Month / March 2017

by Frank Maduri

MLS Expansion: LA, Miami, “Group of 12”, Future of Soccer In America

MLS Commissioner Don Garber announced recently that the newly rebranded Los Angeles Football Club (LA FC) which are the initials they will be known by in the future, will be entering the league alone in 2018. This is a deviation from a trend of expanding the league by two teams at a time, and it also casts some doubt on the state of the Miami expansion bid.

It was anticipated that the Miami bid spearheaded by former soccer superstar, David Beckham, would also begin play in 2018 with LA FC. The Miami bid has had numerous setbacks, most notably with securing land for a stadium as well as securing total private financing for the stadium.

When the calendar flipped to 2017, the news out of Miami was, that after striking out on their attempts at obtaining land at the Port of Miami, Museum Park, and a plot of land across from Marlins Park; Beckham had secured land in the Overtown section of Miami. The group does need to acquire the adjacent lot which is owned by the county for municipal vehicle storage.

The Overtown section is north of Miami’s main downtown and is notably a high crime and economically depressed area with a very diverse population from several countries. The Beckham group proposal has the jobs generated from the stadium and team being located there as the primary piece in his pitch to the government.
The plan for the stadium, according to local news sources and the MLS site, is for a 25,000 seat venue that will cost around $200 million in the final estimates. The Beckham group is currently reported to be seeking out additional minority investors to help come up with the rest of the financing needed to get the stadium facility built successfully. The target date now is for Miami to join the league in 2019, but all parties involved caution that those parameters could change in the future.

The league has issued statements of support for Miami, which also happens to boast the highest overall TV ratings for soccer in the U.S. (which is a huge reason why the MLS has been so patient) and a demographics mix that is favorable for supporting a soccer club for the long term. In my prior coverage of the expansion of MLS, the media rights deal for the television packages both regionally and nationally has come into focus.

The league wants to grow their presence in large TV markets so they can increase their revenue capture in the next TV rights deal. The addition of Atlanta and Minnesota as expansion clubs this season and the second team in LA in 2018 as well as potentially Miami in two years, will be a huge bargaining chip for MLS to get more revenue dollars out at the negotiating table.

The second LA team mentioned earlier, LA FC, has a star studded ownership group and is the rebranded entry for the disbanded Chivas USA which shared the Los Angeles market with the Galaxy for a period of years in MLS history. The Chivas experiment was a complete failure, as the club never gained real traction in L.A. and shared a stadium with the Galaxy, which did not help their marketing attempts.

LA FC will have their own modern stadium which is under construction currently on the site of the former LA Sports Arena which is just south of the LA Memorial Coliseum. The location is very good and very convenient for fans, and the league will be releasing information on the expansion draft to help them construct their roster in the near future.

Group of Twelve

The addition of LA FC in 2018 will bring the league to 23 teams, the first time in a while they will have an odd number of teams, which will be a scheduling headache for the league office. The Miami bid looks like it is eventually going to get done as the 24th entry to MLS, which has a stated goal of expanding to 28 teams.

The remaining four spots for expansion will be decided among what is called the “Group of Twelve”, the twelve cities that submitted proposals for consideration for an MLS expansion franchise. The group consists of: Tampa/St. Petersburg, Cincinnati, Detroit, Indianapolis, Nashville, Charlotte, Raleigh-Durham, Phoenix, Sacramento, San Diego, San Antonio, and St. Louis.

I have produced individual articles on some of these cities and their quest for an MLS expansion franchise in the past, I have also completed larger summary articles on each of these bids as well as others which were not included in the “Group of Twelve”. It should also be noted that MLS executives intend on reducing down this group to a smaller number, potentially as early as this summer.

In my view, and I have no indication from the league on this part of the process, it would make sense to cut the group down from twelve bids to eight, since only four slots are available. Then it could either be cut again to six bids, or the four approved bids could be announced.

