Canada Kicks Ass

Billionaire Canadian Eugene Melnyk confirms interest in Senators
Date: Saturday, February 01 2003
Topic: Sports

TORONTO (CP) - One of Canada's richest men is interested in buying the Ottawa Senators and keeping the team in the nation's capital.

Eugene Melnyk, head of a huge pharmaceutical firm and a prominent owner of thoroughbred racehorses, said Friday he is looking at purchasing the near-bankrupt National Hockey League club and the Corel Centre where the team plays.

The Toronto-born billionaire was reached in Barbados, where he now resides.

"Yes, I do have an interest in the Ottawa Senators," said Melnyk, who also owns the OHL's St. Michael's Majors.

The 42-year-old businessman, ranked by Forbes magazine as the eighth wealthiest Canadian, declined further comment.

The Senators and its creditors are not commenting on the sales process.

It's believed that Melnyk has been waiting - but is growing impatient - for the Senators' creditors to either accept or reject former majority owner Rod Bryden's offer to repurchase his club and the arena before filing his own bid.

Melnyk is the founder and biggest shareholder of Biovail (TSX:BVF), Canada's largest publicly traded drug company, which has a stock market value of about $6.4 billion. He owns 17 per cent of the company's shares. The company, located near Toronto, sells the Cardizem line of heart drugs, and recently bought the rights to market anti-smoking drug Zyban in Canada.

The Senators have been operating under bankruptcy protection since Jan. 9 amid more than $360 million in debt on the club and arena. Bryden submitted his offer to repurchase the club and the Corel Centre a few days later, with a decision on the offer expected by Jan. 24. That deadline passed with no decision and no word on the exclusive Bryden talks is expected before Monday.

A source said Melnyk has met recently with the NHL and the Senators' biggest lender, CIBC, but was told to wait for a decision on Bryden's offer before submitting his own.

Melnyk met with NHL commissioner Gary Bettman in New York two weeks ago and has been talking to league officials on a regular basis, sources say.

On Friday, Bettman said he is "familiar" with Melnyk but would neither confirm nor deny Melnyk's interest in the Senators.

"He (Melnyk) is a very successful entrepreneur, he runs a very successful company, he has in the past been involved in hockey," Bettman told The Fan 590, a Toronto all-sports radio station. "If it turns out that the banks decide to move forward and open it up to the bidding process, and if it turns out that he is interested then that would be a very interesting possibility.

"But at the present time the banks are working on the bid that Rod Bryden has put together and he is working very hard with the banks to see if he can make that come to pass."

The source also said that Melnyk has retained Lehman Bros. - a New York firm that backed a failed Bryden bid for the team in December - to make a "fair" offer based on Lehman's evaluation of the team and arena's combined value.

Melnyk has also apparently retained lawyers who examined the Senators' financial records on the previous bid and is "all ready to go" on an offer.

Bryden's offer is said to be worth $130 million and backed by a company run by New York billionaire Nelson Peltz. But it's said to be conditional on reviving part of Bryden's complex December offer, which involved sales of units in the team to 650 investors who received tax breaks in exchange.

That deal was killed by the banks on New Year's Eve, reportedly because CIBC and FleetBoston Financial Corp. felt they would get more of their money back if the team were sold outright.

Reports have suggested Melnyk's bid would contain no conditions, but a source close to the team doubted that's true.

"I don't know anybody who is going to buy anything in that range without any kinds of conditions on it. I question whether it's really credible," the source said, noting the Buffalo Sabres, another near-bankrupt club, could be had for much less. "The reality is he could go buy Buffalo for a third of the price. So why isn't he buying Buffalo?"

Buffalo businessman Mark Hamister has offered to pay $33 million US for the Sabres, to be combined with $40 million US in a public assistance package.

One observer said the fact that talks with Bryden have continued a week past Jan. 24 indicates his offer must be close to being successful.

"It's gone on a long time for Rod . . . there's at least enough there that the banks are really chewing on it," said Jeff Citron, a Toronto-based corporate lawyer who had dealt with the NHL in the past.

Additionally, creditors might be unwilling to risk dumping Bryden's offer in case Melnyk doesn't prove to be serious, said bankruptcy lawyer Richard Orzy of Toronto-based Bennett Jones.

When high-profile companies go up for sale, "you get a lot of people who look like tire-kickers who have money. Most of them go away," Orzy said.

It's believed Melnyk first became interested in the Senators in December, when he was apparently approached by a group interested in moving a team to Hamilton. Sources say his interest faded, partly because he was not interested in moving one the NHL's top teams out of Ottawa, and partly because Bryden's December bid looked like it would be successful.

A Toronto lawyer has said that a bid involving multiple investors interested in moving the Senators to Hamilton has been filed. The bid is not being taken seriously because the NHL has no interest in relocating the franchise to a market sandwiched between Toronto and Buffalo, sources have said.

Another rumour circulating Friday had Gary Winnick - who resigned late last month as chairman of California-based telecommunications company Global Crossing - interested in helping make a pitch for the Senators.

"None of it is true, 100 per cent not true," said Rosalie Zalis, an assistant with Winnick at the merchant bank he owns - Pacific Capital Group, based in Beverly Hills, Ca.

Global Crossing is under investigation by the U.S. Securities and Exchange Commission and investors have filed dozens of lawsuits against it.

© Copyright 2003 The Canadian Press

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