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In Unique $1.2 Billion Coyotes Deal, Buyer Never Met Seller

Eben Novy-Williams and Scott Soshnick
·5 min read
4

Ryan Smith has never spoken to Arizona Coyotes owner Alex Meruelo. It didn’t stop him from executing a $1.2 billion acquisition that will add an NHL team to his growing Utah sports empire.

“It’s a little unprecedented in how this is all happening, but with the timeline—there’s so much to do,” Smith said in an interview.

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NHL owners voted Thursday to approve the transaction, which will see Smith Entertainment Group (SEG), the company controlled by Smith and his wife Ashley, buy the roster, draft picks and hockey operations of the Coyotes from Meruelo. Those assets will be rolled into a new NHL franchise, which doesn’t yet have a name and will begin play later this year.

The Smiths have been talking to the NHL about a Utah franchise for two years, but the talks accelerated in recent months after the league came to SEG looking for a possible exit strategy in Arizona. The unique sale was brokered on both ends by the NHL, a stark contrast to the Smiths’ 2020 purchase of the Jazz from the Miller family, with whom they’d done business in the past and had known for years.

It’s not the only novel aspect to this transaction. When Smith spent $1.6 billion for the Jazz, he was stepping into familiar territory. The billionaire Qualtrics co-founder is an avid basketball fan and had been a Jazz season ticket holder. He’s one of the only NBA governors—maybe the only—who can dunk a basketball. Now he’s entering a less familiar corner of the industry.

“I’m probably a 20 handicap when it comes to hockey, to use a golf term,” Smith said. “I’ll get up to speed as quick as I can. I want to try to be helpful, but I also want to get out of the way if I don’t know something.”

The deal builds on SEG’s Utah sports empire. The group, whose investors include private equity firm Arctos Partners, owns every major pro sports team in the state—the NBA’s Jazz, MLS’ Real Salt Lake and the NWSL’s Royals—a rarity in modern ownership. As the business of franchise ownership shifts more toward broader platform economics, the NHL team should create extra synergies. That’s more than just 41 extra home dates at the Delta Center, or an overlap in personnel and expertise.

Owners like Smith talk frequently about the community aspect of their sports portfolio. He said in 2020 that the state of Utah was a “third party” in his Jazz transaction. The dense concentration of Utah assets helps feed that strategy, which he’s frequently referred to as “One Utah.”

“I went to the RSL game the other night, and there’s a scarf they give out at every game where half of it is RSL colors and the other half is Jazz colors,” Smith said. “And I was like, ‘That’s it. That’s what it means.’”

The approach has shown in Smith’s stewardship of the Jazz. In the face of RSN challenges, the NBA team was one of the first to adopt a new hybrid model—over-the-air TV and subscription-based streaming—that makes games easier (and cheaper) to watch for fans, at a financial hit to owners. Last June, the group launched SEG Media to encompass the strategy. Viewership of Jazz TV broadcasts is up 53% since the move, according to the team, and the streaming service has 20,000 subscribers.

Smith said SEG is “pretty far along” on a similar model for the NHL team. He added that there are extra challenges given the broad overlap of the NBA and NHL seasons, but joked that the Jazz plan last year also came together on a tight four-month timeline.

“We as an organization want to get hockey in front of as many eyeballs as we can in Utah,” he said. “We don’t want a whole lot of friction in that process.”

Utah has hockey history. There’s an ECHL team in West Valley City, a Salt Lake City suburb, and the Delta Center has hosted both minor league games and a handful of NHL preseason contests dubbed “Frozen Fury.” That said, the 18,306-seat venue does need modifications for hockey. It will have 12,000 unobstructed-view seats at the start of the season—way bigger than the 4,600-seat arena that the Coyotes called home the past two years, but still the smallest in the NHL by a wide margin. The capacity is expected to grow over time.

Salt Lake City, which hosted the Winter Olympics in 2002 and will likely do so again in 2034, has deep winter sports roots, a large population of college students and a recent influx of people from other states. There’s a vibrant hockey community, Smith said, but with limited ice availability, something that he and his wife plan to address.

Sportico recently valued the Coyotes team at $675 million, by far the lowest in the NHL. The most recent expansion fees paid to join the league were $500 million (Las Vegas) and $650 million (Seattle). The Golden Knights are now worth $1.3 billion, and the Kraken are worth $1.12 billion.

Smith said he’s not focusing on valuations, or returns, because he’s not looking to sell any time soon.

“I’m not a private equity guy who is sitting here trying to analyze what [the valuation] is going to be,” he said. “I’m bullish on the future of hockey. I’ve seen the transformation on the TV deal, I’ve seen the demand for live sports up close and personal. We’ve had the Frozen Fury here, we know what it’s like, and we want to lean in on it. I don’t need to see more.”

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