Since the drama surrounding the proposed sale of the Sacramento Kings to Seattle hoops fan Chris Hansen has taken on a marine biology flourish, the latest report from Sacramento Thursday afternoon metaphorically claims entry into the river delta of the largest animal on earth, the blue whale.
That would be Larry Ellison, the Oracle software chieftain and noted yacht racer who is said to be worth $41 billion. So if the fortune of Steve Ballmer, Microsoft CEO and Hansen’s power forward, is worth $15 billion, that would make him . . . what? A beluga? Narwahl? Manatee?
Whatever the mammal, suddenly the water is crowded and frothy.
The Sacramento Bee reported Thursday that a member of the Kings minority owners, Bob Cook, said he was attempting to broker a meeting between Ellison and Sacramento Mayor Kevin Johnson in hopes of helping Johnson’s effort to find ultra-wealthy buyers — “whales,” in the lexicon of the investment world — willing to keep the Kings in town.
Cook, part of the group of Sacramento businessmen who took the Kings out of Kansas City in 1985, told the paper he asked a Bay Area sports attorney Monday to help set up the meeting that he speculated could happen by the end of this week. No comment came from Ellison, and Johnson, at a press conference, dodged the question.
“I don’t want to get into who all we’ve spoken to, or whose bids we’re entertaining at this point,” Johnson said. “I feel like it’s my responsibility to protect their interests.”
Besides the facts that Forbes lists Ellison No. 3 among America’s richest and that he recently bought the 141-square mile Hawaiian island of Lanai in June for $500 million, here’s the twist of irony that Forbes doesn’t know — he tried to buy the Sonics in 2006 before then-owner Howard Schultz sold the team to Clay Bennett for $350 million.
According to the story told by insiders in the aftermath of Bennett’s absconding to Oklahoma with the Sonics in July 2008, Ellison offered $250 million for the Sonics with the expressed purpose of moving the club to San Jose, the hometown of his Oracle empire and the 10th largest city in the country.
Schultz balked, and Ellison was said to have dropped from the bidding. But Schultz never told Bennett, who claimed that his intent was to keep the Sonics in Seattle by leveraging his out-of-town status into public tax concessions that would fund a new arena. Schultz publicly claimed to believe him, but privately goosed Bennett to bid against himself until the price reached $350 million.
Then Schultz posed himself as shocked when Bennett exposed himself as a carpetbagger who had every intention of moving the team to his Oklahoma City home.
Rebuffed in Seattle, Ellison has been linked to potential NBA franchise purchases in Memphis and New Orleans, and wanted to buy the Golden State Warriors in 2010 when they were sold for $450 million to Joe Lacob and Peter Gruber. Ellison was reported to have the higher bid, but missed a deadline. In all cases, Ellison’s intent was to move the team to 20-year-old HP Pavilion in San Jose, home to the NHL San Jose Sharks that seats 18,500 for basketball.
A tweet from ComcastSportsNet.com Thursday said the Maloof family, owners of the Kings who entered into a binding agreement to sell the Kings to Hansen for an unknown period, had earlier offered the $525 million price to Ellison, who rejected it as too high.
There was no indication in the Bee reporting that Ellison would move the Kings 80 miles west, but he does have connections in the Sacramento area. He underwent surgery at UC Davis Medical Center in 1992 after being badly injured in a bicycle accident, and wound up donating $6 million to the school. The school’s ambulatory care center is named after him.
Cook owns 7 percent of the team, but his shares are slated for auction as part of his bankruptcy case.
“It is important the community knows we are making the effort to keep the team in town,” Cook told the Bee. “Gregg Lukenbill, Joe Benvenuti and I spent years of hard work bringing the team to Sacramento, and we are not going to let it leave Sacramento without a fight.”
Ellison’s persistent interest in the NBA comes as no surprise, but the relatively sudden availability of the Kings has created a large stir among the whales. A big part of the changing landscape is the new collective bargaining agreement, which NBA commissioner David Stern said could have all clubs reaching at least break-even in two to three years.