The summary of each bid can be found below:

Tampa/St. Petersburg – see my full article on this emerging and popular bid. The Tampa Bay Rowdies have an established fan base, a passionate owner, and plans to renovate and expand their existing stadium on the St. Petersburg waterfront. The stadium plans do not require any changes to the city street grid or any “fill” in the bay to complete which is a big positive with local government and the residents. MLS executives are intrigued by the stadium site and the size of the market for TV purposes. They also have a very organized social media campaign.
The negatives would be that the Tampa Bay area is already part of the territorial rights for the Orlando City FC franchise and they would have to agree to another franchise joining MLS from the same region. Orlando City would also have to be compensated for the alteration to their territorial rights, which could get very sticky and expensive.
Some analysts see that territorial issue and the fact that the league had a team in Tampa which folded in the early 2000s as two major issues with the bid. I think it is still very much in play because of the size of the market, the fan base of the team, the ownership, and the stadium.

Cincinnati – The bid has many strong points such as an established fan base for their current minor league club, strong attendance figures at those matches, and a committed ownership group with great resources. The Midwest is an area of need for MLS expansion when looking at the current footprint of the league.
The negative point for the Cincinnati bid is a big one: the stadium. Their current stadium for their minor league club is too old and too small. The successful bid for this city would need to include a new stadium plan that is actionable. The government seems supportive of that concept and the stadium is a vital component to an MLS bid because the league needs full control of the facilities that their clubs play in for scheduling and maximum revenue generation purposes.
Some analysts feel that this bid only needs a vote on the new stadium and it is going to be one of the approved bids out of the this “group of twelve”. I am not so sure because the spots are limited and MLS executives are very high on the presentations by St. Louis and Detroit and may think those two cities will be an adequate representation of the Midwest at this point.

Detroit- The bid for Detroit is also a process which I wrote a separate article about several months back, it has risen from a long shot to a very real possibility for one of these last four spots on the MLS franchise expansion list. The strong points are: an ownership group that includes two billionaire professional sports owners, one of the largest untapped TV markets for MLS, a diverse population with a history of supporting soccer, and it is the second most populated metro area after Phoenix in the “group of twelve”.
The downsides to this bid: they have no high level minor league presence in the market. Detroit City FC is essentially a fifth tier team that is supporter funded, though they have done a great job on a small scale with marketing the club.
The other main issue is the stadium site. Dan Gilbert and Tom Gores, the two principle potential owners are eying a site in the rapidly redeveloping District Detroit, where the other sports stadiums are located. The site is a few blocks from Ford Field / Comerica Park and is currently a failed municipal construction site for a proposed jail. The budget money ran out and the site has been abandoned for some time. Mr. Gilbert and Mr. Gores have proposed essentially a land swap where the jail would be moved to another area in the city and they would acquire the former jail site to build the soccer stadium. The city is mulling the proposal, and if they turn it down, there is no contingency plan for a site for a stadium. There are some analysts and soccer media people who feel that the stadium site could sink this deal, and others who believe that MLS is so interested in reviving Detroit that it could still move forward with a successful bid.

Indianapolis- This city which I have visited several times is one of the most underrated sports cities in the nation. The downtown is very easy to walk and all of the stadiums are in the same area which makes it very convenient. MLS favors the downtown urban setting for the stadiums for their franchises and the league has appeal with millennials, who also favor the concept of living in a downtown area with access to sports as well as entertainment options.
The city has an upper tier minor league team called “The Indy Eleven” which play in Carroll Stadium and have garnered some impressive attendance numbers. The support of this club is seen as a very strong aspect to the bid. The club has a very wealthy and well connected owner that is very driven to get into MLS.
The city also has robust support from the local and state governments, which just created a tax zone for the area that the proposed new stadium would be constructed. The tax revenue from gate receipts (ticket sales), concession sales, and tax revenue from those that work at the stadium would comprise the public portion of the new stadium funding. The proposed site is near the Colts NFL stadium downtown.
The negative aspects to this bid are that the minor league club does not have an established history, the Midwest could get crowded if the league decides to grant access to St. Louis and Detroit as well, and the last negative is the stadium. The proposal for the tax zone may not gain passage before MLS decides on the last two bids for expansion. In the event that the financing plan for the stadium is uncertain, this bid will fail. I view this as more of a long shot bid.

Nashville- A bid that has gained some traction in recent months is the proposal from Nashville to join the largest soccer league in North America. This push is being spearheaded by the Ingram family worth billions of dollars and enjoys outstanding governmental support. The city is the smallest metro area of this group of twelve applicants, and it has never supported a soccer club on any level.
The stadium site has gained some clarity now that the Nashville Fairgrounds has been zeroed in as the proposed area for development of that facility. The city has a large millennial population and a growing diversity in their population which MLS executives have noted as strength areas.
The fact that they have a strong ownership group and substantial potential corporate sponsorship support are the positive aspects to this bid.
The negative aspects are that they have no attendance figures or history of supporting a soccer club, the size of the metro area, and the lack of a definitive stadium plan puts this bid in jeopardy of being passed over for one of the final spots in this process.

