Heat's on Johnson to assemble a Kings bid to rival Seattle's
01/22/2013 12:00 AM
01/22/2013 11:49 PM
The Maloofs have played their hand. Mayor Kevin Johnson is still assembling his cards.
By announcing a binding agreement Monday to sell its controlling interest in the Sacramento Kings to a group from Seattle, the Maloof family has forced Johnson to quickly pull together a bid to keep the team in Sacramento. The NBA, which must approve any sale and relocation, is expected to begin vetting the Seattle deal soon.
Operating with the open encouragement of NBA Commissioner David Stern, the mayor and his advisers say they've been approached by at least three ultrawealthy investors. Yet it's questionable whether the league would reject the Seattle deal, which puts a record price tag on an NBA team.
"I don't think it's a slam dunk, but I'd say the odds are highly in favor of the move," said Michael McCann, a sports-law expert at the University of New Hampshire. Only once in the past quarter-century has the league blocked a relocation, when the Minnesota Timberwolves were kept from moving to New Orleans in 1994.
The Seattle deal was submitted to the NBA late Sunday and announced early Monday. A source said the Seattle group, led by hedge-fund manager Chris Hansen and Microsoft billionaire Steve Ballmer, is buying the 65 percent of the team controlled by the Maloofs and their Oklahoma business partner, Bob Hernreich.
The deal values the whole team at $525 million. That implies the Seattle contingent is paying $341 million.
The total valuation of $525 million surpasses the $450 million paid for the Golden State Warriors in 2010.
The source, who declined to be identified because he wasn't authorized to speak publicly, said Hansen agreed to pay the Maloofs a nonrefundable $30 million deposit by Feb. 1.
The Maloofs had vowed never to sell the team. But in recent years, the family has endured personal financial setbacks. It faced dwindling attendance at Kings games and increased fan animosity after the Maloofs abandoned two deals to build a downtown arena and conducted well-publicized talks to move the team to Anaheim and later Virginia Beach, Va.
Still, the jaw-dropping price is "probably the only reason" the Maloofs are selling, said John Kehriotis, a Kings limited partner who isn't part of the sale.
Hansen and the Maloofs each issued brief announcements.
"We have always appreciated and treasured our ownership of the Kings and have had a great admiration for the fans and our team members," said Gavin Maloof in a prepared statement. His brother Joe declined to comment when reached by The Bee.
While the negotiations with Hansen were public knowledge for nearly two weeks, the announcement sent a chill through Kings fans.
"I think it's a gut punch to know that the Maloofs are not giving Sacramento a chance to keep their team," said Tom Ziller, founder of the Sactown Royalty website.
Kings player Isaiah Thomas, who is from Tacoma, said he can sympathize with Sacramento fans. "I was a Sonics fan," he said. "I've been through losing a team and seeing what it does to a city."
State Senate President Pro Tem Darrell Steinberg, D-Sacramento, has written a letter, dated today, to state officials asking them to detail how much money Ballmer's Microsoft company is making on state contracts. Steinberg said he wants to send a message to the NBA and the Seattle group that local leaders will fight to keep the Kings.
"I cannot stand idly by while a prominent out-of-state company that has significantly profited from business with the State of California actively attempts to acquire and remove one of my State and region's leading private assets," he wrote in the letter to the state Department of General Services.
Steinberg said he will decide on "an appropriate response" after he gets the Microsoft financial information.
Plans to rebrand
The Hansen group surfaced publicly last February and has loomed for months as a potential Kings suitor.
The team would move to Seattle after the season ends in April and play at KeyArena as a new arena is built. City and county officials have tentatively backed a $490 million building.
Hansen would rebrand the team the SuperSonics, after the team that relocated to Oklahoma City in 2008.
The deal doesn't include the 35 percent owned by four limited partners: Kehriotis, the Benvenuti family, David Lucchetti and Bob Cook. Cook's 7 percent is being sold in bankruptcy court.
The NBA said it has received the purchase documentation and will begin reviewing Hansen's financing and other details. The deal must go through the advisory and finance committee, and relocation committee before going to the full board of governors.
The board, consisting of all the league owners, meets in New York in mid-April, but the examination of the Seattle plan will begin "almost immediately," said McCann.
