Hansen ups Kings bid by $48m, wristwatch, keys to car

The Sacramento Kings bidding war escalated again on Friday, when would-be Seattle owner Chris Hansen increased his bid for 65% of the team from $358 to $406 million, making for a total valuation of the franchise at $625 million. Oh, and he also matched the would-be Sacramento owners group’s offer to forgo any revenue sharing dollars that the team might be eligible for. [UPDATE: According to ESPN "sources," he also also offered to pay a $115 million relocation fee to the NBA if his bid is accepted.]

For those scoring at home, Vivek Ranadive’s Sacramento bid is for $341 million, which would put the total value of the team at $525 million. And for those who have trouble with math, that puts Hansen’s valuation of the team at $100 million more than Ranadive’s — not to mention more than double what Forbes estimated this team was worth just a little over a year ago, before this bidding war started.

I’ve covered elsewhere why I don’t think Hansen stands much chance of making his money back on this deal (especially when you factor in his likely arena costs), but either he knows something I don’t know, or this is just turning into one of those eBay auctions where everybody tries to one-up each other in the closing seconds. But unlike eBay, there could be no winner here: First the NBA has to decide on whether to approve Hansen’s purchase offer, then the Maloofs — remember the Maloofs? — have to decide whether, if Hansen is rejected, they’ll accept $65 million less from Ranadive’s group for their majority share of the team, or whether if Hansen’s bid is rejected they’ll just say “Screw it, we’ll keep the team for now,” as they’ve apparently vowed to do.

And if that happens, then … beats me. There’s been all sorts of speculation about lawsuits, but Hansen would be firebombing his relationship with the NBA if he did so, on the off chance that he could win an argument that his right to buy the Maloofs’ team trumps the NBA’s right to approve its franchise owners. And if the Maloofs were to sue the NBA for refusing to approve their high bidder, they’d be in for potentially even rougher sledding, since NBA teams all agree not to sue the league, and the Maloofs knew the rules about conditions for selling your team when they went into this business.

What Hansen and the Maloofs alike are clearly hoping at this point is that the NBA will decide that the easiest way out is to just let Hansen buy the damn team, and then figure out later whether it’ll stay in Sacramento or move to Seattle, based on how Sacramento’s arena plans work out. It’s not clear whether the NBA is ready to go that route, but if money talks, Hansen just gave the other 29 NBA owners 48 million more reasons to listen.


45 comments on “Hansen ups Kings bid by $48m, wristwatch, keys to car

  1. Hansen also proposed paying a relocation fee of $115 million…. making him the first owner I know of to shoot for the moon when it comes to bribing the other owners outright.

  2. The relocation fee is unconfirmed, but yes, good point, should have mentioned that. Hansen is clearly trying to sway the NBA’s decision by any means necessary, and money is no object.

    $740 million for a team that was worth $300 million 16 months ago seems crazy to me, but I guess rich people buy themselves dumber toys.

  3. “Bribing” the other owners? What the hell do you call a $344M subsidy from Sacramento?

  4. We’re now back to Sacramento’s higher subsidy vs. Ballmer’s billions. Who the hell knows?

  5. That is a public-private partnership griffin. Money to NBA owners only is something different.

  6. It’s different because Sacramento wrote “arena contribution” instead of “relocation fee” in the memo field of their check.

  7. Also, a small point/correction Neil. It is my understanding that Hansen didn’t just offer to “forgo” revenue funds as Ranadive did. He offered to be a “contributor” for as long as the team is in Seattle. This would include years in Key Arena as well as the new building. This is not a match, per se. Essentially, Hansen is offering some kind of a fix payment to the NBA each year.

  8. Not by my reading. In NBA revenue sharing, either you’re writing checks or you’re receiving checks. Hansen has promised that his team will be in the former group every year in Seattle, which presumably means that if the team’s revenues tank and the league formula says he should get checks, he’ll refuse them.

    It’s possible he means something else, but there isn’t much detail in his website statement: http://www.sonicsarena.com/news/the-latest-on-bringing-the-nba-back-to-seattle

  9. I see someone has fallen for the standard “public-private partnership” line.

    Okay, so the City contributes between 60% and 75% of the arena’s costs, and in return, we do NOT get 60%-75% of the building’s profits.

