Revising the Koch-Tsai deal: new reports say $5.8B total, including $5.3B for Brooklyn Nets + arena company; $688M from the Kochs, mainly to retire debt

OK, the initial numbers reported (link) were a bit inflated, but two days ago Sportico asserted that the Koch family is paying $688 million, not the presumed $900 million, for a 15% stake in BSE Global, which includes the Brooklyn Nets, Barclays Center operating company, and the New York Liberty, among other assets.

Though $688 million is nearly 15% of $4.6 billion, the valuation is still said to be worth $6 billion after the deal (and $5.8 billion before) according to Sportico. The New York Post cites the $5.8 billion pre-money valuation. From Sportico:

The $6 billion enterprise value includes $1.43 billion of net debt, said the memo, a copy of which was viewed by Sportico. That’s broken down as $877 million of “enterprise indebtedness” and $550 million of “subordinated owner loans.”

The $688 million figure for a 15% stake implies an equity valuation of about $4.6 billion. BSE will use the majority of the Koch cash—$492 million—to pay down the outstanding principal amount on the owner loans..

That leaves $196 million in cash.

It's not clear exactly how the math works, since we don't know the terms of the debt, but the removal of about one third of net debt--is the remainder the annual arena bond payments?--diminishes future obligations and makes the properties more valuable.

Breaking down the deal

The Post said the Nets are valued at $3.8 billion and the arena at $1.5 billion, a $5.3 billion total which dwarfs the sum paid to previous owner Mikhail Prokhorov, reported at $3.3 billion but, by my calculation, more like $3 billion after a rebate from Prokhorov.

The post reported that the Liberty were valued at $200 million, well above Sportico's valuation last week of $130 million.

That's well above the 2019 transaction, in which Joe and Clara Wu Tsai bought the team from James Dolan and Madison Square Garden "reportedly for the assumption of team debt and a promise of future profit-sharing," to quote NetsDaily.

Note that Sportico set $140 million as the valuation of the top franchise, the Las Vegas Aces, but this has likely reset the baseline. Sportico actually valued the Seattle Storm at $135 million, though sale of a minority stake valued them at $151 million.

Another framing (updated)

I missed the June 20 Forbes Sports Money article by Mike Ozanian, Inside The Koch Family’s $5.8 Billion Valuation For 15% Of Brooklyn Nets’ BSE Global, which noted that the sale values BSE at $5.8 billion, the pre-money valuation, while after the transaction (post-money) it would be $6 billion.

Again, that's confusing, but perhaps it's because of the paydown of debt.

The multiple, which is 14 times revenue, is astronomical, as the "only team to fetch a price for over 13 times revenue was Matt and Justin Ishbia’s $4 billion purchase of the Phoenix Suns last year."

Then again, revenue is expanding.

A snag for the Liberty

Still, even as the Liberty grow their fan base, a snag in scheduling means that they won't be hosting the in-season Commissioner's Cup final on June 25, because the Barclays Center needs to set up for the NBA draft a day later, NetsDaily reported.

So that game will be played at UBS Arena at Belmont Park on Long Island, rather than at the still-operating Nassau Coliseum. NetsDaily suggested the WNBA should've planned better for the contingency.