The Kings may represent the last lease-free team that will be for sale in the next few years, which would drive up the price. While the binding purchase and sale agreement between Hansen and the Maloofs means they can only sell to him, it does not necessarily follow that the NBA owners will vote to allow a relocation if Johnson raises the capital to propose a counteroffer for purchase, as well as a concrete plan to build a downtown arena.
Hansen has no intention of operating the team in Sacramento, or at least only until he flips it. It seems likely that Hansen would have anticipated an effort to save the Kings for Sacramento. But he paid a premium for the binding PSA, so, presuming he passes NBA vetting for ownership, he would control the asset.
The Bee also reported Thursday that Cook claims the minority owners are being denied their legal right to match the Hansen offer to buy 65 percent of the Kings. The other 35 percent is held by four different entities, including Cook’s seven percent share that is in bankruptcy.
The Bee reported that the assertion by bankruptcy trustee David Flemmer could present a major legal challenge to the Maloof family as it attempts to complete its just-announced sale of the team to a group that intends to move it to Seattle.
Flemmer said Cook and other minority owners have “first right of refusal” to buy the club. He said that right is guaranteed in the partnership agreements governing ownership of the team.
Flemmer plans to assert the limited partners’ rights at a hearing Thursday in U.S. Bankruptcy Court in Sacramento
“Bankruptcy is a tool; this tool can be effective,” Flemmer told the Bee. “We are very, very, very concerned that there’s a deal being cut that’s going to (ignore) that right.”
The Bee reported that a source close to the Maloofs said recently that the family doesn’t believe the limited partners have a right of first refusal. And Hansen’s group would seem unlikely to sign a PSA for a franchise where smaller owners have such rights.
Oh, come on, didn’t you say in one of your earlier columns how much more wealthy Hooterville is than Silicon Valley?
Michael, I take responsibility for what I write, not what somebody else’s writes or what you imagine. And nobody who knows anything about wealth distribution in this country would write that.
How serious can this guy be if they need to have a meeting brokered by a lawyer? Don’t buy it. If he was so interested he would have stepped up when the maloofs gave him a chance.
Ellison wants to be pursued, and he probably wants to get the team for San Jose.
The NBA will lose what little credibility they have if they give Sacramento time to assemble a local ownership group and counteroffer the Hansen group. They allowed no such thing to Seattle. Or even Vancouver. The only difference is that in Sacramento they have a mayor who is doing everything he can to keep the team there and has done so since the beginning whereas Seattle had no such thing.
If the NHL is smart they’ll put together an expansion team for Seattle NOW so they can be the main tenant for the proposed arena and not the proposed Sonics.
They gave Seattle over a year from the time it was bought by an out-of-town owner who made it clear he would have to have a new arena. Furthermore, at least he gave Seattle a chance–and time. Hansen has purchased the Kings and is ready to pull that team out of Sacramento within months, and probably today if he could get away with it. Very different situations.
Sac has had years to figure this out, what planet are you on
Seattle had years to figure it out even before Schultz sold it. So we are right back to where I started.
Seattle actually paid for a multi million dollar renovation of their arena, did Sacremento? Nope.
No renovation was seriously considered because the decision was made years ago that the location in Natomas was wrong. It was either downtown or nothing, and the world changed economically in Sept 08.
Schultz complained about the Key from the day he bought the team in 2000 to the day he sold it in 2006. That’s six years too, and he sold to an out of towner.
Michael, you’re mostly right, but again, I-91 blunted the city’s capacity to give a sweetheart lease to the Sonics after 2010. That’s what make Nickels chicken to carry on with the legal fight.
The NBA isn’t too concerned about your view of its credibility. There are those who would be impressed that the NBA gave Sactown a chance; others will say it is mere window dressing to avoid a complete abandonment by fans of the final four months of the season.
And Stern was willing to give the Ballmer/Griffin/Sinegal group a chance in 2008 to pull together a Key remodel, but they kept asking for public tax dollars that weren’t going to be given.
I’d be worried about a collusion lawsuit from the City of Sacramento based on the Maloofs, Hansen and Stern negotiating to sell the team with a subsequent move to Seattle without offering the Kings to local buyers first. If Johnson is able to line up investors willing and able to match the $525 million pricetag, he can argue in court that no good-faith effort was made by the principles to give Sacramento a fair chance to keep its team before the agreement with Hansen was arrived at.
