Kings moving to Seattle, unless they’re not

Wow, was that ever a fun 24 hours of rumor-mongering. Let’s recap:

  • On Tuesday morning, Virginia Beach announced that its doomed plan to build an arena to lure the Sacramento Kings was, in fact, doomed. Speculation immediately began that the Kings owners would now begin talks to sell the team to Chris Hansen’s group in Seattle.
  • A food blogger named Daina Falk, whose dad David is a longtime NBA agent, tweeted (since removed): “So I hear that the Seattle Kings is officially a done deal. The Maloofs finally sold the ailing Sacramento team.” Asked where she got this information, she replied, “Heard it from a friend in the know…”
  • Yahoo! Sports’ Adrian Wojnarowski reported that, according to “league sources,” talks to sell the Kings to the Hansen group for $500 million were on “first and goal at the 1.” Though Wojnarowski added: “The Maloofs’ history of changing course late in negotiations still has some uneasy about getting the sale completed.”
  • The Sacramento Bee, citing still more unnamed sources, reported that any sale talks have thus far been “conceptual,” with no formal offers on the table: “If someone was to put a crazy number on the table, their perspective could change. If somebody like a Hansen were to actually make an offer, which hasn’t happened yet, and that offer was ridiculous, things could change.”
  • Steve Large of CBS Sacramento tweeted:

So put it all together, and it adds up to a great heaping pile of WTF. Clearly some sort of talks are going on between the Maloofs and Hansen, and clearly the numbers being bandied around are somewhere around $500 million, and clearly the Maloofs are being the pains in the butts that we all expected them to be. Beyond that, pretty much anything is possible.

Setting aside for the moment the question of how Hansen’s group ever expects to earn back their $500 million purchase price while also paying for arena construction and a $30 million relocation fee, this could end up a happy ending for just about everyone: Seattle gets a team, taxpayers get an arena at a fairly low public cost, the NBA gets back into the bigger media market that it burned five years ago, and the Maloofs get to pay off the $200-300 million in debt they owe to Sacramento and the league and go back to their first love, selling hooch. Happy, that is, for everyone except Sacramento Kings fans, who would replace Seattle fans as the latest to be bereft of their team in the NBA’s game of musical franchises. Sacramento Mayor Kevin Johnson said yesterday that he’ll “fight like crazy” to find a local ownership group to buy the Kings and keep them in town; at this point it’s hard to envision anyone outbidding the Seattle group (assuming those rumors are true, and not the other ones), but then, nothing up till now has been especially easy to envision, so why stop now?

25 comments on “Kings moving to Seattle, unless they’re not

  1. The reason the Hansen bid got to $500m is that he has already outbid other parties. He didn’t just call the Maloofs and offer that amount; there was a bidding war, and Hansen won. I’m a little perplexed that KJ doesn’t understand this.

    Just because we didn’t hear about this bidding war doesn’t mean it never happened.

    I’m sure word of this successful bid got out there faster than anyone wanted it to. It’s going to be the winning bid. No online petition will change this. No one local can match this bid. It’s too late for that.

    This is going to stick.

  2. Unless something happens like Sacramento forgives the $77M owed to the city by the Kings and there’s no $30M+ relocation fee involved in not relocating a team. Then anyone trying to keep a team in Sacramento would have their bid boosted by $107M, effectively. (not that I think that’d be a great move for Sacramento, but them’s the numbers)

  3. I can’t really see the City forgiving that debt, but if the team stays in town, sure, the Maloofs would be able to accept a $423M bid and generate the exact same revenue a $500M bid would generate.

    As far as the relocation fee is concerned, though, Hansen has already calculated that into his purchase price. From his perspective, his winning bid was $500M + ~$35M. The $35M only indirectly affects the Maloofs.

    No local bid will be for $423M. That’s probably approximately where bidders like Ellison or Burkle, if they stuck to the bidding war that long, dropped out of it.

    There was a bidding war, and Hansen-Ballmer won. It’s just that simple.

    Now, suppose KJ’s campaign was successful, and a local buyer bids $450M. No matter; Hansen-Ballmer is very highly motivated. There is a huge body of evidence to support this assertion. H-B would just increase their bid by some appropriate amount. The local bidder would again be outbid.

    Note that this assumes a buyer who would keep the team local would bid $423M+. I have my doubts about that. If anyone was bidding $423M+, it would probably have been Ellison; he’d just move the team. All KJ would have done is helped improve Maloof profits.

    There is no way Larry Ellison would pay $423M for the Kings and then keep them in Sacramento. Maybe they’d last 2 more seasons here; that’s the unbelievably optimistic scenario.

  4. Another possibility is, obviously, that Hansen is not buying “all” of the team. The Maloofs have some partners as things stand. They might sell their share (which is not a majority share, as I recall) to Hansen while leaving some or all of the other owners as partial shareholders.

    It’s hard to envision Hansen/Ballmer agreeing to be anything less than majority owners, so it is likely that at least one or two other owners have also agreed to sell now.

    The notional sale price represented is not necessarily the amount of money actually changing hands, is the broader point.

    Long term, it’s hard to see Ballmer or Hansen (the former in particular a….. um…. strong personality….) not buying out all the others, but it doesn’t necessarily have to be done now.

  5. Hey! If this thing goes does this mean we can start an “NBA to expand to Sacramento/San Diego/Buffalo/KC thread?????”

  6. The latest development is a hilarious one: The Maloofs want to retain some control of the day-to-day operations of the team once it’s been relocated to Seattle.

    Channeling Dr Evil here: How about a Nooooo.

    I don’t think Hansen and Ballmer will accept that, unless it’s something like getting to choose a Dance Team routine 2 times a year.

