that he gets the team. Terry Jones’ story deserves special mention in this regard:

    First of all, what we’re dealing with this time isn’t a hostile take over attempt against a group of the all-time greatest guys in Edmonton history.

    There’s every indication that Katz, if not invited back from within, was certainly encouraged by a few major shareholders to learn from some of his major mistakes the first time around and come at this from an entirely different direction.

    And this time Katz wasn’t a flim-flam man.

    This wasn’t an offer that said one thing but in reality was something else.

    I’ll let other pass judgment on whether or not businessmen who buy a community treasure for a great price and then ultimately sell it for a handsome profit are “the all-time greatest guys in Edmonton history” but I’m intrigued by the suggestion that he was a “flim-flam man” the first time and that his offer was something other than it appeared. I found Nichols’ explanation in this regard – something along the lines of the lawyers and accountants giving different answers about what the offer was worth after accounting for taxation and contingent liability issues such as employee severance – a bit tough to swallow. For one, I don’t think that this is that complicated on the transactional scale and I have a hard time thinking that a solid number couldn’t have been put on it. I suppose that the different situations of each shareholder might have made things more difficult but really…that seems like a bit much. In any event, this was an offer made by a sophisticated businessman to sophisticated businessmen. Unless there’s something that Jones’ knows that the average Joe doesn’t, I don’t think it’s quite accurate to characterize that offer as something akin to the Manhattan purchase.

    This next part is even better:

    The realization was that this was more about a new arena than owning the Oilers.

    “It’s the best way for everybody to come together to get a new arena downtown and the growth around it.”

    Then Nichols said it: That, for Katz, this isn’t really about owning the Oilers so much as it is the new arena downtown and being in position “A” for the investment around it.

    “It’s all about the arena downtown. He didn’t want to go there unless he owned the arena.

    Buy a hockey team for the fair price of $185 million but get a $450 million arena for $100 million? Steal of a deal.

    Let me just put in the pertinent part from the press conference here, because it makes it pretty obvious that Jones completely blew the quote and which resulted in him utterly missing Nichols’ point:

    …frankly, when I talked to him, only once, for an hour, the focus was really all about the arena and the downtown possibilities and he made it made it known at that time that he simply didn’t want to go there unless he owned the hockey team and I guess if I was in a position to do so, that would probably be the way I would approach it.

    You’ll appreciate that there’s something of a difference between “He didn’t want to go there unless he owned the arena” and “He simply didn’t want to go there unless he owned the hockey team.”

    Read Jones’ last line again: “Buy a hockey team for the fair price of $185 million but get a $450 million arena for $100 million? Steal of a deal.” Now, I’m not one of those lawyers who understands markets and does deals, but it strikes me that a deal that’s even better than the one that Jones has laid out is a deal where you get a $450 MM arena for $100 MM and you don’t have to drop another $185MM at fair market. That’s some awful work on Terry’s part and you wonder if his obvious antipathy towards Katz contributed to his hearing problem.

    * * *

    As long as I’m tagging the local media, a quick perusal of Matty’s mailbag reveals the following:

    On Torres and Stoll being benched in a home game:

    Sorry, but Oilers coach Craig MacTavish doesn’t consult the ticket-buying public when he wants to shuffle his lineup. I agree it would have been nicer for you when you don’t go to many games, but what about the fans who have bought tickets and still haven’t seen Sheldon Souray yet? Souray, who’s had a bum shoulder for months, has only played three Oilers home games.

    On Roloson:

    Roloson’s save percentage is about .900 , better than Miikka Kiprusoff in Calgary, which means he’s still making enough stops. But his goals-against-average is over 3.0, not so good. His win-loss record is five games under .500 and what’s killing him is he can’t win on the road (1-7-1). Garon’s overall record is 7-6, but he’s got a .915 save percentage. That’s a tough stat to ignore for a coach.

    I’ve had more than one person who’s had encounters with Matheson tell me that he’s a hell of a guy and he’s a Hockey Hall of Famer but if he’s the John Lennon of the Edmonton press corps, his mailbag is Revolution No. 9.


    15 Responses to Terry Jones gets it entirely wrong

    1. December 15, 2007 at

      Roloson’s save percentage is about .900 , better than Miikka Kiprusoff in Calgary, which means he’s still making enough stops.


    2. December 15, 2007 at

      It’s been at least five years since I’ve read an Ask Matty that made even half a lick of sense to me. No doubt Matheson’s had a great career, but his tank is empty. You’d think the fact that they clearly make up half the questions would help the guy keep things from careening into outer space, but here we are.

      And shame on Jones for mangling that quote, if the graf you’ve reprinted is right. Inexcusably sloppy for a journo of his tenure.

    3. mc79hockey
      December 15, 2007 at

      Check it out for yourself Chris! (and anyone else who wonders) – it’s in the CHED Audio Vault on Dec. 13 at 5PM at about the 32:30 mark of the hour.

    4. December 15, 2007 at

      Check it out for yourself Chris! (and anyone else who wonders) – it’s in the CHED Audio Vault on Dec. 13 at 5PM at about the 32:30 mark of the hour.

