Part 2: Return on Investment

[This is the second part in a three-part series called ‘Mario Lemieux, Ron Burkle, and the Future of the Pittsburgh Penguins‘]

“Ron Burkle cannot tolerate losing — anything!”

Burkle’s ex-wife, Janet, said that in a court declaration as part of their divorce back in 2003, but it seems to apply to his perspective on business and sports as well.

Ron Burkle — with an estimated net worth of $2.6 billion — demands success.

He started as a stock boy in his father’s grocery stores in the 1960’s and 30 years later owned what was called a ‘California supermarket empire’.  His chains included Dominick’s, Alpha Bets, Ralphs, Food 4 Less and others.

So at the peak of his business career and in the midst of a raging bull market in 1999, Burkle did what any savvy businessman would do: he cashed out.

According to the San Francisco Chronicle, Burkle sold Dominick’s to Safeway for $1.2 billion. Then he unloaded the other chains to Kroger for $13 billion.  The US economy crashed hard as the tech bubble burst in the early 2000’s.  At the epicenter of the collapse was California and Silicon Valley.

But Burkle and his grocery investors had already locked in their returns and escaped nearly scratch-free.  In fact, Burkle had already put some of his cash to use, investing $20 million alongside Mario Lemieux to become majority owners of the Pittsburgh Penguins.

When it comes to grocery stores, the Pittsburgh Penguins, or anything Ron Burkle gets involved in, only one thing matters: return on investment.

He didn’t care that Ray Shero won NHL General Manager of the Year in 2013.  To Burkle, the phrase ‘General Manager Ray Shero‘ is no different than ‘Grocery Store Manager Jay Spero‘. Results are what matters. Loyalty be damned.

Jay Spero, Grocery Store Manager, would be judged on profitability and inventory turnover. Ray Shero was judged on wins and Stanley Cups.  All Burkle knows is that GM of the Year Shero and the Penguins didn’t win the Stanley Cup in 2014 — or in any of the four seasons prior to that.

Burkle knows Stanley Cups lead to ticket sales, sponsorships, and corporate dollars.  Stanley Cups lead to return on investment.

Unlike Lemieux, loyalty is only important to Burkle if it leads to a desired result.  Burkle seems like a ruthless and emotional risk-taker, but calling him reckless probably wouldn’t be fair.  Online profiles portray him as everything from selfless humanitarian to sleazy billionaire, but one thing is for certain: when it comes to business, Burkle knows what he’s doing.

Burkle once explained his acquisition strategy to Bloomberg Business Week:

“We always try to buy companies that are doing OK but that have some issues. We buy at a price that if they just muddle through, we don’t go broke. And if they do better, we make a lot. Since I was 13, I’ve been buying things because they are ridiculously cheap.”

The Penguins were ridiculously cheap and fraught with risk when Burkle and Lemieux purchased the team for $107 million in 1999.

That gamble has paid off handsomely.

Click Here to Read Part 3: The Future of the Pittsburgh Penguins