Tuesday, April 13, 2010

Khan vs. Kroenke! Fight!

So the other ownership shoe dropped last night. Adam Schefter announced on ESPN's NFL Live that Silent Stan Kroenke has decided to exercise his contractual right of first refusal to purchase the Rams. I wanted to wait for confirming details before blogging about it. The report is correct. Enos Stan Kroenke has decided to exercise his contractual right of first refusal to purchase the remaining 60% of Ram stock he does not already own. This puts him squarely at odds with league rules and with Shahid Khan.

First the league rules.

As you all know, the league has bylaws forbidding NFL majority owners from owning a majority share in any other sports franchise in an NFL city. The rule rule used to prohibit ownership of any other pro-franchise in any city. The rule was mildly re-interpreted to allow Paul Allen {owner of the Portland Trailblazers} to purchase the Seattle Seahawks. The league owners wanted Paul Allen in the clubhouse and on the golf course. The owners wanted a league connection to the new silicone economy, and to Microsoft.

League insiders have been divided on whether Kroenke might obtain a similar wavier, and/or whether the league might be prepared to do away with this archaic rule entirely. Many believe that this rule is an archaic relic of a bygone era. Many others believe the league will not change its policy for Kroenke's sake. We are about to find out, one way or the other.

Owning both an NBA and NHL franchise in Denver should automatically disqualify Kroenke, but it just so happens he is a buddy and business partner of Pat Bowlen. Bowlen is the owner of the Denver Broncos, and co-owner of the Colorado Crush of the Arena League... along with Stan Kroenke. Insiders expect Bowlen will plead his friend's case. Pat Bowlen is a powerful owner, and he is also the theoretical aggrieved party according to the strange philosophy behind the cross-ownership rule. Given Bowlen's blessing, the deal might roll.

Several factors militate in Kroenke's favor:
  1. The NFL Finance committee already announced that it doesn't like one of the several financial devices Khan intends to use to purchase the Rams.
  2. Kroenke is already an insider. He has been partial owner of the Rams since the early 1990s. He has been vice chairman of the Rams' board for some time, and served on several NFL committees.
  3. Kroenke has more money than Khan. Kroenke is worth an estimated $3 billion. His wife--Anne Walton, a Walmart heir--is worth $3.5 billion. Together they are worth approximately 3 times as much as Shahid Khan ($2.14 billion).
  4. The NFL ownership booth is one of the most exclusive clubs around. It is a consummate old-boys' network. Kroenke is much more their type of guy than Khan.
What is my take on the situation?

On the one hand, I would have been shocked if Kroenke hadn't exercised his right to purchase the rest of the Rams. My memory fails, but I remember Kroenke buying into the Rams back in 1993 or 1994, when the Rams were having serious financial trouble keeping up with the Joneses {Jerry Jones and Eddie DeBartolo}. It was understood at the time that he wanted to buy the whole enchilada. This was the reason for the contractual right of first refusal he has chosen to exercise now. Ever since then, Kroenke has been waiting on line to buy the Rams.

Why didn't he just attempt to buy outright? One word: Strategy. He wanted the market to set a low price in accordance with the financial distress our nation is going through at the moment. There is also the cross-ownership rule which needs to be gotten around. Kroenke wanted to see what sort of ownership interest the Rams might scratch up, and see whether the owner's club might prefer Kroenke to own the Rams.

Will this blow up in his face? I seriously doubt a man of Kroenke's sense would have exercised his right of first refusal if he had not been given some indications, if not outright assurances, that the NFL would hear his case with favor. I think he is confident that he will be approved, or he would not have made this move.

Now the fight with Khan.

If the league rejects Khan and elects Kroenke, the move could be interpreted in racial terms. Would this be a case where collection of white Europeans just didn't want a Pakistani fellow in the clubhouse? This could make for some very interesting league wrangling inside league circles. Pray for the good of the Rams that this doesn't happen. This could hold the Rams' ownership status in limbo for several years. This could make for several years of lost franchise history.