Charlotte- The bid by Charlotte is one of two from the state of North Carolina (Raleigh-Durham is the other) and MLS Commissioner Don Garber has stated that the league would like to expand their presence in the Southeast. There was some confusion between the potential owners and the city council because of the timing of their request for public funds to build a soccer stadium on the site of the old American Legion Memorial Stadium. The municipal government felt it was rushed, and that is because essentially Charlotte came late to the MLS expansion party and had to apply prior to the deadline.
This bid will most likely be for one of the final two spots in the process because other cities are at a more advanced stage at this point. The positives for Charlotte are the location and the passion of the potential owners, the powerful Smith family of NASCAR fame and wealth. The political support is a bit split with the mayor on board and the county level officials on board with the bid and the stadium plan, and some city level officials that are seeking more time to evaluate the use of funds for an elite level pro soccer team.
The stadium site is fairly convenient as it is close to Charlotte’s Uptown area, which is where the NBA’s Charlotte Hornets have their arena. However, in recent weeks there seems to be some uncertainty being reported by the local media around the stadium plan and the financing for the project. That is obviously never good news when it comes to the prospects for an MLS expansion team. The other positives include the corporate sponsorship presence, the size of their media market, and the support of their other sports teams.
The Independence are a minor league affiliate of the Colorado Rapids of MLS, and they play in Charlotte currently. The support for the team will be part of the evaluation of the bid as will be the robust support that the residents there provided to the U.S. Men’s National team games held in the city recently. My view is that the demographics and some other metrics make this bid interesting, but if the city council blocks the stadium deal, this bid will be eliminated.
Raleigh – The other Southeast bid is from Raleigh, which has a successful minor league team (Carolina RailHawks re-branded recently as North Carolina FC) a dedicated ownership group led by businessman Steve Malik, and a demographic mix of highly educated professionals transplanted from the Northeast as well as millennials starting their careers.
The corporate presence is a bit lacking in major Fortune 500 types, but several large multinational corporations have a presence in the “Research Triangle” area. The bid proposal stressed the fact that the area has just one major pro team, the NHL’s Hurricanes, and that the population can support an MLS team. It also stressed the teamwork between the owner, the local government, the corporations, and the local residents.
The media market size is on the smaller side, but MLS has clubs in small markets that have done very well. The all-important stadium situation is the area where the most progress is needed. They have a design concept, a mid-20,000 seat stadium with a translucent roof. The renderings look amazing, but the site is still not determined. The North Carolina FC club plays currently in a small facility in Cary, which is outside of Raleigh. MLS prefers downtown urban stadium locations with access to public transit. The stadium will be mostly privately financed.
Raleigh is an interesting bid, I still think if Charlotte gets the stadium plan voted through it may have an advantage. Many analysts close to the league feel that North Carolina will get one of the four teams. Then, others feel that Atlanta and Orlando are so dominant in the Southeast that the league may look to hit other areas where they need a presence.

Phoenix- The entry of this city into the group was a surprise to some because the market has not done particularly well supporting their lower tier minor league team through the years. The market is the largest metro area without an MLS club and they have no competition, the next closest MLS club is over 300 miles away so that makes this bid unique.
This bid by Phoenix is a mixed bag of positive and negative elements. The positives are that they have a current minor league club: Phoenix Rising FC, they have an ownership group, and they have a stadium plan as well as a site. There are groups within Phoenix that believe that the support for the minor league club was not strong because the stadium location is not convenient. The new stadium would be in Scottsdale, an ideal location for accessibility.
The negative elements are that the corporate support for the potential MLS club is tepid, the city has other major sports so competition for entertainment dollars is steep, and the market has limited soccer heritage or history to draw upon.
In my view, the stadium moving to Scottsdale is a key component. The population and TV market numbers are very compelling. I think Phoenix has a strong chance because I think MLS wants to be there just from the size of the market and the demographics of the market, just from that perspective. I do have reservations about the ability of the area to support a team and whether it would work, particularly playing matches in the summer months in Arizona.