    If that’s the standard definition of a partnership, then I guess that’s what this is.

  10. I want to see the BOG reject the HBN offer, though, because I think what would follow would be pretty entertaining. And I think they will reject the offer.

    It really is just flat-out vindictive that the Maloofs won’t even listen to the Sacramento group, though. That’s just cruel. I’m glad they are showing that they’ll reject it, though, because our arena deal is about as bad as Hamilton County’s.

    You should read the accompanying article about arts funding in Sacramento, and the problems this arena is causing in that regard.

    http://www.sacbee.com/2013/05/13/5415151/amid-kings-actions-sacramento.html

    I think it’s important to realize that both of these things are going on at once.

  11. Oh, and Ken Berger’s article about how this is a hostile takeover is complete nonsense. He’s getting called on this article in a pretty big way in the comments section.

    http://www.cbssports.com/nba/blog/ken-berger/22229050/will-seattles-hostile-takeover-of-kings-work

  12. One more thing: No one anticipated how crazily-motivated Hansen would be. He’s nuts. It’ll take a decade for this to get into the black — if it ever does.

    The people who keep raising the “Best interests of the league” article are misinformed. You reserve that clause for when an owner clearly has to go. Stern may press this with the BOG, but I just don’t see where HBN are not fit to own an NBA franchise. How you go from “perfect prototype” to “best interests” inside the space of 10 days will be very hard to justify. I don’t think the BOG would agree with Stern on this one.

    To me, it all comes down to this: Sacramento offered a very large subsidy, er, public-private partnership, while Seattle offered a loan that is far smaller than Sac’s subsidy (darnit, said it again; sorry). That’s all this is about: Seattle has wrecked the model. Sadly, it was a better fiscal model than Sac’s.

    Had this been an out-and-out $200M subsidy, there would no longer be a debate. Stern would have already said, “Close enough!”.

  13. There’s an NBA draft coming up and the Maloofs are taking haymakers deciding who will run the team next year and revising their contracts as late as last week. The Maloofs just said how they can’t make the team work in Sacramento and it needs to be sold from that market and out of their hands… but plan B is that they’ll keep running the team in that market while they’re above the NBA debt limit (and be happy ?)

  14. Instead of subsidies, or public-private partnerships, I prefer to call them the Sacramento Welfare Kings.

  15. Yes, they’d be fine. Ballmer can afford this.

    He’d simply offer to make payments for the rest of the minority owners — but of course, he’d need some equity interests to make it work.

  16. So if Hansen owned 20% of the team, he’d surely be approved for the 7%. That’d give him 27%. Hernreich would then sell out; 40%.

    Not all that hard to see where this would be headed, probably within 6 months of the initial $125M investment.

  17. The NBA is not a game….It is a business. The Supreme Court has ruled against the NFL, NBA, and NHL several times in the past on this. The NBA thinks their bylaws and constitution are above the law? No it is not…..MLB should not be excluded from this either….a la A’s to San Jose.

    The NBA is trying to strong arm the Maloofs into taking a lesser offer so they can feel better about themselves? Makes total sense…..a bunch of rich old guys being eccentric and thinking they are above the law.

    In the end, they cannot force the Maloofs to do anything. Blame Kevin Johnson on this one, instead of calling David Stern he needed to call the Maloofs and beg them to sell to his group. He went over their heads and because of this Ranadive’s group will not agree to the same terms (not just money) as the Hansen deal….They seem to think they have imaginary leverage and that also pisses the Maloofs off.

    They call that in the “real world” going over your head….makes sense why the Maloofs will not sell to the KJ group out of spite.

    The NBA is teetering on a major lawsuit for tortuous interference. The by laws about owners cannot suing the league will not hold up in court. Because the NBA does not have an anti-trust exemption. So it is really just writing on paper that means really zero as is just a “guideline”.

    Each franchise is its own business, the league may want to make sure all the teams are located in the right places but that is secondary to the sale of a franchise….Hence tortuous interference.

    The price difference is now so great between the groups the NBA cannot stop this from happening now. Or they will have to deal with the Maloofs in Sacramento indefinitely with Hansen as a minority owner.

    The NBA screwed up big time here hence they are meeting again today to discuss the new numbers before the vote tomorrow.

