I am not a business reporter, I know nothing of your "high finance" and I have only 38 minutes to write this column--yet I am going to tell you more about why Tom Hicks is selling the Dallas Stars than The Dallas Morning News has to date. So buckle up and set your faces to "stunned."
OK, that's a bit of an over-sell. This information is not stunning, per se. In fact, it's not even new information. All I want to do here is raise questions that should be asked of Tom Hicks, alpha dog of the investment firm Hicks, Muse, Tate & Furst and arguably the most powerful businessman in Dallas. And, truth be told, many of these questions were raised in the recent D magazine cover story, "Is Tom Hicks Going Broke?" by Dan McGraw. But there are follow-up questions to be asked of Big Swinging Hicks, and someone else needs to ask them, because I'm not very smart and I wouldn't know if I was being lied to or not.
In theory, though, the newspaper that made its reputation on having a world-class sports section and business section would have someone who could ask these questions, then write about them in an aggressive, authoritative way.
Here's what we know, distilled for dumb people like me: Tom Hicks is selling the Dallas Stars, a local hockey concern. Packaged with this team, he's selling some other stuff that has some stuff to do with arenas and the hockey team. Some ice rinks and some management businesses or people or something that manages the new arena or the old arena or somesuch. I can't figure it out, and I failed to find the auction on eBay. Doesn't really matter. Bottom line, he hopes to sell the whole package for $250 million to more than $300 million or so. Lotta coin, in other words.
Now, one big unanswered question is this: Why is Big Swinging Hicks doing this? (If you need to understand why figuring out his motives is important to Dallas, read Jim Schutze's column on page 11. He is far smarter than I.) He was asked this question by the media. His answer: It's a good time to sell, I want to focus on my other biz-toys, I want to spend more time with my family.
Not to put too fine a point on this, but dumb ol' me thinks the family angle is bee-ess. Not just when he says it, but when any high-profile rich guy says it. Realize that anyone can spend more time with his or her family at any point in his or her life. You just do it. You don't need a business transaction to make it happen. The only people who don't have this option are poor people. Rich people can juggle schedules to make baseball games and birthday parties, no matter if they own one or two sports teams. Even if it is a part of his consideration, it ain't the driving force behind his decision to unload the Stars.
But newspapers have to buy this argument, which is why everyone trots it out when they hold news conferences. Fine. But he also says it is a good time to sell. Is it?
I wish the DMN would answer this question for me, but it's too busy not asking these questions. So I asked a guy who is a super-multimillionaire and who has been involved in lots of these high-dollar sorts of deals. I can't give you any info about him or details of what he told me, because I don't want him to be found out, and his number-crunching, even written out and carefully explained, looks like trigonometry to me. I had to cheat to pass trig. Bottom line, he says it's not the best time to sell, from a pure investment-return standpoint. "Pretty shitty return for a guy who is supposed to be a world-class investor," was the source's analysis. That I understood.
But even if we assume Hicks really believed it was a good time to sell--and what better time, really, than waiting until the stock market goes all bear on your ass to sell a multimillion-dollar package of properties--another question not asked or answered is this: If the plan was always to cash out, why have you been telling people for a couple of years that it only makes financial sense to own more than one team?
"You could see this sale coming for months and months," says Dan McGraw, the former writer-editor for U.S. News & World Report who wrote the D piece. "Even though in April he told me that the synergy of [owning both teams] was the only reason he was in it. He said owning one team doesn't make sense. But I knew everything was changing. I said on the Mike Fisher [radio] show six weeks ago that I thought he'd sell the Stars. Hicks Muse had a horrible year last year, and it's had an incredibly horrible summer. He needs cash to pay off his investment-return guarantee. The Rangers lose money. They're not worth enough. But the Stars he can sell."
Hicks also told Fortune last year that his original plan of buying the Stars and selling them off went away after they won the Stanley Cup and became the top revenue-producing team in the NHL. "Hicks regarded the Stars' 1999 playoff run as the most exciting time of his life," Fortune wrote after spending much time with Big Swinging himself.
But Hicks said there was no relationship between his selling the team and the performance of his investment company. "Full stop, no," he said, at once denying the link between his sports teams and his day job and ordering the compliant press to quit asking him mean questions. Yet again, we turn to Fortune. "There's hardly a discernible line for Hicks between sports and business...He uses the sport's glamour and his heightened profile to bag business for Hicks Muse."
I humbly request, then, that the great sports and business sections of the DMN look into some unexplored corners of his portfolio and ask, "Is this sale driven by a Hicks cash crunch?" He will then bellow, "No. Didn't you hear me, my minions? I said full stop, no." Please, then, would you ask him some follow-up queries, such as:
1. Has the Fund IV guarantee been paid off? In other words, have you paid those investors the guaranteed 20 percent return on their $200 million investment that is accruing every day?
2. If he answers no, ask him why the money that he might recoup from this sale (my source says it could be about $200 million) neatly coincides with the amount he owes.
3. Ask him if the fact that he and his partners must raise a boatload of funds to pay off this guarantee has anything to do with his desire to sell.
4. The next time he brings up that his net worth is $750 million, ask him how much of that is liquid? How much scratch can he actually get to without, say, selling off one of his assets? Such as a local hockey concern.
5. Ask him if he has been making up operating deficits out of his own pocket for the Rangers the past few years. Ask him if those deficits are about $20 million or so a year in prior years--and about $50 million for the current season. Ask him if that affects his business decision-making at all.
6. If he says again this is all b.s., that he could raise the money to pay off the guarantee quickly, please respond by saying, "Of course, but wouldn't raising money other ways force you to scale down your personal financial commitments, much more so than selling the Stars?"
7. Finally, ask him why he hasn't answered these questions before. Oh, right. Because you haven't asked him.
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