KJ: I have $19m in pledges to buy Kings! Who’s with me?

Sacramento Mayor Kevin Johnson held a press conference yesterday to announce his countermove to the proposed relocation of the Kings to Seattle, and the key points went a little something like this:

This has led to much joking on Twitter, but KJ insists that he’s going to find some “whales” who’ll put up the bulk of the money to match the Seattle offer. (USA Today says these could be 24-Hour Fitness founder Mark Mastrov and Pittsburgh Penguins co-owner Ron Burkle.) It’s all very nebulous, but really, what else is Johnson going to say? If he falls short, he can blame the Sacramento business community for not stepping up and saving the team. And on the off chance it works, he’ll be the guy who saved the Kings — albeit also probably the guy who committed the city to spending $255 million on a new arena.

Anyway, Johnson has until the March 1 relocation deadline to put together his dream team, though since the NBA owners don’t actually meet until April 18, it’s always possible that he could finalize things a bit later than that and still get a hearing. One big question is whether an arena deal would have to be hammered out before then: Yahoo! Sports assumes yes, but so long as the whales didn’t mind, it’s an open question whether the NBA would make that a requirement of a winning bid. And then another big question would be whether these would-be Sacramento owners would want the city to sweeten the pot on its arena plan in exchange for committing big bucks to wrest the team back from Seattle. Really, it’s questions all the way down.


20 comments on “KJ: I have $19m in pledges to buy Kings! Who’s with me?

  1. Where there are whales, there must be a Captain Ahab.

    Wait, I think I can see him now.

    If the Maloofs and Hansen have a valid, legal contract, I just cannot see how a third party can come along and say, “We can make an offer, too!”. That ship has sailed. Now, if the NBA can find flaws in that contract, that’s a different story, and even at that, they cannot be minor errors that the participants in the contract agree to fix. They have to be whoppers to void the contract, and I just don’t see that happening.

    If the NBA says, “Well, you have to take this other offer anyway”, why do you think the Maloofs hired an antitrust lawyer? This deal with Hansen has been in the work for a very long time; much longer than the news reports indicate. I’d bet on 18 or more months.

    I’m sorry, I just think the Maloofs have a bullet-proof contract, and neither side will agree to cancel it — much less both sides. This is not a matter of praying the deal makes it through a cooling-off period. It has already cooled. This was a careful, deliberate deal, and the best the BOG will ever do is make it look like they tried to “Save the Kings for Sacramento.”

    I acknowledge that there is a chance, just like there’s a chance I’ll meet Beyonce one day, and she and I will settle into a blissful life together. Yeah, that’s not going to happen.

  2. The short game, keeping the current Sacramento Kings, is all but over. The Mayor is building a team for the long game- an expansion NBA team or maybe an NHL team. The short game is over because Hansen and Ballmer have been at this for years and have made a lot of progress- of course, the NBA would like access to the billions that Ballmer, Hansen, and the Nordstroms bring to the table.

  3. MikeM, that’s not how it works: The Maloofs own an NBA franchise, and like owning a Dunkin’ Donuts franchise, the franchisee can tell you what you’re allowed to do with it.

    Or so the NBA has long insisted, anyway. The last time this came up with with the Clippers’ move to L.A., I believe, and that was settled out of court, so it’s never really been tested.

  4. I’d say the Clippers case actually was settled.

    They wanted to move from San Diego to Los Angeles. And where is it they’re playing now, exactly?

    Technically speaking, the movement of NBA teams against the league’s wishes has not been tested in court. You are correct. But in practice, the NBA has seen what has happened in the NFL, and they know that restricting team movement would never stand up in court. I’ve seen fans insist that the NBA has new rules in effect that would restrict team movement. I do not believe they would be. It’s restraint of trade.

    The best recent example of a team sale is, I think, the Warriors, where Larry Ellison said he made a better offer than Lacob did. But he made that offer after the auction ended; he missed the deadline.

    This deadline has already passed. The BOG will need to find a major problem with the Hansen contract to reject this sale. That’s my story, and I’m staying with it.

    (And I still can’t believe I’m getting no love for my Moby Dick reference.)

  5. Neil, “CAN tell you what you’re allowed to do with it” is a lot different than “WILL tell you what you’re allowed to do with it”. If Stern/BOG start dictating to whom an owner must sell the team, then that sets a huge precendent that I am not sure rest of the owners want to see set. This is the reason that most relocations (all but 1 actually) have been approved in the past. The owners want as much flexibility as possible to pry open public funding via threats and relocations, which will obviously from time to time include selling to out of town owners.
    This is no different than what took place in Seattle before Sonics moved. Deja vu all over again. Those who have amnesia may actually want to dig up the old articles regarding many, many so called “whale” investors that “stepped forward” to buy the team back from Bennett, but didn’t even come close. A lot of times these so called investors just want the publicity.