Sacramento- The soccer world was anticipating this expansion bid to be a virtual “lock” based on the progress that this group made in all phases of the process. The events of the past few months, however, have put the Sacramento bid in a degree of jeopardy. The capital city of California has been working tirelessly over the past four years to obtain an MLS expansion franchise. The demographics are ideal for MLS, the market size has some attractive attributes, and there is little competition with only one pro sports team in town: the NBA’s Kings.
The other main positive to the bid is that the minor league club, Sacramento Republic FC, has been a huge success in that market. The club has set attendance records in their league and was the initial reason behind the interest level for MLS being so high in potential expansion to that market. The branding of that club clearly has connected with the community and it “checks all the boxes” as far as MLS criteria for a minor league club presence and established fan support base.
The stadium site is also a positive attribute to their quest for one of the last four spots in MLS. The new facility is designed and the project is shovel ready in a tract of land in the Railyards section of the Sacramento downtown, which is part of a huge redevelopment project being spearheaded by the city.
The ownership component is a bit tricky because Kevin Nagle, who is leading the MLS bid process did not have the rights to the branding of the Republic name, logo, and colors. Those rights are controlled by Warren Smith who runs the operations of the minor league club. The two men caused the issues with the bid alluded to earlier in this section because at the time the bid was due to MLS, Nagle submitted it without the Republic being a part of the submission. This created concern within the league over whether the local ownership was fractured. In the end, an agreement between Nagle and Smith was made about four days later, and the MLS process will move forward with the Sacramento Republic being the name and branding used for the potential expansion team.
The other issue with Sacramento is the emergence of San Diego as an exciting candidate for expansion, which raises the question of whether MLS would add two more teams in California.
In my view, this bid is still very solid and MLS cannot ignore the unbelievable success pattern that Sacramento Republic FC has had over the past few years. The ownership situation appears to be solidified as far as the transition of the branding for the minor league club. This bid seems more reliable than others in the group.

San Diego- This city, along with the two bids from North Carolina, are the most recent additions to “the group of twelve”. The San Diego attempt at MLS expansion gained a huge amount of momentum when the city’s longtime NFL franchise, the Chargers, relocated to Los Angeles in January. The city officials, seeking to fill a void, moved quickly to facilitate a comprehensive proposal to obtain an elite pro soccer franchise for San Diego.
The proposal has several positive attributes from the outstanding climate, the proximity to other franchises in the league for rivalry purposes, and to the favorable demographics. San Diego has a growing millennial population and has strong potential corporate sponsorships available as well.
The other positive attribute is the stadium proposal which calls for a comprehensive redevelopment of the Mission Valley site that was home to the Chargers football stadium. The old stadium would be torn down and a new smaller venue for soccer and college football would be built there along with other housing, office, and retail space for the university.
The downside is that the San Diego bid is up against some stiff competition with cities who have been honing their MLS bids for years. The government is supportive but the league also currently has teams in California and may want to use the expansion slots to grow the game in other areas of the country.

San Antonio- The bid from this city is interesting because the support for the minor league team is solid, and that club was just recently purchased by the same group which owns the San Antonio Spurs of NBA small market success. The ownership group is the strongest aspect of this bid. The renovation and expansion plan for the facility where the minor league Scorpions club plays currently is very unclear, and thought to be the negative that could eliminate this bid from the whole process.
San Antonio has the right demographics and millennial population, but it is in a similar predicament as San Diego. MLS has two clubs already in Texas and may not want to add a third franchise there, especially when FC Dallas has struggled to connect with the fan base in that market over many years.

St. Louis – The bid is similar to San Diego, this city also lost their NFL team (Rams) to a relocation to Los Angeles. The plan is to build a soccer stadium on land near the Union Station railway hub downtown. I wrote a separate article about this city and the quest to gain an MLS spot. The ownership is dedicated and passionate and the city has great soccer heritage as well. The downtown site is ideal.
The city has hosted some high profile soccer matches which were well attended recently. The expansion there would fill a hole in the Midwest on the MLS map.
The negative aspect is the unproven aspect of being able to support a team long term from both a sponsorship and fan base perspective. The other red flag on this bid is the stadium proposal. The Governor of Missouri has pulled the state level financing, and the city has amended a bill to try to gain tax revenue for their portion, but the use of tax revenue is going to be decided by the voters.
Commissioner Garber was in St. Louis on Monday ahead of the vote on both propositions for the proposed stadium, trying to drum up support. The long and short view of this bid is that MLS wants to be in St. Louis, but they have to iron out the financing of the stadium or this bid will not be approved. The option to privately finance the stadium project is still on the table but ownership is already reportedly going to pay $150 million in an expansion fee to MLS, then they committed another $80 million toward the stadium costs plus the overruns. They would need private financing of another $80 to $100 million to get the project completed.