  7. I think they are going to make these changes to the divisions:

    Pacific Division:
    Golden State
    LA Clippers
    LA Lakers

    (likely re-named) Northwest Division:
    Oklahoma City

  8. Good point, John, that Hansen et al wouldn’t really be spending $500m, in all likelihood. But that also means they’d be getting a smaller share of neo-Sonics revenues, so we’re back where we started. Unless they gave themselves an extortionate lease a la Wayne Huizenga with the Marlins, to funnel revenues to the arena company they’d wholly own… hmm.

  9. Hansen and Ballmer do not come across with the money to pay for their arena, so what makes you think they would pay unlimited amounts for a team? Also, Hansen and Ballmer overpaying for a team hurts their publicly funded arena proposal. Citizens will see that money is no object to Hansen and Ballmer, and feel used by the public funds, and tax exemption, going to their arena.

    No one should think that the Seattle proposed arena is a done deal. The arena proposal is far from final approval, and far from being able to be built.

    Currently, there is a lawsuit to stop the process, and an Enviromental Review is being done. The lawsuit is in court on February 22, 2013, the Environmental Review is estimated to be done in late 2013.

    Then changes would be made to the MOU, which would take time; and a whole new round of voting by the Seattle City Council, and the King County Council, would occur, which would take more time. Then, more than likely there would be more lawsuits.

    Then the contracts referred to in the current revised MOU would have to be written, which would take more time. Then, after the contracts were written, approved, and signed, the heavy duty lawsuits would commence. These are the I-91 lawsuits.

    The Seattle arena proposal is not even halfway there.

  10. Also, while all of that is going on; Seattle has a Mayoral election this November 5th. Mcginn, the major political supporter of the arena proposal, stands a good chance of losing. Two of the Seattle City Council Members that voted for the revised MOU are up for election as well. These are O’Brien, and Bagshaw. I think that Mcginn will lose; but I do not know about the Council Members losing.

    Then, there is the wildcard of the Seattle initiative/referendum/charter amendment process that could appear at any time during the process.

    The proposed arena is not popular with the Seattle Citizenry, it is not a done deal. So, Hansen could buy the Kings and end up with no new arena, and playing in Key Arena. That would be the best result for Seattle, anyway.

  11. According to Matt Steinmetz of Comcast Sports Net, the deal has been finalized. $525M, and the Maloofs have no remaining stake in the team.

    Several sources are now repeating this news.

    Let’s see if this one holds.

  12. David Stern is no dummy. This will be for the better of the league. I feel sorry for Kings fans, but if you live in California anyway, than you have plenty of other options. God forbid you might have to drive 80 miles to watch the Warriors, in a new arena, in probably the most beautiful city in the country.

  13. So that would be $525m for the whole team, or $525m for just the Maloof’s share, or a pro-rate $525m for the Maloofs’ share? Damn this 140-character reporting…

  14. This must be the most-moved franchise in NBA history. Started as the Rochester Royals, then the Cincinnati Royals, then the Kansas City/Omaha Kings, and now the Sacramento Kings. A steady move westward, so on to Seattle and then Honolulu.

  15. I just cannot imagine how it would be $525M for 43% of the franchise.

    That’s a $1.221B valuation. In what universe would that make sense?

  16. Well, right. But then which of the others is it, given that some of the minority owners say they haven’t even been told what’s going on?

  17. After the Kings move to Seattle, they will play a few years in the Northwest and then move to Birmingham , Alabama.

    The Kings have won more NBA Titles than any team, and will be higly coveted in years to come.

  18. Bobster855, the Kings were already the most moved franchise in top level sports in the US and Canada. This move will just make them even more moved than other franchises. This will be their 6th different city.

  19. The Sacramento Mayor was quoted as saying he’ll “fight like crazy” to keep the Kings there. What exactly does a mayor do in fighting like crazy to keep a team in town? The only thing I can think of is that he fights to find as much funding (or other tangible benefits) as he can to keep the team in town, either from his own city budget or from other sources.

    He’s also completely showing his hand from a negotiating standpoint. Wouldn’t it be best to show an indifferent attitude about the team staying? Or are cities forced to be as compliant as possible when dealing with team owners?

    The Mayor is demonstrating an attitude that is common amongst many elected officials – We must do whatever we can to make sure we get (or keep) the professional sports team. With this attitude it’s no wonder they end up committing to bad deals that end up hurting their city in the end.

  20. There’s also talk now of fairly local buyers putting in a bid, but I just see them getting outbid if they try. Also, that would probably revive the arena deal the Maloofs axed in April — and that means someone would have to come up with about $140M. No matter how you slice it, in order to build the new arena, you have to pay off the current balance and provide about $73M towards the new arena.

    I really think that would discourage a local bidder.

    Mark Mastrov has a stated net worth of $350M. That is severely undercapitalized if you want to own a sports team. Looks to me as though he’d have as many money issues as the Maloofs do. Why would anyone do that?

    Neil, apparently the minority owners only need to be notified once any given transaction is complete. So the fact that they have had no formal notice yet doesn’t mean a thing. It sure would be nice if the Maloofs told them, though.

  21. Neil:

    Yes, I agree that the minority ownership position that the Maloofs are selling will likely be short term… I’d expect Ballmer & Hansen to buy out most or all of the others in the near term… but there is no reason they need to ruffle feathers (or low ball their new partners) now. I wonder if it would be advantageous from “league approval” perspective if they didn’t try to gain full control immediately?

    As I recall, the NBA is “fine” with Hansen. But I don’t believe they’ve had the opportunity to actually vote on him/Ballmer yet.

    As for the share sale issue, it’s hard to know. Most partnerships include right of first refusal on any share sale amongst the existing ownership group before a sale can be offered outside the group. As far as I’m aware there is no law (federal or state) that makes such an option a right unless it is included in the partnership agreement itself.

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