Andlauer’s Senators Buy Included Protection From Dadonov Fallout

During his takeover of the Ottawa Senators earlier this year, Michael Andlauer and his lawyers negotiated a high six-figure indemnification clause to mitigate possible punishment related to the team’s 2021 trade of Evgenii Dadonov, according to an NHL source familiar with the deal points.

The topic sparked league-wide intrigue last week when the NHL docked the Senators a first-round draft pick for trading Dadonov without disclosing specifics of his contract. After the punishment was handed down, Andlauer called out the NHL and the sellers, saying in a press conference that he felt he was misled about the severity of any potential discipline.

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“I knew about it through the due diligence process, and it was basically, from the seller’s perspective, it was really a non-issue,” he said. He then made it clear that he believes the actual punishment is more serious than a “non-issue.”

Andlauer earlier this year bought the Senators for about $950 million from the estate of late owner Eugene Melnyk. The purchase agreement includes a specific section related to the NHL’s investigation into the Dadonov incident, said the person, who was granted anonymity because the details are private. The high-six figure amount, which the sellers agreed to indemnify the buyer in the event of punishment, matches exactly the financial losses that the Vegas Golden Knights claimed to have suffered because of the trade mishap, the person said. The document also says that the Knights were seeking multiple Ottawa draft picks, including a first rounder, as an additional penalty.

It’s unclear if Andlauer intends to file a claim under the indemnification clause. Representatives for the Golden Knights, the NHL and Galatioto Sports Partners, the sell-side bank, all declined to comment. Cassels Brock & Blackwell LLP partner Sheldon Plener, who served as governor of the Senators after Melnyck’s death and oversaw the sale, also declined to comment. Representatives for the Senators and Goodmans LLP, the buyside law firm, didn’t respond to requests for comment.

The NHL’s punishment stems from a July 2021 trade between Ottawa and Las Vegas. In the process, the Senators didn’t disclose that Dadonov’s contract included a no-trade clause that would let him veto future trades to some other franchises. When the Knights tried to trade Dadonov the following year to the Anaheim Ducks, the Knights weren’t aware that he was allowed to nix the deal. The trade was voided, which caused downstream salary cap and personnel issues for the Ducks and Knights.

The NHL held multiple days of in-person hearings last year to collect information from all three teams about the mishap and how each team was affected. At the time, Melnyck’s estate was in the early stages of the sale process. In its punishment last week, the NHL said the Senators would have to forfeit a first-round pick in either 2024, 2025 or 2026, at the discretion of the team.

Shortly afterward, Andlauer made his frustrations clear. He admitted that the team was negligent in the Dadonov trade, but said he didn’t understand why it took more than a year after the hearings for the NHL to decide on its discipline.

“I don’t understand why it’s taken so long,” he said. “Maybe because the club was for sale and they didn’t want to disrupt, making sure the seller got the biggest price possible. I don’t know… You’d have to ask the NHL that question.”

While the purchase agreement makes it clear that the Senators losing picks was at least part of the discussion during the NHL’s hearings, it’s unclear how the league or the sellers represented that risk verbally during the sale process. The two sides eventually negotiated an indemnification clause that specifically matched the Knights’ claimed financial damages but did not cover anything related to the loss of draft picks. (The value of that draft pick will obviously vary dramatically depending on where in the first round the forfeited pick falls.)

It’s been a rough few weeks for the Senators. Heading into Thursday night’s game against Vancouver, the team has lost five of its last seven games and is dealing with a number of injuries. Off the ice, forward Shane Pinto was suspended for 41 games, the first half the season, for violations of the league’s gambling policies. Senators general manager Pierre Dorion resigned last week.

Andlauer has also said that he was not aware of the Pinto investigation during the sale process. It is not mentioned in the purchase agreement, the person said.

At least nine groups submitted offers for the Senators during the process. Melnyck’s estate remains a minority investor in the team.

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