Would that argument be a winner in a courtroom? Depends on the judge and that’s always a roll of the dice, which is why the City of Seattle approved an out-of-court settlement allowing the Sonics to move just before Marsha Pechman delivered her ruling. Somehow, I don’t see Kevin Johnson blinking the way Greg Nickels and the Seattle City Council did.
What legal ground does Johnson have to sue? There is no lease binding the Kings to Sac. Maloofs are NOT required to sell locally. Hell Schultz didn’t attempt to let local groups buy the sonics before he sold them to Bennett.
correct, nothing to sue over, there is no lease.
I’m not sure that Johnson said he would sue. He wanted the opportunity to make a competitive bid. And Stern granted it. If the NBA prefers the Seattle option and Hansen passes vetting, absent a valid lease, I’ve not heard of litigation the city could pursue against the move.
The issue of first refusal is a claim emerging from the Maloofs’ minority partners. I would be surprised if Hansen’s people hadn’t anticipated that. That may be why Hansen has purchased only 65 percent. But it’s too deep in the undisclosed weeds for me to know.
You’re right about why Nickels blinked, but you overlook one thing. The city’s voters approved I-91 74-26 in 2007, undercutting Nickels’ ability to subsidize a new pro sports lease with the Sonics after the 2010 lease expiration. I-91 had a bigger impact on the NBA’s view of Seattle than most sports fans understand.
But thankfully the populace is firmly behind finding the money for bike lanes for one tenth of one percent of the population.
Get on a bike, Mike. You’ll feel better.
Oh, I do about a two-and-half hour workout four to five times a week. (1.5 hours of weights., half hour of cardio, and then a trip around Greenlake). I think I am holding my own, at 46 years of age.
What law says the Maloofs have to give someone in Sacremento a chance to match? NONE. The team has been sold, you can’t force the Maloofs to sell to someone they don’t want to.
The team has not been sold.
there’s a signed PSA, money has exchanged hands.
The team has not been sold. And the money Hanson put up is money that Hanson is putting up and will lose IF THE SALE DOES NOT GO THROUGH. Thus, by yet another inference, the team has not been sold.
The only money to change hands comes Feb. 1, when Hansen pays a $30M nonrefundable deposit. If the deal falls through, he’s out some coin.
If by NONE you mean the NBA board of governors has the right to tell the Maloofs who to sell to… then yes we agree, the answer is NONE!
Stern gave permission to Johnson to put together a counteroffer. The team’s sale has yet to be approved. It’s just a binding PSA, not a closed sale. If Hansen’s offer is disqualified — the NBA can say the arena in Seattle is unresolved — then Sactown would be in line for the purchase.
Assuming Larry Ellison can and does buy the Kings they’re not staying in Sacramento. He’ll have to match or exceed the Hansen group’s bid. Financially this doesn’t pencil out for keeping the team in its current location.
Sacramento still needs a new arena while San Jose has one that’s state of the art. San Jose is the economic engine of the Bay area. With the Warriors moving to San Francisco there might be room for an NBA team in the East Bay.
Either way the Kings are gone from Sacramento.
A reasonable possibility, Mark. Getting a downtown arena plan done in less than three months sufficient to satisfy the NBA is a tall task. Sac-town does have two things going for it: It is a one-horse town, which Stern loves, and it’s the 20th largest TV market, seven behind Seattle.
But like most Cali cities aside from LA/SF/SD, Sactown is hurting big time for tax revs. It really cannot afford to subsidize anything but a token part of the arena. And you’re right, Ellison wants a team in SJ, so it may be up to Ron Burkle to do to Sactown what Hansen is proposing here.
