Ukrainian Canadian billionaire is new owner of NHL team

by Christopher Guly
Special to The Ukrainian Weekly

OTTAWA - A son of Ukrainian immigrants has become the owner of Canada's hottest National Hockey League team.

In May billionaire Eugene N. Melnyk, the 44-year-old, Toronto-born chairman and chief executive officer of pharmaceutical giant Biovail Corp., received Ontario Superior Court approval to purchase the Ottawa Senators, which won its first Presidents' Trophy this year for finishing the regular season with the best overall record and made the Eastern Conference final against the New Jersey Devils - the closest the Senators have ever come to winning the Stanley Cup.

The $100 million (about $75 million U.S.) deal to purchase the nearly bankrupt 11-year-old NHL franchise, through Mr. Melnyk's company Capital Sports & Entertainment Inc., was to have closed by May 30. But the offer hinged on finalizing a transaction to buy the Corel Center, the team's home arena that defaulted on payments 14 months ago and was placed into receivership in May. On June 10, that deal, too, was finalized, though its details were not released.

Mr. Melnyk had offered $27.5 million to purchase the Corel Center - built for more than $220 million in 1996 - from Covanta Energy Corp., an insolvent New Jersey-based company that is owed $210 million for financing construction of the arena. (Figures are in Canadian dollars unless noted otherwise.) However, a Manhattan bankruptcy court overseeing Covanta's insolvency first had to approve the deal. (The $400 million combined debt of the Senators and Corel Center placed them in bankruptcy protection for months.)

"The NHL's board of governors unanimously approved the purchase of the Ottawa Senators and the Corel Center" by Mr. Melnyk on June 17, the Associated Press reported.

Yet even before the final sales agreements are signed, Mr. Melnyk - who originally considered buying the team and moving it to Hamilton, Ontario - has become somewhat of a hero in Ottawa for saving a financially troubled team that was either destined for extinction or somewhere else.

He comes bearing two gifts Sens fans like: he loves hockey and he has lots of money.

Though he was not much of a player in his youth, as his boyhood pal and best friend Dan Pawych, a creative director with a Toronto advertising firm told The Ottawa Citizen, Mr. Melnyk has combined his business acumen with his passion for the sport.

Two years ago, he was approached to buy a stake in the Toronto Maple Leafs, a team for which he holds season tickets, but declined.

Instead, he paid $2.5 million to buy the junior Toronto St. Michael's Majors, the Ontario Hockey League home team for St. Michael's College School, a Toronto-based junior and secondary school run by the Catholic Basilian Fathers that Mr. Melnyk attended.

A hands-on owner known for discussing strategy with the coach between periods and chartering planes rather than buses to transport the young players, he's now planning a new arena for the Majors.

And even when he's not near the ice, Mr. Melnyk tries to catch all of the team's games via a satellite uplink - at a cost of $1,000-an-hour - to his home in Barbados where he spends about 30 weeks a year. (He often watches NHL games via satellite at Bert's Bar in the commercial district of Christchurch.)

Considered a tax-shelter haven for some, which he denied, Mr. Melnyk moved to the Caribbean island nation 13 years ago and lives in a hilltop mansion in the southeast corner of Barbados with his wife, two young children, 4-year-old Anna and 8-month-old Olivia, and a nanny.

The sun, surf, golfing, entertaining and a private jet (a Gulfstream IV) come courtesy of his personal fortune estimated to be $1.7 billion U.S.

For the last two years, he has also been Canada's highest-paid executive. In 2002, Mr. Melnyk made nearly $2 million U.S.: $607,908 U.S. in salary and $41.3 million in stock options.

The year before he took home even more: $552,644 U.S. in salary and $78.6 million U.S. after cashing in stocks. He owns 17.8 percent, or $1.63 billion in stock, of Biovail.

Forbes magazine ranked Mr. Melnyk the 234th richest person in the world in 2002 (in eighth place in Canada), up from 292 on the global list in 2001. Not bad for a guy who ended his post-secondary academic training after a brief stint at York University in Toronto.

Mr. Melnyk preferred receiving his education from experience rather than in a classroom.

As a boy, he peddled cookies Mr. Pawych's grandmother, Pauline, would make for neighborhood kids in the Ukrainian-flavored Bloor West Village where "Mel," as he is known to his friends, and Mr. Pawych grew up.