  6. When I read the Sacramento coverage of the “whales”, I too thought of Moby Dick. It’s unfortunate metaphor because doesn’t everybody die at the end of Moby Dick when they confront the whale- except for Ishmael.

  7. Stern has said repeatedly in the past that all things being equal, he’d like to see teams stay put. It’s been a nice way of getting bidding wars going — if the Sacramento crew didn’t think there was a chance of convincing the NBA to give them the team, they wouldn’t be offering anything, now would they?

    I agree with you that the odds on getting enough investors to actually outbid Hansen are pretty minimal. But if it were to somehow happen, I wouldn’t be at all surprised to see the NBA rule in favor of the status quo city.

  8. Jason: I thought of Eric Idle’s “Did whales build Stonehenge?” sketch, but as I couldn’t find a live YouTube link, I skipped the joke.

  9. The question isn’t just about investors “outbidding” Hansen. They also have to come up with an arena. These things take time. A lot of time. If everything is not squared away in a couple of months, I am just not convinced that the owners will vote Against “a sure thing” and vote For a “may be”.

    Secondly, recall that when Bennett bought the team, Stern “allowed” Ballmer to make an offer of $150M to renovate Key Arena, with matching funds from Seattle. Now, if the Sonics/Thunder were as good as gone, why would he allow such a rich and powerful man to waste his time? The answer is the same here: Stern wants the “perception” that Sacramento is ALLOWED their best shot but still came up short. Otherwise, everyone would scream bloody mary about how SAC was never even given a fair shot. It’s all PR. That’s what I think anyway.

  10. I would add that I wonder if there is a break up fee involved. If this fee is hefty, then that would just kill SAC’s chances. If I were Hansen, I would set an outrageous Break up fee, like $100M. This way, Maloofs will have zero incentive to change their mind but the new “whales” would have to outbid Hansen by at least $100M to cover the fee.

    http://www.investopedia.com/terms/b/breakup-fee.asp

  11. Well it may have been amusing, but KJ apparently has found at least 2 of his 5 targeted whales. Burkle and Mastrov are in together on a bid to keep the Kings. And there’s rumors Broad may join as well bringing their net worth higher than anything Seattle currently has in their group. Additionally Sac does still have an arena plan just waiting a signature from the new ownership. Plus a second arena plan has developed quickly at the site of the downtown mall between (ironically enough) K and J Streets.

    And it wouldn’t be unprecedented for the BOG to derail an executed sales plan by denying a move. They did so back in 1994. What would be unprecedented would be the NBA moving away from a city with a multi-billionaire ownership group and a primarily publicly and public partner funded arena to go to a different city (where their arena plan is majority privately financed).

  12. The 1994 denial has been talked about quite a bit in Sacramento.

    That denial of the Timberwolves sale was based on a very, very shaky offer. In order to use that case to justify/rationalize denying Hansen’s bid, you’d have to come up with similar grounds.

    Good luck with that.

    In that case, the BOG looked at the offer and laughed. That was a great example of how the BOG is supposed to operate.

  13. I don’t even think Mastrov counts here, by the way. His listed net worth is $350M. I can imagine someone like him stretching and throwing in $100M. I think he’d be nuts to go over that amount.

    In short, I think he’s mastrovating here.

    Don’t stop me, I’m on a roll.

  14. The NBA cannot stop the move legally speaking. The reason why the San Diego to LA Clippers move was settled out of court was because at the same time the Raiders won their suit to move to LA from Oakland based on the “rule of reason” judgement.

    Rule of reason in the Raiders case was stated as the owners of a league may of course want to geographically spread out their franchises but it must be weighed against if the individual owner can make more $$ and sell more tickets in the new market. This means the other owners cannot stop you because of “status quo” or because of a TV deal. There has to be logic to stop the move.

    In the case of the Raiders they were moving from Oakland where they shared the market with the 49ers to market in LA that was twice the size with only Rams as competition….You see why the Raiders won easily? Rule of reason came into play because of this.

    In the case of the Kings to Seattle the new owners (Hansen) is moving the franchise to a bigger TV market with more corporate sponsors and a new arena in place…..The NBA would lose badly in court and they know it.

