Today's news feed discusses how Mario Lemieux, the famous Pittsburgh Penguins player, took the ownership stake in the team by turning the team’s $32 million bankruptcy debt into a $900 million asset. The news is about Mario Lemieux's smart business move and how he stood firm in the difficult times of his team.
Mario Lemieux's Smart Business Move
Mario Lemieux, the famous Pittsburgh Penguins player and team captain, stunned everyone with his wise business move. He bought the Pittsburgh Penguins from bankruptcy in 1999 and sold the team to a trustworthy group in 2021. This way, he flipped the team’s $32 million debt into a $900 million asset.
Pittsburgh Penguins Bankruptcy and Debt
In the late 1990s, the Pittsburgh Penguins faced tough times when the team spent more than its budget. The Pittsburgh Penguins owners, Howard Baldwin and Morris Belzberg, had amassed $90 million in debt to various creditors and filed for bankruptcy in 1998. owing $90 million to creditors. Mario Lemieux was the biggest creditor of the team and was owed $32.5 million in deferred salary.
Mario Lemieux's Move to Convert Debt into Equity
Mario doesn’t want the team to file for bankruptcy, and secondly, he knows that the demand for his salary would lead to the team’s sale to new owners, which means moving to a new city, which he was not in favor of. He came up with his smart move and proposed offers to investors.
Lemieux offered to convert $20 million of the debt into team equity plus $5 million in cash for managing the team’s expenses. He suggested framing a new group of people to buy the entire franchise and also promised to keep the team in Pittsburgh.
Mario Lemieux Ownership Stake and Profit
Mario and a group of investors led by Ron Burkle Mario bought the Penguins. Mario converted $20 million of his deferred salary into a 25% ownership stake in the Penguins, which later increased to 40%. Ron Burkle’s 19% stake increased to over 25%. The team's value grew from $107 million to $900 million. Lemieux's stake was worth around $360 million.
By 2005, all pre-sale debts had been cleared.
In 2021, Fenway Sports Group (the company that owns the Boston Red Sox and Liverpool F.C) bought the Penguins from Lemieux and Burkle for around $900 million. Lemieux received over $350 million from the sale and remained a minority team owner.
Comparison to John Elway's Decline the Offer Scenario
Mario isn't the only professional athlete to come forward with a wise move of converting deferred salary into team ownership in the late 1990s. In 1998, NFL quarterback John Elway was offered a similar deal to convert $21 million in deferred salary plus $15 million in cash into a 20% stake in the Denver Broncos when the team was worth $180 million.
John Elway declined the offer. Broncos were sold to Walmart heir Rob Walton for $4.65 billion. If John Elway had not declined the offers, his 25% stake could have been worth $930 million. His demand for $15 million made him lose about half of it in a Ponzi scheme.
Lemieux's Biggest Accomplishment
Penguins Pittsburgh are blessed to have Mario Lemieux, who served the team with his fantastic captaincy skills and led the team to win two consecutive Stanley Cups (1991 and 1992). His move to turn team debt into a multi-million asset is the most significant accomplishment he has made for his team.