In the end analysis, my own view of this situation with expansion of MLS in the future is that it is a very fluid situation. The Miami club will most likely be granted into the league at some point in the near future. The league has spent an inordinate amount of time, money, and resources trying to make Miami a viable situation. That would leave four open slots for twelve teams.

The most likely group that will emerge in my view of the situation are: Sacramento, San Diego, St. Louis, and Tampa/St. Petersburg. The league is really intrigued with those four markets for various reasons. However, in the event that St. Louis cannot get the stadium deal done, Detroit or Cincinnati could slide in as a replacement in the Midwest. That is provided that they get their own stadium deals in place, if the jail site land swap fails, Detroit is out of the running.

I know two California teams seems like a wild concept, but Sacramento is the most ready of all the bids and is such a great fit as an MLS market it makes too much sense for them. The league is really taken with San Diego, and they have a fairly straightforward bid because the city owns the land in Mission Valley and is supportive of the development project there.

In the event that the St. Petersburg group cannot reach an agreement with MLS and Orlando City FC on the territory rights, that could doom that bid. In that case, I think the league would go with one of the North Carolina bids to fill a spot in the Southeast. The stadium issues being resolved either in Charlotte or Raleigh would be the deciding factor in which bid moves forward.

I also understand that many fans and those with interest in this topic feel that Cincinnati has a great bid, and they do, but they are in a small media market. I think a spot opens for them only if one of the spots fails to seal the deal, namely St. Louis. I do not see the league adding two Midwest teams.

The interest in the league is growing and the speculation around how the league will look in the next few years is an exciting prospect. The theme of this whole process is that soccer in America has really gained a foothold and is gaining popularity.

The expansion process will play out in the next several months and it will be interesting to see from the vote in St. Louis, to the land swap in Detroit, to the city council decision in Charlotte, and to the negotiations for the St. Petersburg territory; which bids will be successful in joining the league. The process will play out and the league will have some exciting new cities on the franchise map in the near future.

by Frank Maduri

Zero Hour: EPA Superfund Follow Up

The EPA Superfund program has come under fire recently from the new Trump Administration which has cast a shadow of doubt over the future activity from this vital program. The significant amount of sites still being actively contained and remediated by the Superfund program has caused concern within residents of those areas.

The concern comes from the potential budget cuts for the program that could come from the Trump Administration in the coming months. The Superfund provides focused attention on the most contaminated or hazardous areas from past industrial, chemical, or other types of pollution.

The program also has a National Priorities List (NPL) designation for these sites as well. The specifics on the list and the foundation of the program can be found in my earlier article series on the Superfund program.

The follow up to that series will focus on some sites that have made the news recently, particularly in my home state of New Jersey and the New York metro area. The State of New Jersey has the most Superfund sites of any other state in the country.

The main misconception with Superfund sites from certain factions of the federal, state, and local governments as well as some groups of the general public is that the program is not producing results. The rationale behind that misconception is largely because of the many years it can take for a site with that level of contamination to be remediated.

The other component involved is the sheer time it takes for the entire Superfund process to move through all of the necessary steps prior to remediation work even beginning to take place. This process and the various steps it takes through the public and community input stages can be found in my earlier article series on the Superfund program.

The reality is that the program is effective in maintaining, treating, and remediating very complex areas of environmental contamination. The multiple steps involved are necessary – and the process, while taking a significant time horizon to transition from start to finish, has been proven to work in rehabilitating sites of increased pollutant exposure.

The EPA is currently focusing their efforts on the NPL sites that have been progressively difficult to contain and clean in particularly contaminated industrial areas throughout our country.

Diamond In The Rough

A Superfund site that is recently in the mainstream news here in the Northeast, is the former Diamond Alkali site in Newark, New Jersey. The site is part of the Passaic River Superfund cleanup focus area as well. It is a particularly complicated site because of the types of chemicals used there, and the level of widespread contamination of those chemicals and industrial materials.

