Hartford Whalers Purchased by Compuware Principals

Hartford Whalers Purchased by Compuware Principals

Post by Steve Gallich » Sat, 04 Jun 1994 01:31:30

Four more years.

Peter Karmanos and Thomas Thewes ended up offering the state of Connecticut
far less of a guarantee than William F. Dowling and Michael Largue did, but
they were able to offer the one thing that eluded the Whalers organization
throughout the Richard Gordon era...a group of owners who were proven to be
qualified to run a hockey team. As a result, pending league approval, today
Karmanos and Thewes, principal owners of Compuware Corp., own the National
Hockey League's Hartford Whalers. Part of the conditions of the sale require
that Karmanos and Thewes keep the team in Hartford for at least the next
four years.

In a last grasp bid to overtake the Compuware group, the Dowling group had
offered to guarantee a seven year minimum stay in Hartford, and to provide
more of the sale money up front. But the Connecticut Development Authority,
acting to broker the transfer of ownership from Gordon, chose the group with
the most hockey experience to lead the Whale. The Compuware principals, led
by chief hockey executive and former NHL goaltender Jim Rutherford, have
extensive experience in minor pro and youth hockey. Compuware currently
owns the Detroit Jr. Red Wings of the Ontario Hockey League.

The sale price of the team was set by the terms of a lease Gordon had signed
with the state last year. As a condition of the lease, which provided Gordon
with some financial assistance from the state, Gordon was allowed to invoke
an escape clause on June 1st which required the state-run CDA to either broker
a sale of the team within 30 days or to allow Gordon to move or sell the team
to out of town interests. Gordon had notified the CDA that he was likely to
trigger the option several weeks ago, allowing the CDA to solicit bids and to
negotiate with prospective buyers in advance of the "put" by Gordon.

Gordon will receive $47.5 million for 100% of the franchise from the CDA,
including $45M for the team and $2.5M to cover operating losses. The $45M
price was determined as 90% of the current $50M expansion fee, since the CDA
was contractually allowed to match any valid offer at 90% of face value.
Gordon will in turn pay off the corporate partners who still owned 24% of the
team from that sale price.

The Compuware group provided $2M to the CDA on Wednesday, and will pay an
additional $20M in cash to complete the sale. The remaining $25.5M will be
financed through CDA loans. Karmanos and Thewes were required to provide
evidence of a $50M line of credit, and will be required to absorb up to $30M
in losses during the next four seasons. Gordon has stated that the team lost
$14M this past season. The Dowling group had offered up to $30M as an up front
cash payment.

Karmanos and Thewes become the fourth ownership group in the 22 year history
of the franchise. Howard Baldwin, John Coburn, Godfrey Wood and William
Barnes gave birth to the WHA's New England Whalers in 1972. When the franchise
moved to Hartford in 1975, ownership of the team was taken over by a group of
16 Hartford businesses, with Baldwin as the team's general partner.

Richard Gordon, a successful Hartford-area real estate developer, and Donald
Conrad, a Colonial Realty executive, purchased the Whalers for a then-NHL-
record $31M in 1988. The original corporate partners retained a 24% stake in
the team, in their original proportions. Gordon, who originally planned to be
a "silent" partner, soon engaged and defeated Conrad in a power struggle to
gain full control over the team, buying out Conrad's and a now-bankrupt
Colonial Realty/Colonial Whalers' share of the hockey team.

Gordon's greatest failing as an NHL owner was his complete lack of hockey
knowledge. His assumption was that he could hire "hockey people" to run the
operation; but his close friend, Bobby Orr, convinced him to hire Eddie
Johnston as his top "hockey person" in 1989. Johnston systematically tore
apart the Whalers over the next three seasons, including a move which
Gordon supported at the time but now considers his greatest regret, trading
Ron Francis and Ulf Samuelsson to the Pittsburgh Penguins in 1991. Gordon
has severe personality conflicts with many of the people he hired to run
his operation...he demanded that EJ fire EJ's hand-picked coach, Rick Ley,
after two seasons. Gordon then fired EJ and hired Brian Burke one season
later. After a building year under Burke which e***d many people in
Hartford, Burke quit the Whalers due to conflicts with Gordon. Including
Emile Francis and Larry Pleau, the GM and coach when Gordon took over in
1988, the Whalers went through four general managers and five coaches
during Gordon's six year tenure, which produced just one winning season.

Gordon's legacy will also include the fact that he was adamantly opposed
to moving the team out of Hartford. Despite several opportunities to move
or sell the team to out of town interests at a substantial profit, Gordon
always chose to insure that the Whalers would remain in Connecicut.

Farmington Hills, Mich, based Compuware, Corp, recorded a profit of $59.1
million last year on systems software sales. The Compuware principals have
sought an NHL expansion team in the past, most notably in 1990 when their
bid for a team in St Petersburg, Fla, fell short to Phil Esposito's Tampa Bay
Lightning bid. The Compuware group currently holds a non-exclusive lease for
an NHL team in the America West Arena in Phoenix, Arizona, but Rutherford
claims that the Phoenix lease has no bearing on the Whalers' situation,
"We have a non-exclusive lease with America West. They can talk to anyone else.
So can we. Our discussions on the Whalers are totally unrelated. We would keep
the Whalers in Hartford."

Rutherford will move to Connecticut immediately and take over as president
and chief operating officer of the Whalers. There is no word at this time
whether or not he will chose to also take over as general manager in place
of current GM Paul Holmgren.

-SG