    The Anaheim deal was sank because the Maloofs saw the league was against them and felt Kevin Johnson had something solid for them waiting plus they did not want to be Donald Sterling and file an anti-trust suit.

    If they wanted to move to Anaheim now they could but they need the $$ to pay of debts and get back into the liquor distribution business. They are thinking logically now about their situation.

    Turns out KJ’s arena deal is smoke and mirrors and his city refused to answer the Maloofs questions on the proposal. KJ expected the Maloofs to dive head first….typical politician.

    The Kings are gone, the Maloofs know the Hansen group has the $$ and they have a binding agreement. They also retain a small piece so they can come to games and sit in the suite and have fun in Seattle. Even if they sell to a local group they cannot show face in Sacramento again at this point.

    The Warriors meanwhile will now get the 1M or so TV sets they are blacked out on right now in the Sac-Modesto-Stockton media market on top of the Bay Area….They will have the 3rd largest media market in the NBA behind LA and NY….That new arena in SF will get built by “sneezing” on it…..The NBA knows it makes more sense for them $$ to have powerhouses in Seattle and SF than to have no team in Seattle and 2 teams sharing Nor Cal.

    It is game over….

  15. Also the Kings hired an anti-trust lawyer just in case this time around. Because they took a non-refundable 30M deposit from the Hansen group on Feb 1st just in case of a lawsuit…..Makes sense.

  16. Quoting the Raiders case from ’94 (or the Colts & Clippers from ’84 etc) is all well and good, but sports leagues have changed the way their rules and constitutions read since then.

    Their claim is that the loopholes that allowed those moves have been closed. That claim has not been tested in court, but suffice it to say that the goal of the changes has been precisely to avoid the same type of thing happening again.

    None of us can know what a court would decide if it came to that. However, in the last two decades, sports franchisees have been made aware by their franchisor that what they own is not a portable self contained business but one outlet in a group of related companies.

    Translation: What the Maloofs own is the Sacramento Kings, an NBA franchise located in Sacramento. That is what they paid for and that is what they own. They do not own a fully portable asset that they can take anywhere and open up shop (though, if they chose to go through bankruptcy court it is possible, though not likely, that the court would agree that their business is fully portable).

    The NBA needs to approve the sale and the relocation (though not necessarily at the same time). So yes, they can prevent the move if they want to. Assuming they follow the NHL/NFL model, the NBA will also say they own a dormant franchise opportunity in Seattle, WA – which means that Seattle is not “free territory” to any franchisee who wants it. Hence the relocation fee/cost.

    It would be a mistake to assume that the NBA cannot prevent this or any move if it wanted to. Having said that, I don’t believe they will find any reason to do so given who the new owners are, and that a new building is coming in Seattle. It is a better market for the NBA in every way, and they are getting better owners and a new building – something they likely could not hope for in Sacramento.

  17. John, the only way this deal gets blocked is if the Board of Governors finds material, substantial faults in the sales agreement between the Maloofs and Hansen.

    What’s more, there is no arena plan in Sacramento, and there isn’t likely to be one put together before March 1. I just think the NBA is tired of this, and is extremely likely to allow this sale and relocation.

    If a team moves from Seattle to OKC, a team can certainly move from Sacramento to Seattle. If they were all that concerned about relative market sizes, they never would have allowed the Sonics to become the Thunder.

  18. MikeM:

    It has alot more to do with Arena deals/revenues than market size. If a city is willing to hand a sweetheart deal to an NBA team to move from a midpack market to a tiny one, and the midpack market isn’t willing to offer a similar or better deal, the move will almost certainly happen.

    I agree that this deal is unlikely to be blocked by the BoG. My only point is that those saying the NBA “cannot” intervene for either legal or “free enterprise” reasons are not correct.

    In this particular case both the market and the arena deals are better in Seattle, and the NBA can also rid itself of the embarrassment that is the Maloofs… so with the exception of long suffering Kings fans, it is a win for everyone involved.

  19. I agree with you on most of that, John, but not in terms of arena deals vs market size. In football it’s all about the stadium lease because local TV revenues don’t matter, but in MLB, the NBA, and the NHL market size can be very much a bigger draw than a juicy arena lease. (Though teams will still pretend otherwise, as when George Steinbrenner hinted that the Yankees could move to Charlotte without a new stadium.)

    Not that it matters much here, as Seattle and Sacramento aren’t dramatically different sizes. (Seattle is probably a mid-sized market, Sacramento lower-mid.) But on general principle, I don’t think you’d see, say, the Warriors move to Kansas City or something.

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