      You don’t even have to do that. MacKinnon gets the quote correct here.

      Both Matheson and Jones need to retire. Or be forced into retirement. The game, and the profession, has passed them by.

    5. HBomb
      December 15, 2007 at

      Two days in a row, two terrible articles:


      I hope that once Katz gains control of the team, Jones is completely black-balled when it
      comes to “scoops” and the like.

      He (and Matheson) need to join John Short in retirement. Bryan Hall too, for good measure.

    6. Colm in Belfast
      December 15, 2007 at

      That Jones article is, even by Edmonton Sun standards, a complete abomination. I mean “Who was favourite player growing up? What do you think of the uniforms?” Jesus Christ. The man is either blinded by his vitriol or, failing that, he’s completely lost his mind.
      Oh, and if the first thing the River Valley’s apparent answer to Howard Hughes does is shitcan Laforge, I say he can build the Spruce Goose on the Gainers site and drink his own piss in the owners’ box if he wants.

    7. Rod
      December 15, 2007 at

      ‘Tis the season for all things abominable I guess. Terry’s just trying to fit in by becoming one. Seeing as he can no longer write coherently, any bets on how high this ‘bumble would bounce?

      Ludicrous items from the article based on Jones’ completely mute questioning of the EIG:
      - suddenly there’s questions crying out to be answered. Appropriate questions about public money for the arena. Uh, where were those same questions about the EIG and the new arena?
      - Katz’ 100 million for an arena is a negative. EIG funding was going to be what exactly?

      The Rexall Drug lord still hasn’t given the populace a chance to take the measure of the man by making a public appearance.

      It’s no accident the positive term “Drug lord” found it’s way into Jones description of Katz. EIG investors? Greatest in history. Excuse me while I puke.

      According to Jones, Katz hasn’t given the fans a chance to form an opinion. Hasn’t Katz’ avoidance of the spotlight itself given us an indicator? There’s not a smidgen of a chance Katz is in this to grab headlines or limelight…like say Frank D’Angelo.

      The kicker is that Jones asserts Katz isn’t in front of the camera enough. Then, in the same article, he makes this point:
      At this point, clearly, there are some owners who would prefer to remain owners.

      Oh, really? It’s clear is it? Which owners is Jones talking about? Did they hold a press conference? Did they face the media to answer questions that are crying out? Have these particular owners ever been in front of the camera answering questions? Could the average fan even pick them out of a crowd?

      Critical journalism is fine and all. We actually need more of it in Edmonton, so that’s certainly not what I’m reacting to. The problem is, Jones clearly has an agenda. The holes in his arguments make the agenda clear for everyone to see. To the point anything he writes about Katz reeks of a smear campaign, while propping the EIG on a pedestal.

      Way to ‘bumble through yet another article Jones.

    8. Sean
      December 15, 2007 at

      Having met and talked hockey with Matty a couple of times I can personally attest to his knowledge of the game, and specifically its gossip. He definately seems to have his hands tied, with regards to what he can report in the paper. He’s much more forthcoming if you can speak to him in person. That being said, I don’t buy either Edmonton newspaper. I get my Oilers/NHL news from the blogosphere. I prefer the sabremetrics, and candid opinions – whether I agree or not.

    9. mc79hockey
      December 15, 2007 at

      This is my favourite on Jonesy’s list:

      * Any truth to the rumor that the first thing you’d do as Oiler owner is fire CEO Pat Laforge and put your own people in place on the business side?

      We should be so lucky!

    10. Pat H
      December 15, 2007 at

      good entry MC. Like Chris said, it’s inexcusable for a guy with Jones’ experience to so carelessly fudge a quote. Unprofessional.

      Generally, I second the remarks of Colm in Belfast. It’s funny how Jones has such a burning desire to ask all these probing questions of Katz, yet the current regime has gotten off scot-free in recent years by most of the MSM.

    11. December 16, 2007 at

      That is the only MSM article that I’ve read on the subject, and I wish I hadn’t. That really is tragic.

      My understanding is that Katz’s previous offer to purchase was for the Oilers hockey team only, an asset owned wholly by the EIG. And that this recent offer was for the purchase of shares of the EIG. According to Nichols on The Team 1260 there are significant tax implications in this distinction.

      Also, from a link to an accounting professional magazine (CA) that someone posted on HF years ago, there is a unique agreement with Revenue Canada that allows buyers of NHL teams the benefit of declaring the majority of the purchase price as a depreciating asset, 60% of the purchase price according to the article.

      This makes no sense to me at all on a practical level, hopefully an accountant can chime in here. In any case it would be a tremendous benefit to the buyers of a team, if they were buying that team as an asset, and if this agreement with Revenue Canada is still in place. This assuming that the purchaser(s) had other business interests that generated a significant profit. In the case of Katz, that’s a safe assumption.

