How Sacramento hopes to use a billionaire to reel NBA back in
by Art Thiel
Larry Ellison Credit: Hartmann Studios/Oracle PR
Since the drama surrounding the proposed sale of the Sacramento Kings to Seattle hoops fan Chris Hansen has taken on a marine biology flourish with talk there of "whales" entering the bidding, the latest report from California Thursday afternoon metaphorically claims entry into the Sacramento River delta by 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 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 at the relocation. 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 reached after a lockout last year, 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.
But the permutations of this transactions are numerous, and Hansen has unfinished business for his SoDo arena — two lawsuits as well as an environmental impact study on the location. By the time the owners vote on a proposed relocation in mid-April, they may have three choices — Sacramento, Seattle and San Jose — for one team.
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.