Donald Sterling has repeatedly stated that the LA Clippers are not for sale. No one is listening to him anymore. With the unprecedented sanction of Sterling a near certainty at this point, the LA Clippers have become a jump ball. A host of big name celebrities and Private Equity firms are elbowing each other to take a shot at securing the team.
Common wisdom says that PE firms don’t want sports teams because the funds have a fixed life and sports teams are too unreliable or don’t appreciate fast enough. That was the point made by John Danhakl, managing partner at Leonard Green & Partners, when he answered questions about the Clippers during a panel discussing at the Milken Institute Global Conference. The other panelists agreed, except for Leon Black, CEO of Apollo Global Management, which deals in alternative investments. Black reminded the audience about why another LA team, the Dodgers, were recently bought by a consortium fronted by Guggenheim Partners. GP projections were based on cash flows from network broadcaster contracts.
The Clippers could represent a similar investment profile. When Sterling bought them three decades ago, they went for a modest 12.5 million in 1981. Today, Forbes estimates the team is worth around $575 million, partially due to a 55 percent surge in TV ratings. The coming bidding war could drive their valuation closer to a cool billion.
The strangest upshot of this situation is the clamor of voices from celebrities and other millionaires who seem to treat the announcement of bidding for the Clippers as a kind of status symbol. The following five are actually the most likely candidates.
The man whose Instagram started the whole circus says he is serious about taking over responsibility for the team. He has even secured backing from Guggenheim Partners, who now know a thing or two about team ownership. Johnson has the support of NBA Commissioner Adam Silver as well and that pulls a great deal of weight.
The Wall Street Journal singled out Burkle, who is the founder of Yucaipa Companies and already co-owns the Pittsburgh Penguins, as representative of the PE leaders who want to buy the Clippers. Last month, Fortress Investment Group and Avenue Capital Management teamed up to buy the Milwaukee Bucks.
Multibillionaires David Geffen, Oprah Winfrey and Larry Ellison each have war chests that could buy most teams outright. Together, they look like a cash tsunami. Geffen already made an unsuccessful bid for the Clippers four years ago for $600 million. This time, however, he’s bringing in some backup. Winfrey isn’t interested in running the team, but agrees with Commissioner Silver that greater minority ownership in the NBA is long overdue.
Mayweather/De La Hoya
It sounds like a pay-per-view fight in Vegas, but this time Floyd Mayweather and Oscar De La Hoya want to throw their hats in a different ring. Mayweather expressed how much he would like to join the NBA club, “I called Al (Haymon) today about that to see if me, Leonard (Ellerbe) and Al, and hopefully Richard (Schaefer) and a couple of other guys, a couple other of my billionaire guys, can come together and see what we can come up with. Hopefully, we can do it, and it’s not just talk.” EllerbeIt’s the longest of long shots, but if the NBA is serious about supporting minority ownership, giving these guys a chance would be the best way to prove it.
A few years ago, a blog on CNN Money explained why PE ownership of NBA teams rarely works out well. When the Boston Celtics were bought by a group of partners led by Bain Capital more than a decade ago, Bain’s managing partner Steve Pagliuca said that team ownership is not about making money; It’s about ego, pride, and glory for a local institution. That’s one reason why celebrities would make a better choice for the new owners of the Clippers–they’ve got plenty of experience in ego management.