Mr. Thiel, I’m not sure how you missed this, but Sac already has an arena plan done that not only satisfies the NBA, it was actually negotiated by the NBA on the Maloofs’ behalf due to their unreliability and incompetence. And we’re not talking “they think they know what they want to do”, the Sac city council actually voted to approve the term sheet (a vote that Gavin Maloof attended and applauded) and money was already spent on pre-development before George Maloof’s infamous “We didn’t really have a deal when we said we had a deal” press conference in NYC last April. That arena deal is ready to go with new owners stepping in that, unlike the Maloofs and their mountain of debt, can keep their end of the bargain. And it’s hardly a “token” subsidy that Sac is offering- it’s $250 million, which a league executive called a “model public offering”. That deal and subsidy have been waiting for one thing- the Maloofs to finally put the team up for sale. Unfortunately, George Maloof decided his ego was burned too bad by Mayor Johnson’s success so he insisted on selling the team to Hansen in total secret in order to prevent any chance of the team staying in Sacramento (even if he got the same or more money from Sac bidders). You would think that Stern and the Board of Governors would not look kindly on that kind of open vindictiveness, but I suppose we need to wait a couple of months to find out for sure.
A non-binding arena plan agreed upon last year by different parties. It was a “model public offering” for everybody except the Maloofs, who decided it didnt pencil out for them so well. Who is to say this new “whale” (which hasn’t revealed itself yet despite multiple 2pm meaningless press conferences) won’t feel the same way about this “plan”.
Again, Michael, things have changed since the old deal. Including a voter approved change in tax revenues that signals improvement for all municipalities in Calif.
I’m well aware of the old offer that the Maloofs rejected. But it may or may not work for new owners, specifically Ron Burkle. The Sac Bee has reported that people close to him say he prefers another location besides the railyard. So it’s possible they will be starting from scratch — and it could include more private money, a la Hansen, to make the deal more palatable for city officials who had a helluva fight to shake loose public parking money for the Maloof deal.
Again, the Maloofs didn’t “reject” the offer. They agreed to it- Gavin cried tears of joy and relief for the cameras in Orlando, George Maloof called it a “fair deal” on record, Gavin and Joe set up a “Thank You Kevin Johnson” celebration and video montage for the Kings’ next home game- and then something (a phone call from a certain hedge fund manager?) made George Maloof decide to kill the deal several weeks later. Certainly, it’s not yet clear just how close a new deal with new owners would be to the deal that the Maloofs backed out of, but the major pieces should all still be in place. Mayor Johnson actually has even more allies on the city council this time around (though the final term sheet in the dead deal was approved by a 7-2 vote), and he has stated that the city’s side of that deal is still ready to go. Arena operator AEG has also publicly confirmed that they are still ready to go with their end of the deal.
The proposed location change shouldn’t be a big deal. The two downtown locations (Railyards in the dead deal, Downtown Plaza Mall location apparently preferred by Burkle) are less than a half-mile apart. The Plaza location has actually been a part of arena planning for years, but the former owner of the site wasn’t interested in participating. An investment firm buys the mall, hires their own arena consultants that come back with a positive report, and suddenly the Plaza site is in play.
I know I’m not going to convince anyone here to root for Sacramento in this situation, but I wanted to back up my original point that there absolutely is a viable arena plan ready to go in Sacramento as soon as the Maloofs are out of the picture. To be frank, there’s a lot less keeping the shovels out of the ground for an arena in California’s capital then there is in your fair city. Let’s just get it straight that it won’t take a leap of faith from the NBA Board of Governors to decide that the Kings are better off staying in their home of 28 years. Whether there is any reasonable way to get the Maloofs to leave the team where they found it and go away forever is another matter. Giving Seattle an expansion team immediately would be a good start.
I am with you Micheal the financial group you speak of that bought the downtown plaza is JMA. They have teamed up with AECOM to look at building an arena at the plaza. AECOM did the Barclay Center for the Nets and is also doing the Warriors waterfront arena. JMA is wanting to own the arena in the downtown plaza outright and looking into funding this arena themselves. This is one of the major reasons there has been a switch from railyards talk to plaza talks
Ya, and San Jose is a pit, and that arena is not a palace. Regardless, if Ellison buys the team it is staying in Sacramento. And, really, the distance between Sacramento and San Jose is not that much further than the distance between Tacoma or Olympia and Seattle.
Haven’t been, but it is 20 years old, or or older than KeyArena. I’m not able to read Ellison’s mind. Especially if he is apt to change it regarding each new business circumstance, which may be one reason why he has $41 billion.
What I meant was that I do not see how they would allow Ellison to buy it and move it to San Jose. Furthermore, then the Seattle folks would really have a legal argument regarding getting stiffed.