That pressures Johnson to put his deal on the table as soon as possible, the sports-law expert said.
Johnson couldn't be reached for comment Monday. In the midafternoon he tweeted: "I keep getting asked do we still have a shot? You better believe it!"
Mayoral adviser Chris Lehane said there's no need to panic, arguing that Sacramento is in the same situation it was 24 hours ago: needing to come up with a deep-pocketed investor.
So far one major investor has publicly announced his interest: Bay Area investor Mark Mastrov, founder of the 24 Hour Fitness chain. Another suitor mentioned by Johnson and Stern is Ron Burkle, the Southern California grocery tycoon who tried to buy the team in 2011.
The mayor has said he wants Sacramento investors involved, too, and his advisers plan to release their names this week. Among those expressing interest are developer David Taylor and Dale Carlsen of Sleep Train Mattress Centers, whose company is the naming sponsor of the Kings' local arena.
Kehriotis, who owns 12 percent, said he still thinks it's possible the team will stay.
"The mayor is working extremely hard to make that happen," he said. "I think you should have faith in him."
Monday's announcements made no mention of the team's debts or the future of Sleep Train Arena.
Among other things, Sacramento City Manager John Shirey said the team will have to immediately repay a loan to the city of $77 million, including prepayment penalties.
The NBA will also charge a relocation fee, probably at least $35 million.
The Maloofs took control of the team in two phases, making an initial investment in 1997 and buying out former owner Jim Thomas two years later. The Bee reported in 2002 that they paid a total of $247 million for their majority share, plus the arena. Their 53 percent stake in the team is owned in tandem with Hernreich, who owns 12 percent.
With the arrival of the Maloofs, the Kings soon became an elite franchise, and the brothers became folk heroes of sorts – flamboyant heirs to a beer and gambling fortune rooted in the Southwest. Their father once owned the Houston Rockets, and the family reveled in its return to the NBA.
But the relationship with Sacramento began to sour after the Maloofs refused to back a plan to finance a new downtown arena with a sales-tax hike in 2006. The plan was rejected by voters.
Hit with personal financial struggles, including the eventual loss of their Las Vegas casino, the Maloofs tried to move to Anaheim in 2011. They backed off after Johnson persuaded the NBA to give the city another shot at building an arena that would cement the team's future in Sacramento.
The Maloofs agreed to an arena deal last February, personally negotiated by Stern. But they abandoned it later, saying it was loaded with unfair deal points and was based on wildly optimistic revenue projections.
Last fall the Maloofs negotiated a possible move to Virginia Beach, Va. The plan died early this month but may have generated additional momentum for the Seattle plan.
As part of the Virginia negotiations, the Maloofs had preliminary discussions about selling a share of the team to Comcast-Spectacor, the company that would have developed a new arena in Virginia Beach, according to a source close to the Maloofs.
While the discussion didn't go very far, it prompted the Maloofs to conduct internal research on the team's market value, this source said. News of the Hansen negotiations leaked out one day after the Virginia Beach proposal collapsed.
HOW WE GOT HERE
The sale of the Sacramento Kings has been brewing for some time but accelerated in the past two weeks.
Jan. 8: The Kings' owners, the Maloofs, end talks to relocate to Virginia Beach, Va.
Jan. 9: Word leaks that Kings have been negotiating sale to Seattle group led by hedge-fund manager Chris Hansen and Microsoft's Steve Ballmer. Mayor Kevin Johnson vows to find a bidder to keep the team in town.
Jan. 10: NBA Commissioner David Stern says Sacramento investors should be allowed to make a counteroffer. He lists grocery tycoon Ron Burkle as a possible bidder.
Jan. 11: Another suitor emerges to keep the team in Sacramento – Bay Area investor Mark Mastrov, founder of the 24 Hour Fitness chain.
Jan. 12: Owner of Downtown Plaza says it's considering turning mall into a new arena, in partnership with a bidder for the team.
Jan. 15: Johnson says he'll take counteroffer directly to the NBA, bypassing the Maloofs. Arena operator AEG, at the urging of Stern, announces it's still committed to the arena project abandoned last spring by the Maloofs.
Jan. 21: Maloofs and Hansen announce they've reached a deal.
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