    Hansen will make his $$ back easily. His new arena will full of corporate sponsors, naming rights, club sections being sold out, and a growing media market that will continue to grow at a good pace. Perhaps a future NHL team as well.

    Give Hansen credit…He is making this awfully tough and Sacramento has failed how many times on an arena in the past? Cal Expo? The Railyards? The Plaza Mall? Natomas?

  18. Regardless of what happens to the Kings, we are still the 8th most redneck city in Seattle. I was reading some tweets by some Seattle rednecks and they blamed David Stern for their city’s exclusion from the list: http://www.movoto.com/blog/top-ten/10-most-redneck-cities

  19. I meant 8th most redneck city in America. It’s hard to get the emerald city out of my mind.

  20. I thought we already had this conversation about “Tortuous Interference.”

    D’oh.

    I mean, it is that as well… But is it illegal? Just don’t use waterboards, I guess.

  21. Let’s see what the NBA Brain Trust comes up with first and how the various players respond.

  22. We’re having tortuous arguments about how torturous this process is for both cities. If this done anything more to damage the image of the NBA then I hope David Stern raises the issue of tortious interference with how the Maloofs have handled their team’s transition with the league.

    http://www.merriam-webster.com/dictionary/tortuous
    http://www.merriam-webster.com/dictionary/torturous
    http://en.wikipedia.org/wiki/Tortious_interference

  23. I’m reading now from the always-reliable (cough) Bee comments that the Wednesday vote has been postponed.

    I’d wait for some confirmation of this before putting this info into a blog, though. Oh, wait.

  24. The Bee should sell a book of some of the greatest hits from its reader comments section. That alone would turn their business around. Based on the reader comments, Sacramento has to be up there on a list of Angriest American Cities. I could see the NBA delaying the vote to give Sacto more time to sweeten the term sheet- as this is not a bidding war. I repeat, not a bidding war. #MovingTheGoalPosts

  25. Curiously, my interest in watching how all of this plays out is about 1000x greater than my interest in watching any actual NBA games.

  26. As long as the Kings want to stay part of the NBA (and without NBA membership, the Kings are worth about 99% less), the NBA has some amount of leverage. Each situation is different. The Raiders and Clippers moved. The T-Wolves and Coyotes didn’t.

    The big thing that bugs me (not from Neil, who I think is doing a great job here, but from other media outlets) is quoting the $625M purchase price. The reality is that Hansen is still trying to get into the NBA on the cheap. If Hansen puts out a statement saying that he’ll pay $625M for 100% of the Kings (or an expansion team, for that matter), then I’ll take him seriously. Until then, it looks to me like he’s trying to poach the rare situation where he only has to buy 65% of a team (thus lowering the price of entry).

  27. I don’t know about that. How many NBA teams are now owned by one person/family? Not even the Lakers and Celtics are.

  28. Remember when Mark Cuban tried to buy the Mavs for about $180m all those years ago?

    The owners (Ross Perot among them?) refused, saying they didn’t want to sell the club.

    As I recall his next offer was about $280m. Suddenly the existing ownership group felt it was time to pass the torch to new blood.

    Hansen’s current bid for the club puts him into expansion fee territory. He’s clearly showing ‘enthusiasm’. But I wonder if he wouldn’t be much better off just accepting the inevitable here (that the NBA won’t approve a move of the Kings right now, at least) and focusing on an expansion franchise for 2015 instead.

    As Mike says, the NBA knows Hansen and Ballmer are legitimate ownership candidates. At some point, even by being enthusiastic, they are just pissing the NBA off… and making their own lives more difficult going forward.

  29. I think it’ll cost even more to buy an expansion team in, say, 2016, though. This probably is the lower-cost alternative.

    If Sacramento loses this round, they’ll never win another one. No way someone comes along in 2016 and says, “Sure, $650M for expansion. Where do we sign?” That won’t happen in Sacramento.

