The NHL’s illustrious New York Islanders: winners of four consecutive Stanley Cups in the early 1980s. Coached by the immortal Al Arbour and propelled by five future Hockey Hall of Famers, the Isles and their fans in Nassau and Suffolk Counties enjoyed one of the greatest runs in hockey history. The names still resonate: Bossy, Gillies, Potvin, Smith, and Trottier.
In 2000, businessman Charles Wang purchased a stake in the team. Wang co-founded Computer Associates International, Inc. (now known as CA Technologies), and was integral in dictating the company’s direction until his sudden departure in 2002 under intense scrutiny. In 2004, Wang obtained majority interest of the Islanders in a buy-out of his partner and convicted fraudster, Sanjay Kumar.
Since 2000, the Islanders have seen a dismal run of 431 wins in 1032 regular season games, five playoff appearances, and eight playoff wins. The Islanders have watched numerous superstars come and go in deals that turned out to be complete laughers. See, e.g., Bryan McCabe, Todd Bertuzzi, and a third round selection (Jarko Ruutu) for Trevor Linden; Zdeno Chara, Bill Muckalt, and a first round selection (Jason Spezza) for Alexei Yashin; Olli Jokinen and Roberto Luongo for Mark Parrish and Oleg Kvasha. From a fan relationship standpoint, Wang’s ownership of the team has been troubled to say the least. (To be fair, the 1990s were not exactly kind to the Islanders.)
Enter Andrew Barroway, a successful Philadelphia securities lawyer and co-founder of Merion Investment Management, LP. Mr. Barroway has been linked to a purchase of the Islanders for months. On August 11, 2014, Barroway’s entity, NY ICE, LLC, sued Wang and his various holding entities in the Supreme Court of New York, New York County (Manhattan), alleging that Wang reneged on a partially-consummated contract to sell the team to NY Ice for $420 million.
The lawsuit alleges that, after nine months of negotiations, Barroway and Wang memorialized their agreement in a 70-page Securities Purchase Agreement (the “SPA”). The deal purportedly included a $100 million up-front payment, an $83 million promissory note, and assumption of $125 million in debt owed to Bank of America. Wang’s ownership entities would, in turn, receive a 25% ownership interest in NY ICE.
Wang purportedly committed verbally and in writing to the deal, and the parties began the process of fulfilling the conditions of closing, including (a) seeking approval of the deal from the NHL, and (b) securing a $125 million credit facility to satisfy the Bank of America debt.
In June 2014, the parties met in New York City, at which time Wang allegedly pulled Barroway into a side room and expressed that he could command a much higher price for the team following Steve Ballmer’s $2 billion bid for the Los Angeles Clippers. The parties met again in July, at which time Wang allegedly “blindsided” Barroway with a new $548 million demand. Two days later, Wang announced his intention to sell the team to another investment group.
The seven-count Complaint sets forth claims for breach of contract (numerous grounds), promissory estoppel, and a permanent injunction. The Complaint is aimed at compelling the sale of the franchise to NY Ice. The lead count seeks specific performance in the form an order compelling a sale on the terms set forth in the SPA. Further, the claim for injunction seeks to bar a sale to any other party. In the alternative, NY Ice seeks liquidated damages under the SPA in the amount of $10 million, which it dubs a “break-up fee.”
Lost in the coverage of this dispute is the fact that Forbes recently valued the Islanders at $195 million. Wang, who was purportedly to receive $183 million in cash for the team under the SPA, thinks the enterprise value of the New York Islanders is just shy of the NHL record $575 million paid by Molson for the iconic Montreal Canadiens in a 2009 leveraged buyout. Putting all of this into perspective, Red Sox minority shareholder Jeffrey Vinik purchased the Tampa Bay Lightning in 2010 for $93 million – less than the up-front cash Barroway agreed to pay under the SPA.