After months of rumors, the Brooklyn Nets are for sale. Mikhail Prokhorov, the Russian billionaire who bought the NBA team in 2010, has hired Evercore Partners to help him sell, according to Bloomberg News.
Prokhorov paid about $220 million for an 80 percent stake in the team when he also bought a 45 percent share of the Barclays Center, the team’s new arena, which opened in 2012 He also agreed to cover about 80 percent of $220 million in team debt. The transaction put the total value of the Nets at $428 million—and team prices have surged ever higher in the past four years. The Nets deal came before the Golden State Warriors sold for a then-record $450 million; the Sacramento Kings fetched $534 million; and the Milwaukee Bucks changed hands for a $550 million. And, of course, these transactions all preceded Steve Ballmer’s stratospheric $2 billion purchase of the Los Angeles Clippers last year. All of those sales came before the NBA extended its national TV contracts with Walt Disney and Time Warner for $24 billion over nine years, almost triple the previous rate.
The upshot is that Prokhorov can now expect the team to fetch at least $1 billion. Topping the price Ballmer paid Donald Sterling to take the Clippers? Not likely. Evercore Partners put a $1 billion price tag on the Nets when it was trying to sell Bruce Ratner’s 20 percent stake in the team, just weeks before the record-smashing sale of the Clippers. The Atlanta Hawks, another team currently for sale, will likely to go for more than $750 million.
The price paid for the Nets is "going to be more than the Hawks," says Irwin Raij, of Foley & Lardner, a law firm that specializes in sports transactions and represented the buyers in the $2 billion deal for the Los Angeles Dodgers. "It's going to be north of a billion." There are other indications that a price short of the Clippers haul will be enough to buy the Nets. Back in October, ESPN reported that Prokhorov was shopping the team at a $1.2 billion value. Peter Schwartz, a managing director at Christie & Associates, gave $1.3 billion estimate to Bloomberg today.
Ballmer's record appears safe for now. “I’d be surprised if the take for the team itself was over $2 billion,” says Raij. Ballmer paid a price well beyond the normal parameters for NBA teams for the Clippers because he expects to keep the team long term—and because the longtime Microsoft chief executive could afford to do so.
Unless the Nets can find another Ballmer, the team will have to sell according to the book. Still, the book looks pretty good. The Nets play in a thriving new arena in the league's largest market. Their regional TV deal with the YES Network expires in 2016, and the next one should bring in much more than the current $20 million per year. "That's a very low number for this market," says Raij.
On the downside, the Nets are not very good. After trading away draft picks and saddling themselves with bad player contracts, the team has no obvious route to becoming good anytime soon.
Last season, according to Grantland, the Nets lost $144 million. That number is less important than overall revenue. According to a report prepared by Bank of America to assess the value of the Clippers before that team's sale and obtained by ESPN, four of the nine NBA teams that have sold since the Nets last did were running deficits. But whatever the final price tag turns out to be, Prokhorov will have to subtract at least some of those bills from the cash he collects.
