The Steelers for Sale: Why Now?

The Wall Street Journal believes that the uncertainty surrounding the ownership of the Pittsburgh Steelers has arisen now "thanks in part to a sacking from the realities of estate and capital gains taxes."

The WSJ opinion piece represents an opportunity for the conservative publication to launch a broadside at the presumptive Democratic nominee for president, Barack Obama, but without any other explanation being publicly offered it's difficult to refute.

He's Nobody's Fool

The Pittsburgh Post-Gazette is reporting that Duquesne Capital Management founder Stanley Druckenmiller has his limits:

According to a source who has intimate knowledge of the New York hedge fund manager's dealings with the Rooney brothers, Mr. Druckenmiller will not get caught up in a high-stakes bidding war to purchase the shares necessary to become majority owner if Goldman Sachs & Co., the Wall Street investment bank that is serving as financial adviser for the Rooney brothers, opens the process to public bid.

Far be it for us to tell a group of millionaires (i.e. the Rooneys) how to treat a billionaire they are recruiting to bail them out, and this is not the first place you will have read this, but the Pittsburgh Steelers are more than a football team ~ it is a public institution and the Rooneys have always managed it as such. While ensuring that the family receives a fair price for the 84% of the team that is, apparently, for sale is smart business playing competing billionaires off one another in an effort to grovel for every possible penny would be . . . unbecoming. Additionally, this team, this institution shouldn't simply be open to the highest bidder.

In Chicago and Los Angeles residents are witnessing what happens when someone of limited creativity and vision, but with a great deal of money and/or creative financing, gains control of respected local institutions. The franchise celebrated its 75th anniversary last season, and the Rooney family owes it to the city of Pittsburgh and the legion of Steelers' fans to ensure that the greatness of this franchise endures for another 75 years ~ if not more.

More Financial News than You Wanted

With the "official" confirmation that the Rooney family is seeking new partners to invest in the Steelers, the Wall Street Journal is reporting that the value of the team could be enhanced considerably by a change in its tax status (subscription required).

We're barely capable of navigating TurboTax in order to file our returns every year, but according to the WSJ the Steelers currently operate as a "C Corporation" which requires that the team pay taxes on both its income and any dividends that are paid each year. Conversely, a move to an "S Corporation" classification shifts the tax burden from the corporation to the shareholders, and permits for the depreciation of assets. It appears, on the limited information we have, that the Steelers would qualify as an S Corporation, and according to the WSJ such a shift could add as much as $200,000,000 to the value of the franchise.

Finally, according to the WSJ report, if Stanley Druckenmiller makes an offer for the team it "would likely be all cash, buying out all owners except Dan Rooney, who would continue to run the Steelers and retain his 16% stake."

A New Face

Despite all the breathless media reports that the Steelers are for sale, it seems much more likely (as reported in the Pittsburgh Post-Gazette) that the Rooney family may look for someone willing to invest in the team without actually being desirous of taking over its operation. And Stanley Druckenmiller, founder of Duquesne Capital Management, appears to have been approached by the Rooney family. Who is Stanley Druckenmiller? Here's a look at a few pertinent facts:

• He's Wealthy: Forbes Magazine ranks him at #91 amongst America's wealthiest 400 people, with an estimated net worth of $3,500,000,000.


• He's a philanthropist of the first order: According to Philanthropy.com in 2006 Mr. Druckenmiller gave $25,000,000 to the Harlem Children's Zone, a "non-profit, community-based organization that works to enhance the quality of life for children and families in some of New York City's most devastated neighborhoods." Additionally he provided $14,000,000 in funding (see press release) for the Stanley F. Druckenmiller Hall on the campus of Bowdoin College, his alma mater -- the total cost for construction of that facility was $16,400,000. Most impressive, at least from a raw dollars perspective, was the gift of $45,000,000 he and his wife, Fiona, gave to the N.Y.U. Medical Center (reported in the New York Times, April 8, 2008).
  


• He's a Republican, sort of: It doesn't appear that Dan Rooney's support for Barack Obama would be much of an impediment for the motivated investor -- according to records at Campaignmoney.com Mr. Druckenmiller gave $2,300 to the campaign of Mitt Romeny, the Huffington Post reports that he donated $4,600 to John McCain's campaign (while others with Duquesne Capital have donated to Democratic candidates), however he also gave $28,500 to the Democratic Senatorial Campaign Committee. In previous election cycles he has donated to both Republican and Democratic candidates. Additionally, according to a report by Hedgefundintelligence.com Mr. Druckenmiller provided financial support for Michael Bloomberg's presidential exploration committee (subscription required).

Despite being one of the wealthiest and generous individuals in the United States, "[t]hose who know him -- friends, in-laws and people in the money-management business -- say he prefers staying out of the limelight" (New York Times, April 18, 19093). If it should come to pass that Mr. Druckenmiller becomes part of the ownership group of the Pittsburgh Steelers the limelight is certain to find him.