There is a legally binding agreement. I don’t get why this keeps getting glazed over. The Maloofs can’t just go take another offer.
Its up to the NBA!!! They approve ALL sales, I dont get why this keeps getting glazed over. Also there is the issue of denial of Right of First Refusal…. minority owners may be entitled to buy ahead of Hansen.
Nope, non issue. Keep dreaming. Stop reading the sac bee
Non issue says Seattle. But I would argue that minority owners being denied their rights is a big issue. The only one quoted as saying it is a non issue is an anonoymous source. So I wouldnt bank on it just yet Bill.
I’m sure hansen and ballmer don’t have lawyers that would have seen that before the sale was made. Come on man get a clue
As I wrote above, the first refusal right is a common inclusion in such partnerships, but there’s not enough known about this partnership to say definitively. It could be that that is why Hansen didn’t buy out the partners who own 35 percent. They may have to accept relocation, or may be able to extract something more from Hansen for waiving rights.
Again, sale and relocation are separate issues. Intertwined, yes. The NBA has not vetted Hansen yet, and could decide independent of relocation that he is overextended, for example. Not saying it will happen, but it is one step at a time.
It’s not being glazed over by me. The Maloofs are entitled to sell to a qualified buyer. But the NBA decides whether to allow relocation. Two separate issues. If the NBA decides to stay in Sactown, Hansen won’t buy, or he would buy and then flip it to whatever local offer emerges.
Art Thiel is the guy that has to show how smart he is by bringing up issues that nobody has thought of, then when they actually don’t become issues, he’ll move on to the next manufactured issue thinking eventually one of his “issues” might actually become an issue so he can tell everyone “see I told you so”. For instance, his latest one on radio is “Ballmer might back out because Microsoft is worried about its image”. That’s a stretch, but if it happens he can say “told you”. I think Ballmer knew exactly what he was getting into when you offer to buy a team from another city. The guy didn’t make billions by being a moron. Im sure Hansen/Ballmer knew Sac would do everything they could to keep their team, even if it meant holding daily meaningless 2pm press conferences. Then Art had another gem, the only reason the Maloofs sold to Hansen is to motivate Sac to step up. LOL Another stretch. So from that standpoint, I can sell somebody a car, then if it motivates others to up their offer, go back to the buyers and say I don’t want to sell to you now because these other buyers stepped up and I want to sell to them instead. That’s not how it works Art, but nice try. But I guess if one of these actually happens, Art can say “see told you” and proclaim his brilliance, but if they don’t, just move onto other non issues.
Billy, thanks for the insight. I didn’t know that discussing what has been known by many is suddenly something nobody thought of.
Anyone following Microsoft’s stock price over five years has been discussing whether Ballmer can afford to be distracted by things other than the company bidness. While Microsoft is a global company that is hard to scratch, much less dent, it does not need an episode that appears to some as piracy to reinforce some bad company mojo. The observation is low-hanging fruit.
Regarding the Maloofs’ proposed sale to out-of-towners, I never said on KJR it was a motivation. I said it was a standard business tactic for years with sports franchises as well as any other monopoly operator working two markets. Get the out of town bid in an exclusive negotiating window, then let the hometown think about it. Maybe you don’t read the news, but that’s what Boeing did between Seattle and S. Carolina. Again, another observation plain to many.
I bring them up because some people aren’t as smart as you, Billy, and might fight the discussion illuminating. Please write again if you hear me say or see me write anything close to “I told you so.” I have a bar of soap handy with which to wash out my mouth.
Replace “fight” with “find.”
So Art, you don’t think Hansen/Ballmer/etc. didn’t consider these before they got into this? Sure, many things can happen, An earthquake could happen tomorrow and Seattle could sink into the Sound. It doesnt mean it needs to be raised by you in every article. I’m sure if these potential “issues” were so valid, Hansen/Ballmer are smart enough to consider them ahead of time and have plans in place to address them.
I wasn’t writing for Hansen/Ballmer, Billy. I was writing for readers who are busy and may not be as alert as you to radio, web, etc. It’s my attempt to inform about other outcomes besides the easy one. Hansen/Ballmer are very smart dudes, but even the best business person can’t anticipate everything.