  30. the value of the Queens in Sacramento is basically $0.00

    The guys with the deep pockets in Seattle have this going as a HOBBY….they don’t expect to make any money

    Gates has poured his $$$$$, zillions of them into Udub and quite a campus it is…to rival Cal…
    and
    then Gates has built is edifice in the Gates Foundation in Seattle…and quite an edifice it is…and his partners?

    just continue on your computer and the cash pours into Seattle/Silicon Valley

    Allen has put his basically unlimited wealth into the Jailblazers and Seahawks…it’s an amusement…

    Knight built the new Matt Knight Arena…he designed it, he hired the consultants, he hired the contractor…and to hell with bids or any of that other public stuff…much like all his work at Oregon…what else is he going to do with all the cash that flows in? Doesn’t look like he wants any part of this pro stuff, unless you can and some do, categorize college athletics as professional…hobby, amusement whatever…

    Magoofs this entire deal was for their entertainment deal…and just how entertaining is the NBA? well most games besides later round of the playoffs resemble the old staged matches of the WWF…look fixed…but some folks like the WWF…

    and Sacramento is still dealing with opening swimming pools for the kids…

    Bunch of criminal lowlife blood sucking losers are the government of Sacramento, not to mention the child molesting Mayor…

  31. Brian Windhorst is tweeting that the NBA relo committee is not changing their reccommendation.

  32. “We’re having tortuous arguments about how torturous this process is for both cities.”

    Would anybody be interested in some torte while we discuss this?

  33. This article baffles me. Back in 1995 here in NJ the Devils won the Stanley Cup and then the crying started about losing money and threatning to move to Nashville with there Arena under construction. NJ sold the naming rights to the Arena and made all sorts of concessions for the Devils and Nets and the Arena Debt grew and the NJSEA lost tons of money. After years of wrangling the Devils wanted a New Arena in downtown Newark and finally got it and the Nets moved out of the old arena playing 2 seasons at Prudential Center before moving to Brooklyn this season. The reality of my blog is the the OLD ARENA the was no good for the Devils and Nets is now Profitable without them and now the Devils and the City of Newark have been battling for yrs now over Rent,Taxes and Parking and the City of Newark wishes they Never built the Arena while the Devils are pushing NJ to close Izod Center because they dont want a competing arena. After seeing this play out the best thing a city that doesnt support there team is GOOD RIDDANCE because it gets ugly.

  34. The Izod Center is profitable? That’s news to me. It has two concerts scheduled for June and two for July — tough to make money on 24 events a year.

  35. It’s becoming increasingly obvious that the sale to Hansen will be rejected.

    When this happens, it’ll be one of Sacramento’s single most-expensive days in its history. Hansen won’t sue, but the Maloofs will, and they will sue the City of Sacramento and the NBA for interference. And I think they’ll win, because the NBA’s rules governing the movement of franchises won’t pass constitutional muster.

    Hansen won’t sue, but he’ll be leading the cheers.

    The verdict will be for treble damages, because that’s the way it works in the world of antitrust. Maloofs get shorted around $60M, so they’ll get $180M in return, from the City and from the NBA. What’s more, the courts will probably then decide that HBN deserves the team after all, and they’ll get their team.

    I tell you, the resolution on Wednesday will be to reject the move, and then the Maloofs will not negotiate with Ranadive. They’ll decide to keep the team.

    We’re looking at 2 years, at least, until a final resolution.

  36. I agree that the ‘relocation’ provision will not be approved, Mike.

    But it’s very unlikely that the Maloofs will sue anyone (least of all the NBA). If they do try and get this case into court on an antitrust basis, they will almost certainly fail spectacularly.

    Remember that they agreed to all the provisions of the league’s rules around franchise ownership. They do not have a constitutional right to own an NBA franchise.

    What makes you think that the expansion fee for Seattle would be $650m? Has anyone credible thrown that number out? Expansion fees tend to be set around the value of a “generic” franchise in the “then present” market. What did the league pay for the Hornets? What did the Warriors just sell for ($450m)? The Bobcats ? ($300m in 2003 – a number considered “startling” at the time usatoday30.usatoday.com/sports/basketball/nba/2002-12-18-cover-johnson_x.htm – and about the same as the league paid to get the Hornets from Shinn just two years ago)

    Seems more likely to me that an expansion franchise – particularly one awarded to help ease the current “situation” – might be more reasonably valued at $375m-400m, give or take.

  37. Ben:

    In nearly all the examples of “franchises stolen in the middle of the night” cited, the owners were already part of the club. (Colts, Clippers, Raiders, Browns, Rams etc). Clay Bennett & Michael Heisley are the only ones I recall who were “new” owners, and even they ‘promised’ that they wouldn’t do what they was obviously going to do. In both cases existing owners had thrown up their hands/in the towel… so the league could reasonably say they had no options (though they did, of course, just not ones they wanted to explore).