The site has housed production of chemicals since the 1940s, when according to the EPA studies, DDT was manufactured there on the premises. The Diamond Alkali Company made several products there in the 1950s and 1960s including the herbicide known as “Agent Orange”, which the process to manufacture creates a dangerous by-product known as dioxin.

The company eventually sold the land, and the EPA conducted site studies in the early 1980s which yielded elevated amounts of dioxin, PCBs, and other dangerous toxins. The plan for the site, as with any other Superfund designated location, included immediate, interim, and longer term countermeasures to contain and remediate the area.

The process took many years and several steps and is still ongoing. The most recent plan to fully remediate the Diamond Alkali site and the greater Lower Passaic River project is slated to take 10 years to complete. The project made headlines recently when the EPA and municipal government officials announced that the companies involved in the pollution of the Passaic River are going to foot the bill for the cleanup.

The Lower Passaic River site encompasses an area of eight miles and it will take, according to NJ.com and other sources, 1 year to negotiate and 10 years to conduct the actual cleanup and remediation work. The cost of the entire project is $1.4 billion (yes billion with a “b”) and any enthusiasm regarding the corporations allegedly involved picking up the tab should be tempered by the fact that none of them have signed up to do so at this time.

The plan calls for dredging and draining of sediment from the river. The sediment will then go through a process known as dewatering, then the sediment will be transported to a remote area for disposal by train. Finally, the entire stretch of the site identified as the Lower Passaic River site (the entire 8 miles) will be capped, which is the process I described in my initial article series, it involves the application of a sand and stone barricade of about two feet in depth to seal off the area.

The companies involved will be in negotiations with the EPA regarding the cleanup costs, and I am certain that the pressure of public opinion will also help benefit this project. It is a long term and large scale job, but the proper cleanup of that site requires that type of diligence.

Ring of Doubt: Ringwood Ford Site

The EPA does not always enjoy the benefit of positive public opinion. The situation in Ringwood, New Jersey is a case in point of that type of scenario. The EPA, the residents, and the municipal government are all at odds over the course of action needed in the Ford site along a river in Upper Ringwood.

The residents are upset because the EPA has seemingly changed course over the plan to recover the site from years of pollutants. The original plan was for the excavation and remediation of over 160,000 tons of polluted soil from the site.

Instead, the proposal from the EPA is now pushing for the town to put a recycling center on the site. The pollutants would be contained by a “cap” and would not be excavated. The recycling center would cost the township about $5 million and the remediation work will cost the town around $30 to $35 million depending on the estimates.

Ford used the site as a waste dump essentially for all the chemicals and other toxic products from their plant in nearby Mahwah.

The 500 acre site has been relisted numerous times on the Superfund NPL because of repeated attempts to remediate the widespread contamination of the site. This latest plan by the EPA to cap the site has resulted in upset groups of local residents that want Ford to be held responsible for the cleanup and for the site to be remediated in a more comprehensive way.

The general public sentiment is understandable, the feelings of distrust of the EPA can also be completely valid in this case. Ford is a multi-billion dollar corporate goliath that used that land to get rid of waste from their plant for decades, and now they want to shirk the cost of the cleanup.

The resolutions proposed by the EPA would both entail the taxpaying residents foot the bill for the recovery of the site. This is patently unfair, and this is a case study example of why the EPA has been under such intense scrutiny in recent weeks. The two resolutions they provide in this Ringwood Superfund site will not address or solve the underlying pollution there in an effective manner.

The EPA has to consider other remediation alternatives, determine a whole new course of action, and they need to get Ford involved in the cost of the cleanup process. The whole situation there is a literal and figurative mess.

The legal ramifications of the process are another area where this situation could be very troublesome for all parties involved. It definitely merits watching in the weeks and months ahead.

Down to Zero

The new proposed federal budget from The White House carries huge cuts to a variety of agencies including the EPA. This obviously casts a doubt on the future of the agency and the Superfund program.

The cuts, according to CBS News and other major news sources, to the EPA budget are around 30% and the Superfund projects currently open or active face a great deal of uncertainty. The budgetary constraints take on an added significance when you take into account the duration of time it requires to remediate many of these highly polluted sites.