In 1980 Mr. Melnyk, the son of physician Dr. Ferdinand Melnyk, established Trimel Corp., a company that condensed information from medical journals for doctors into a 16-page digest. Seven years later the company was listed on the Toronto Stock Exchange.

In 1989 Mr. Melnyk sold Trimel - then generating $9 million in annual revenue - to publishing powerhouse Thomson Corp. for $8 million and, at the age of 29, became a multimillionaire.

Mr. Melnyk used the proceeds to invest in Biovail SA, a Swiss medical company, and acquired a Canadian research facility to conduct clinical trials on controlled-release drugs (those that release their active ingredients into the bloodstream over a 12- or 24-hour period) for other pharmaceutical companies.

In 1991 he helped establish BCI, which became known as Biovail Corp. three years later when it began selling its own time-release medication to treat diseases in the cardiovascular and central nervous systems and to provide pain management. The company also specializes in "Flashdose" technology that enables medication to dissolve on a patient's tongue without the need for water.

Biovail, which produces the Cardizem line of heart medication, including its flagship drug, Tiazac, for angina, and distributes the Zyban quit-smoking drug, reported $87.8 million U.S. in earnings on $788 million U.S. in revenue. The company recently posted record first-quarter profits of $63 million U.S. on revenues of $191.4 million U.S.

Biovail expects revenues to reach $1 billion U.S. this year, and the company plans to launch seven new drugs by 2005.

Canada's largest publicly traded pharmaceutical company, Biovail operates nine plants in five countries and employs more than 1,600 people. Shares in the company, which is also listed on the Toronto Stock Exchange, have been trading at around $50 U.S. on the New York Stock Exchange.

Last December, Biovail bought Pharma Tech for about $66 million U.S., and earlier this month acquired the U.S. rights to two drugs from Madison, N.J.-based Wyeth for $130 million U.S: Ativan, for the treatment of anxiety disorders generically known as lorazepam; and the cardiovascular drug Isordil (isosorbide dinitrate), that which prevent angina pectoris due to coronary artery disease. Together, both drugs represent nearly a $12 billion U.S. market opportunity, according to Biovail.

Beyond attempting to stay ahead of the competition in the pharmaceutical world, Mr. Melnyk also has his eye on the finish line at the track.

He owns about 280 racehorses, many of them kept on a 1,000-acre farm near Ocala, Fla. His Archers Bay (named after a location in Barbados) won the Queen's Plate and the Prince of Wales Stakes in 1998, and Graeme Hall ran the Kentucky Derby three years ago. In 2001 he paid $1 million U.S. for a two-year-old colt, Warners; it was the highest amount paid for a thoroughbred at a public auction that year.

Mr. Melnyk once said he hires the best legal team and best financial and scientific people "money can buy." Though expensive, "at the end of the day, you get what you pay for," he added.

When major creditors approved a plan by Rod Bryden (a former federal deputy assistant minister and majority owner of the franchise since 1993) to regain control of the Senators with help from New York billionaire and fast-food magnate Nelson Peltz (of Arby's), Mr. Melnyk, who had expressed interest in submitting his own bid to buy the team and create a "dynasty," waited in the wings to try again.

In late February major bank creditors rejected the $245-million Bryden deal for the Senators and the Corel Center after performance milestones were missed. Mr. Melnyk then stepped in with his discounted deal (a $100 million all-cash offer for the Senators, compared to Mr. Bryden's $195 million-cash-and-tax-shelter proposal for the team and related assets such as management and coaches' contracts) to control a team that owes more than $200 million to over 500 creditors, including $12.6 million in player and staff payroll and deferred player contracts.

However, knowing that he has some of the league's best talent, Mr. Melnyk also plans to divert $8 million of the $100 million price tag for the Senators, according to court documents, to honor current and deferred contracts to staff, managers, coaches and players, including former Sens star Alexei Yashin, now with the New York Islanders, who is believed to be owed $2.36 million U.S.

However, Mr. Melnyk will receive about $5 million in net ticket revenue from the Senators' playoff series with the Philadelphia Flyers and the New Jersey Devils.

His deep pockets and commitment to keeping the Senators at home makes him, in the words of NHL Commissioner Gary Bettman, "exactly what the fans in Ottawa could be hoping for in their wildest dreams in terms of a new owner."

Copyright © The Ukrainian Weekly, June 22, 2003, No. 25, Vol. LXXI

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