A message for Mats

It has been quite a few years since I paid close attention to the NHL. Bernie Parent, Bobby Clark, Bill Barber, Dave Schultz and Rick Leach were bowling over the rest of the league in 1974-76, and it’s fair to say that no group has ever seemed as interesting.

It’s not that I haven’t tried. Rick Segal and I caught a Leaf game at some point last season. First of all, it’s colder in the ACC than I’m used to for the Raptors, which makes it a suboptimal place for swilling (and Rick’s a Diet Coke guy in any event).

Then there’s the lack of actual plays. In the NBA, you might see two dozen athletic, passing or scoring feats in a single game. I can’t recall any that night. The Leaf fans are better on the nuances of hockey, I suppose, but they are also just a bit more agonized after years of disappointment. The place seems tense.

Rick and I lasted two periods and independently concluded that 10ish was the right time to leave; the Raptors would have had us out of there at 9:24 p.m. and our limited partners and portfolio companies need us rested, after all.

However, what I do know is that Toronto Maple Leafs Captain Mats Sundin is lionized at the ACC, and that his skills are sought after around the NHL now that his contract is “up”. For all the sense that “no-trade” clauses might mean to senior players who want to keep their kids in a certain school or setting, the economics of Mats’ decision are so overly compelling that I feel the urge to wade into the situation and give him some advice:

The $20 million being offered by Vancouver is so much money for the last two years of your career. It seems incredibly unlikely that the Toronto Maple Leafs are a season or two away from winning the Stanley Cup, so it’s not like you’ll miss anything on the professional front in Toronto. The good folks at MLSE may still retire your jersey someday, even if you do go, but would it be worth $5 million to you if that was never to happen?

On the math front, the economics of being a retired hockey player are difficult to figure out. Maybe they are excellent, and it’s none of our business. But unless you want to be a broadcaster or an investment advisor, there don’t appear to be very many 2nd career plans that have worked for others. At least not in Canada. And all of the former NFL players that own U.S. car dealerships are probably not a happy lot these days, so that might be a business venture worth avoiding in your eventual retirement.

Folks will pitch you lots of business opportunities, and some may be worth pursuing. But the odds of any of them working out are the same as the rest of the angel investing community.

The appearance fee circuit could work, but how many events can any booking agent generate in a single year? 40 tops? At $5,000 each plus expenses? With natural gas heating bills alone now costing most families with your real estate footprint $10,000 a year, and hydro at $6,000/yr., $200,000 of pre tax income isn’t likely going to cover the nut. And, ten years from now, 40 events might be hard to come by despite your justifiable adulation from the Leaf Nation.

I’m assuming that you’ve saved some money over the years. But with the Dow Jones hitting bear market territory, relying on capital gains to finance the next 40 or 50 years is a risky proposition. And you will probably want to help put your grandkids through University someday.

So, here’s the math on the $20 million assuming that you can bank every penny you earn from this proposed deal after tax:

– $20MM Vancouver contract
– $10.8MM after tax (assuming 46% tax rate)
– 6% yield on the portfolio (a mix dividends, debentures, trusts, maybe some of the Decade of Daddy Fund™ managed by “self-made Billionaire Kevin O’Leary” – according to the Wasaga Beach Sun newspaper)
– $648,000 a year of income from the portfolio
– $349,920 of earnings after tax (assuming the highest tax rate of 46%)
– $29,129/month of spending (or saving) money

$20 million is a barrel of money. But it has to last a very long time unless you follow in the footsteps of John McEnroe, Johnny Miller and Tony Gabriel and work hard at a new job soon after retirement. Even then, no one is paying these guys their former rate to show up to work each day.

It’s a long life. $20 million secures your family’s financial future. Take the Vancouver offer. Your true fans in Hogtown will understand.

MRM