The Gowanus Canal site in New York City was one of the projects I featured in my series of articles on the Superfund. This project was in the news again on Tuesday with the Attorney General of New York and other Congressional representatives who held a media event at the site urging Congress to reject the budget.

The Gowanus Canal site is one of the worst in the nation as far as pollutant levels and toxicity. They have commitments from several companies to cover about $500 million in cleanup costs, according to estimates from the site proposal. The budget cuts could defund the entire project, which is in the “design” phase with remediation work set to begin in 2018.

In the event that the program was defunded that would essentially waste four years of time that many entities committed to pursuing a solution for this environmental disaster. I understand that big government waste is a real issue, but it should not come at the cost of environmental safety.

Conversely, there are other programs that function well, that is the real cost of some of these cuts: the time, money, and resources already dedicated by countless groups of people. Those groups include volunteers, concerned citizens, local government officials, and numerous professionals from a variety of backgrounds. In this specific case of the Superfund, the cuts or the defunding of the budget create a scenario where there are tax dollars already utilized to evaluate the respective site and develop the cleanup procedure, so the cuts essentially compound the waste of resources.

The future of the EPA and the Superfund program hang in the balance as the budget proposal moves through the legislative mechanism in Congress. The future of our environment, the potential for neglect of catastrophic waste sites, and the very real possibility of untold amounts of chemicals causing illness to Americans is all at stake.

The Superfund program, for the most part, was an example of a government program which actually was effective. The program got the polluters to pay for the damage they caused, which is also a novel concept when applied to a big government run scenario.

The sad reality is that without the Superfund in place, these big corporations would never comply with paying for the damage they caused to the environment. In the event that anyone thinks that these corporate giants will comply in the future, without the enforcement of the Superfund, they are sorely mistaken. That type of negligence comes at a cost, a huge cost, to our American society.

by Frank Maduri

Walgreens Ups The Ante For Rite Aide Merger

In a follow up to prior pieces I have done on the proposed Walgreens – Rite Aid merger which would combine two of the largest retail drug chains in the United States, it appears that the proposal is taking another interesting twist.

In reports from Bloomberg and other sources, Walgreens has agreed to increase the number of stores it will sell to Fred’s, a Southeastern based retail drug chain, from 865 store locations to a higher but undisclosed amount. This is being done to “up the ante” to appeal to the Federal Trade Commission (FTC), which in my prior work on this topic, had demonstrated reluctance over the merger proposal.

The FTC displayed so much reluctance that myself and some others who have written about M&A activity of this type, felt that the merger may end up being blocked. That “where there is smoke, there is fire” scenario played out because Walgreens efforts with this enhancement to the deal they have with Fred’s certainly indicates that they felt the merger might get scuttled by the FTC.

In the enhanced version of Walgreens deal with Fred’s, Walgreens would also sell the southern based chain certain distribution centers, technology, and also would transfer some key executives from Rite Aid into similar roles at Fred’s. This was all done to help decrease the concerns that the FTC has seemingly held for the Walgreens-Rite Aid merger with regard to the size and scope of the acquisition.

The enhancement to the deal by Walgreens does not address the underlying cause for skepticism from the FTC in the first place: that Fred’s cannot double the size of its store footprint and survive. The stock price for Fred’s has increased about 30% with all of the renewed activity around this deal.

Walgreens-Rite Aid is currently caught in a scenario that many entities in a merger this large and far-reaching have had to grapple with in the past which is the sale of enough assets to not further dilute your own valuation, but sell enough assets to gain approval from the FTC. It can be a tricky situation and it is not always easy to find another company within your industry segment to make that type of asset sell off transpire in an expedient way.

The emergence of Fred’s in a “right place, right time” type of scenario with their business standing to increase dramatically in size, gain access to new geographic markets, and gain the use of some of the branding power of Rite Aid where the Fred’s brand name does not have the same recognition.

The FTC is reluctant, and they might remain unchanged in those sentiments, because they have been “burned” in the past with approvals of large scale M&A proposals which ended up going badly. Some of those deals ended up also damaging the third party company involved, in this case the role being played by Fred’s, where that third party company swallowed up assets which ended up bankrupting them.

The merger of Walgreens and Rite Aid would create a gigantic retail drug powerhouse that on the one hand could rival CVS, and on the other hand could end up limiting consumer choice. This merger also could have negative potential consequences for consumers with prescription drug costs being set by only a handful of companies. This is the area where some analysts close to this potential merger feel that the FTC is also concerned.

