Pollin Sells Capitals to AOL Executive
By Rachel Alexander
The deal is valued at about $200 million. About $85 million of the cash deal is being used to purchase the National Hockey League Capitals, who a year ago made their first appearance in the Stanley Cup finals but this spring failed to make the playoffs.
The remaining $115 million buys Leonsis and his group a minority share of Washington Sports & Entertainment -- the umbrella company of Pollin's many holdings -- and the right of first refusal to buy the remainder of his long-held empire. That means Leonsis could one day own two of the city's three professional sports franchises and the District's top sports facility.
"Let me say I am in perfect health, but I am 75 years old and I have decided to spend a little less time with sports and spend a little more time with those less fortunate than I am," Pollin said at a news conference at MCI Center. "I could have sold it for a lot more, absolutely. But my decision has never been about the bottom line; it was important for me to get the right guy."
Pollin's decision to sell the Capitals marks the beginning of the end of an era in which he literally remade the landscape of the Washington area, first by making the then-state-of-the-art Capital Centre in Landover a suburban sports mecca. Three years ago, he had the vision to revitalize downtown by personally financing the construction of a 19,000-seat arena, which drew thousands of fans on a nightly basis. Now he is preparing to sell his valued properties to Leonsis, a product of the burgeoning Virginia high-tech community, which didn't even exist when Pollin founded the Capitals in 1974.
One of the more charismatic and flamboyant characters in the Washington technology community, Leonsis made his fortune -- his net worth is estimated at about $1 billion -- as AOL mushroomed into the world's largest online service. He will own 60 percent of the Capitals. Minority partner Jonathan Ledecky will own 32 percent and team president Dick Patrick will increase his share to 8 percent.
Like Bethesda businessman Daniel M. Snyder -- whose $800 million offer for the Washington Redskins is expected to be approved by the National Football League in less than two weeks -- Leonsis describes himself as a longtime sports fan who began attending hockey games while a student at Georgetown University from 1973 to 1977. He said he would be "the fat guy with the cigar in the owner's box yelling and screaming."
Both Snyder and Leonsis are fairly young, as sports team owners go -- Leonsis is 42, Snyder 34 -- and both made their personal fortunes in marketing. Leonsis came to AOL in 1994 when the online service paid $45 million for Redgate Communications Corp., a Vero Beach, Fla., media marketing company Leonsis founded.
Also a self-described fan, Ledecky, 41, has holdings in various public companies totaling $200 million. He has made unsuccessful offers for the Cincinnati Reds and Los Angeles Dodgers; Leonsis has been solicited to invest in the St. Louis Blues and Kansas City Royals.
They pursued the Capitals and Wizards, however, because of their local ties and, Leonsis said, because of the family atmosphere Pollin promotes. Leonsis said he initiated negotiations with Pollin through Patrick about four months ago. Two months ago, the talks intensified.
Pollin admitted yesterday that the contentious, nine-month-long sale of the Redskins -- which effectively ended the 30-year ownership by the Cooke family -- in part prompted him to escalate his search for a buyer. Late Redskins owner Jack Kent Cooke left the franchise to a trust, and with the prices of sports teams skyrocketing, his son, John, was outbid twice for the team.
Neither of Pollin's sons -- Robert, an economics professor at the University of Massachusetts, and Jimmy, who owns a local travel company -- expressed an interested in taking over Washington Sports & Entertainment, which also owns the Washington and Baltimore franchises of TicketMaster, US Airways Arena in Landover, and a management contract to operate George Mason University's Patriot Center, among other holdings.
Pollin's teams have struggled financially in recent years. The Capitals -- despite coming off their Stanley Cup finals berth last season -- projected a $20 million loss before the first puck was dropped this season. The Capitals failed to live up to last season's performance, finishing with a 31-45-6 record, and while their average attendance was ninth in the 27-team league, their season-ticket sales rank in the bottom half of the NHL.
The Wizards lost $16 million in ticket revenue during the NBA lockout, which wiped out 16 home games, but they didn't have to pay their players during that period. They failed to make the playoffs with an 18-32 record and their ticket sales rank 21st in the 29-team NBA.
Leonsis said that while he'll be an active team owner, he will remain president of AOL's interactive properties. He plans no major changes in the Capitals' front office -- although Patrick will take a more active role in day-to-day operations. General Manager George McPhee and Coach Ron Wilson will remain with the team. But he indicated yesterday he'll try to improve the team's marketing and ticket sales.
"I'm going to look at everything," Leonsis said. "This franchise needed a jolt of energy and focus. I couldn't tell you a good defenseman or not, but I can tell you how to present and package up a brand and make sure that the players connect with the audience. I think right now that we've built this barrier between players and the community, and I don't like that. We need to break those barriers down.
"We want to focus the Capitals organization to be winners. They have done quite well, but they haven't quite gotten to the finish line. We want to do the right thing and do it in the right way."
Leonsis must next submit to the NHL approval process, which begins with endorsement from a 10-owner executive committee. The bid will then be brought before the Board of Governors for a full vote. The next meeting is June 22, but NHL Vice President Bill Daly said that if necessary the approval process can be fast-tracked, with the owners voting by fax or telephone.
NHL Commissioner Gary Bettman said he wanted to wait until Leonsis's application was studied before endorsing him, but that preliminary investigation showed Leonsis to be a solid ownership candidate.
"I briefly met Ted, and while we have not started the approval process, based on everything we have been told, we are not anticipating any problems," Bettman said. "Abe has been in the league for a long time; he's a well-respected owner and a close personal friend."
Pollin said team president Susan O'Malley and General Manager Wes Unseld will remain with the Wizards. Pollin will still have the final word in determining Wizards personnel, including filling the current coaching vacancy, although he said he will solicit advice from Leonsis.
Pollin has been a major player in the area's sports scene since purchasing the NBA's Baltimore Bullets in 1964. He became the team's sole owner in 1968 and moved it to the Washington area in 1973 after building Capital Centre in Landover. Looking for another tenant for his new building, Pollin obtained an expansion franchise from the NHL, and the Capitals made their debut in 1974.
While the Bullets brought Pollin his only championship ring with a surprise title run in 1978, the Capitals' early years in Washington were lean. The team went 8-67-5 in its first season and did not make the playoffs until its ninth. Things improved after that, with Washington making a string of 14 straight postseason appearances, but the team advanced past the second round only once.
Leonsis, who as a season-ticket holder has seen both teams struggle, said the during a recent tour of the MCI Center he was brought to the middle of the basketball court and looked up.
"My first thought was how are we going to fill all those seats," he said. Neither he nor Ledecky wanted to reveal their specific plans to add some sizzle to the franchise, although Ledecky emphasized that "Our plans are very creative and innovative, and we're going to put a lot of tushies in the seats," Ledecky said. "We're going to market in an exciting way. There are a tremendous number of opportunities we're not taking advantage of to market to aggressively."
Staff writers Peter Behr, Shannon Henry, C. Jemal Horton, Jerry Knight and Tim Smart contributed to this report.
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