      Also Nichols states there that the EIG was set up as a limited partnership, and the shares were flow-through. Meaning that the tax deductions are not held by the EIG, but were passed on to the shareholder. So if you bought a million dollar share that would give you a million dollar deduction in taxable income, saving you 400k-ish overall. No?

      Then there is the imaginary capital losses from the rapid depreciation (four year straight line according to Cal Nichols in CA magazine), so $600k on your share over the first four years of ownership. This of an imaginary asset (our tax dollars at work, folks). Which is very real in taxation terms however, assuming you have other personal revenues that are significant.

      So that means that you would have seen near enough a total of $1 million in tax benefits over the first few years after your initial $1 million investment. Again, I’m not an accountant, but that’s as it seems. The purchase of an NHL franchise in Canada is clearly a unique situation from a taxation POV.

      And I’m assuming that the Oilers have always maintained positive cash flow and were able to service the debt handily, even reduce it significantly I think. Nichols says that he spoke with a former employee of Peter’s (CFO?) and that the Pocklington regime had mislead fandom with claims of annual losses, he clearly indicates that the expectation was for cash flow to be positive, and handily be able to service the debt.

      For those that haven’t read it, there is a terrific satire on the Oilers ownership through the early 90′s through to current times. It’s called ‘Animal Farm’, and it’s a must read for Oiler fans methinks, put it on your Christmas list!


      Back to point:

      What I’m not fully clear on:

      The sale of EIG shares are subject to capital gains tax, no?

      Why would the EIG shareholders be reluctant to sell the Oilers as an asset, instead of selling EIG shares? Am I right to assume that capital gains on the asset would be assessed as the difference from the depreciated value and not the purchase value?

      If so, then selling the asset would create a capital gain that is $50 M-ish higher than if it were a sale of shares, no?


      As an aside:
      Jones is alluding to millions upon millions of expenses related to severance payments. How the hell does that make any sense? I can only assume that Katz’s original offer involved the closure of the GM plant in Oshawa.

    12. mc79hockey
      December 16, 2007 at

      Unfortunately, I don’t know enough tax law to answer this. I had kind of assumed that (this is grossly simplified) the sale of the shares would result in them being taxed on $88MM in capital gains ($188MM in today’s purchase price less $100MM in original purchase price) whereas the sale of assets would result in them being taxed on $138MM ($188MM in today’s purchase price less the notional $50MM tax value of the shares.)

      Jones is alluding to millions upon millions of expenses related to severance payments. How the hell does that make any sense? I can only assume that Katz’s original offer involved the closure of the GM plant in Oshawa.

      This was part of what struck me as so stupid about the initial rejection and Jones’ trashing of the Katz offer. I would think that they could have tagged something on to the offer whereby Katz agreed to carry that liability. Unless his plan was for the blood to be knee deep in the offices on Kingsway, I can’t see where that would have mattered.

    13. The Rage
      December 17, 2007 at

      Is this what you’re reffering to vic? From Punjabioil:

      Here’s something from the CA magazine I found interesting. Like Dan Mason mentioned in the Business of Hockey class, many owners purchase teams for the tax benefits involved (amortizing player contracts):


      While looking into the purchase, the would-be investors also discovered some seductive tax advantages. With the help of Durwood Ashcroft, another local chartered accountant, from Deloitte & Touche (who, like Pennock and company, volunteered his time), the once-laughable deal was quietly starting to look better. “We didn’t find out until late in the game about some written understanding between sports teams and Revenue Canada on how certain things would be taxed,” says Ashcroft. “The Calgary Flames has been a limited partnership, as has Ottawa [Senators]. This allows a flow-through. You hope that what you paid for the franchise doesn’t go down in value and this understanding allows you to take 60% of the purchase price as players’ contracts and amortize it on a straight-line basis over four years. It can provide a fair-sized tax deduction.”

      Adds Nichols: “If we did nothing more than break even over the first four years, at least [we] would be in a position where we could get almost 100% of the investment as a tax writeoff against other incomes and still have the paper, the shares of the Oilers.” In other words, the investors could have their cake and eat it, too. “If we get to the point where we take this public, we should be in a position to roll those limited partnership shares into public ones,” continues Nichols. “We will have been able to take advantage of the tax write-down and end up with negotiable public shares that have some liquidity to them, and which didn’t cost us that much at the time.”

    14. sketchy
      December 17, 2007 at

      “An increase in the money value of a capital asset such as a share, bond, parcel of land, antique or other asset, which results in a profit if the asset is sold. If a share is bought at $26 and sold at $30, there is a capital gain of $4.
      See also taxable capital gain.” There’s your definition of a Capital Gain from the Canadian Government, if I am not mistaken the ‘tax value’ of the shares is accounted for in past periods, and CGT only applies after the sale of assets.

    15. namflashback
      December 18, 2007 at


      A sale of shares is a deemed disposition, and the seller can.

      Selling price – Cost basis = Capital Gain

      There are deferral mechanisms that each shareholder might have — depending on the structure they employed to buy in (holding co versus personally held). However, at some point whether on sale or at a later date as the deferral allows — it is considered a capital gain.

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