Friday, March 13, 2015

Forbes: Prokhorov's desire to sell minority stake in Nets ends relationship with investment bank; NBA may step in (updated: owner thinks Nets worth $3B?)

Forbes Sports Money writer Mike Ozanian writes, in What Went Wrong With The Sale Of The Brooklyn Nets, that rumors of extravagant prices for the Nets have now been dampened by the severing of the relationship between majority owner Mikhail Prokhorov and investment bank Evercore.

And Ozanian reports that the bank, not Prokhorov, walked away. He writes:
The main problem is that Prokhorov has not committed to selling a majority of the Nets and no one is apparently crazy enough to pay big money for a minority stake in a money-losing team. Such a deal would mean the new investor would have no say in how the Nets are run but would likely have to make cash payments to make up for the team’s red ink. As one banker who traded candor for anonymity put it, “No one knew what the deal was.” Apparently Evercore grew frustrated spending time and effort dealing with Prokhorov’s fishing expedition for a minority investor.
Note that Bruce Ratner and Forest City Enterprises, which own 20% of the team, also have a keen interest in the sale. Their share is valuable, if considered a fraction of the team's estimated new, increased value, but only if there's a majority owner who can run things and, presumably, find a way to profit. So Prokhorov's posture is apparently another reason why the sale of the 20% has lingered.

Otherwise Forest City continues in the same vein of the "new investor" described by Ozanian: it absorbs losses--absent a deal with Prokhorov to deflect them--with no say in what's going on.

Ozanian predicts that "NBA commissioner Adam Silver will step in and tell Prokhorov to fish or cut bait," ensuring that the oligarch sells the full time, which presumably would unlock the biggest valuations.

The plot thickens

The New York Post, in Nets’ owner Prokhorov now looking to sell a minority interest, reports that the Nets are trying to sell 49 percent of the team, including 29 percent from Prokhorov plus Forest City's 20 percent, without an arena sale:
But the price tag is still an obstacle, sources said. They are seeking $1.5 billion for the stake, valuing the team at a record $3 billion. The franchise loses roughly $70 million a year and has the highest payroll in the league at more than $90 million.
“That price is not near a place it needs to be to get a deal done,” said one source, who believes it is about 50 percent above where it should be.

That's a rather interesting comment, since by overshooting to $3 billion and adjusting "about 50 percent above where it should be," you could get to $2 billion, which would already be a very high price. After all, a sports team may be a trophy, but this one is losing money

Where's Prokhorov?

Stefan Bondy of the Daily News, in When will Mikhail Prokhorov say 'Hello, Brooklyn' again? Anyone seen the Nets owner lately?, wrote:
Paging Mikhail Prokhorov. Paging Mikhail Prokhorov. Seriously, where the heck are you?
We understand there’s an economic crisis in Russia and you’re probably busy losing money elsewhere, but there’s a basketball team in Brooklyn that desperately needs your attention.
We’re starting to think you just don’t care.
He detailed Prokhorov's mercurial presence and noticeable absence, even as the Nets lose steadily, fall further behind, and look at an ominous future, having lost several draft picks and agreed to swap the next first-round pick with the surging Atlanta Hawks, which will have a very low pick.

Bondy writes with near glee:
As much as we’d like you to show up to a game in Brooklyn, a bit of caution about Friday: Jason Kidd is coming to town. We’re guessing there’s a lot on your plate since you missed All-Star weekend in your own building, so here’s a recap: turns out, Kidd can coach. Remember that stuff you said about getting even with him on the court? Well, Kidd is making you look bad.

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