    Had Hansen (make that “should Hansen”?) just tried to become owner of the Kings, he could almost certainly have enjoyed near unanimous approval… and then applied to move in 2 years when the arena negs went nowhere.

    He has been honest about his intentions. I applaud him for that (as well as for his financial commitment to the arena deal, which puts other owners to shame, frankly). But it might turn out to be what costs him this opportunity in the end. I believe there will be others for him in the future. The NBA isn’t going to let guys like Hansen and Ballmer get away. They want them in the club. Patience is a virtue – sometimes even for the super rich.

  38. The expansion franchise will cost about $650M, because it’s apparent that’s how much Hansen is willing to pay for a franchise. $375M is in no way related to the realities of the market.

    If it was only $375M, Hansen would have voluntarily backed out already. To save $275M? Heck yeah.

  39. What about the Maloofs unilaterally moving the team to Key Arena for 2013-14? If they say no to Ranadive they can’t stay since they burned a few bridges. So, screw everybody and just hightail it up I-5 with the Maloofs as owners and tenants of Chris Hansen.

  40. Since the Maloofs do crazy very well, I can’t see them selling to Ranadive unless if they are in dire financial straits- dire meaning they can’t afford to operate the team. The fact that they have an antitrust lawyer and already were rebuffed from going to Anaheim means they are getting, needless to say, a little pissed. Sure a lawsuit against the NBA could get dicey- because of franchise agreements but not impossible because trying to push a buyer offering $60 million less is serious. But a lawsuit against the City of Sacramento may hold water because their actions of getting a group together and getting an arena deal together are interfering with a business that doesn’t belong to them or the “whales.” So, the NBA could win in court but the city may lose.

  41. Jason, from that wikipedia article I linked to:
    Tortious interference with business relationships occurs where the tortfeasor acts to prevent the plaintiff from successfully establishing or maintaining business relationships. This tort may occur when a first party’s conduct intentionally causes a second party not to enter into a business relationship with a third party that otherwise would probably have occurred. Such conduct is termed tortious interference with prospective business relations, expectations, or advantage or with prospective economic advantage.

    In either of the above situations, the tortfeasor’s conduct must be intentional. There is no cause of action for merely negligent interference with the performance of a contract.

    Do you think Hansen’s one-upping his bids and now 4 different purchase scenarios is preventing the NBA from doing their process in evaluating the future of the franchise in Sacramento ? What if this drags out through the draft ? I don’t think anybody has airtight lawsuit fodder, but tortious interference is a pretty broad claim and could well be claimed by the NBA on Hansen’s group’s actions of late.

  42. MikeM: The Maloofs can sue if they want (and they’re the Maloofs, so who knows what they’ll do), but I don’t think you mean “constitutional muster.” Antitrust law isn’t in the constitution, unless there’s some amendment that nobody told me about.

    ChefJoe: By that definition, Hansen would need to be bribing Ranadive to drop his bid in order to be guilty of tortious interference. Offering someone more money for something they’re selling is just “bidding” — the NBA is welcome to ignore it if they want.

  43. I still maintain that the bidding process should be completed before the current owners forward paperwork to the NBA for ratification. Continually churning the contract and announcing new variants isn’t the way the NBA wants these things to go down… hence they’ve never officially ruled these increased bids as “the current offer”.

  44. $375m is in no way related to the realities of the market?

    Really? Then how do you explain the price the league paid Shinn for the Hornets? Or the Bobcats expansion price? Or the price recently paid for the Warriors (a better market by far)?

    The proper determination of FMV is the price paid between a willing seller and a willing buyer, absent any undue influence. I’d argue an insane auction for an asset of which only one example presently exists (IE: NBA franchise with a for sale sign on it) is the exact opposite of that.

    As for Hansen, he should back out the minute the league refuses the relocation. If he continues beyond that point, he might end up owning the Sacramento Kings in Sac for a lot longer than he would like. After he politely withdraws, he can send in a check for $350m for an expansion franchise c2016 and “not balk” when the league asks for $50-75m more.