Walgreens maintains that they have grown to their capacity and that the only way that both they and Rite Aid can continue to compete and survive with stiff competition from CVS in this industry space, is to merge together. Walgreens seems intent on doing whatever is necessary to satisfy the FTC in order to consummate this deal. It could even mean involving another retail drug store chain, though I am not sure who that could be at this point. It could be a company like Safeway or Publix but those two companies have a current store geographic footprint that is much different than the Northeast heavy presence of Rite Aid.

The proposal gets complicated by the reports that some within the industry do not understand why Rite Aid is selling, basically with the thought process that being number 3, is a good place to be. Walgreens was pretty dogged in their presentation of offers for the Rite Aid business, continuing to pursue this blockbuster potential merger.

The FTC and other regulators will now review this enhanced version of the deal that Walgreens is offering to Fred’s. A determination will be made on whether the asset divestiture creates a path for the very large merger between Walgreens and Rite Aid to take place.

The exact parameters will become clear in the weeks and months ahead as we head through spring and into the summer months. The outcome is uncertain, but in the past when I have observed a company take the steps that Walgreens has undertaken to gain merger approval, that company usually gets what it wants.

by Frank Maduri

Follow Up: Dow – DuPont Merger Outlook Upgraded

The latest news on the now 12 month saga that is the Dow – DuPont merger proposal is that both stocks have been upgraded from “Hold” to “Buy”. The upgraded status from Jefferies is being reported by CNBC and Barron’s among other financial news outlets, and it is due to the outlook for the merger looking more promising.

The ratings staff at Jefferies places the new odds at “90%” that the year-long quest for the mega-merger of these two chemical giants will gain approval. The rationale behind this upgrade, according to their ratings report which was quoted by CNBC is that the increased stock market activity and economic growth has created conditions where the EPS (Earnings Per Share) for chemical companies will not be tied to just traditional metrics.

The changes in the economy also have combined to create favorable industry conditions in the chemical space. The regulatory bodies involved apparently maintain that this merger will not inhibit growth and competition in their specific industry segments.

This is the backdrop for the next round of regulatory proceedings, and if this merger is ultimately approved, it amounts to a whole new slate of issues for the farmer, the consumer, and the protection of our environmental resources

The detractors to this merger are still the farmers, some agricultural groups, and environmental groups. These factions all have legitimate claims to skepticism when it comes to an over $120 billion dollar merger that will further consolidate the seed industry for crops into fewer hands.

This merger, if approved, strikes fear into the environmental advocacy groups because of the prevalence of pesticides, herbicides, and other chemical agents that the combined Dow-DuPont will market more aggressively and more cost effectively to the farming and agricultural products areas.

The combined Dow-DuPont along with chemical giant Monsanto would control the majority of the seed industry used for crops for food and other staple crops such as corn, used for alternative energy sources. The stakes for the farming industry, which is dwindling because it is harder to maintain profitability, and is still dominated by family owned farms, are enormous. These two companies could set pricing and put enormous cost pressures on farms.

The proposed merger of these two chemical titans has been tied up in the European Union by their regulators, and at one point the outlook was bleak that it would move forward. The EU regulators were told by Dow-DuPont that they would sell some of their assets to clear up the concerns over anti-trust issues that the oversight board had regarding the merger.

In February, Dow-DuPont discussed with the EU board a plan to sell off some assets in DuPont’s crop protection brand portfolio and Dow’s acid copolymers and ionomers business holdings, this is from CBS Market Watch. In earlier work I have done on this specific merger, I had mentioned the selling off of business assets or brands as the best pathway to work with anti-trust, anti-monopoly concerns held by regulators in both the EU and the United States.

The US regulators, provided that the assets are sold, seem apparently through this upgrade and the reports today to be willing to move ahead with approving this merger. The changes potentially on the horizon in Congress with regard to business regulations and the strength of the overall business climate seem to have opened the opportunity for Dow-DuPont to get this done.

The concerns of the farmer, the consumer, and the environmental advocates have definite merit because any merger this large is going to have an impact on all of those areas: the food supply, costs of food and other products, increased pesticide/ GMO use, as well as potentially huge negative environmental consequences.