Header Ads

Breaking News

Joseph Tsai Nears Full Ownership of the Nets

Joseph Tsai, a co-founder of Alibaba, the Chinese internet giant, is closing in on a record-breaking deal to gain sole ownership of the Nets, continuing a momentous off-season for a franchise making its most significant steps toward emerging from the shadow of the neighboring Knicks.

The Nets deal, valuing the team at $2.35 billion, will set a record for the purchase price of a sports franchise, further signaling the ascendence of the N.B.A. and the opportunity for Mr. Tsai to help the league capitalize on its international ambitions.

“It speaks volumes for the demand and vibrancy of the N.B.A.,” said Salvatore Galatioto, the president of Galatioto Sports Partners, who was the financial adviser on the sales of the Sacramento Kings and the Golden State Warriors, among other sports franchise sales. He is not involved in the Nets deal.

Mr. Tsai, who already owns 49 percent of the Nets, is purchasing the remaining 51 percent of the team from Mikhail Prokhorov. The news that Mr. Tsai would take full control came a little more than a month after the Nets stunned the N.B.A. by signing Kevin Durant and Kyrie Irving, two of the summer’s top three free agents.

The negotiations were confirmed by two people with knowledge of them who were not authorized to discuss them publicly. The deal will most likely close this week, though it could take longer, the people cautioned. It will require approval by the N.B.A.’s Board of Governors, but that is considered a formality because Mr. Tsai has already been vetted.

The deal does not include a stake in the Barclays Center, the team’s arena, though Mr. Tsai is expected to eventually gain control of that, too. Mr. Prokhorov’s Onexim Sports and Entertainment currently controls the arena’s operating rights.

The New York Post first reported news of the sale. A spokesman for the company that controls the Nets declined to comment. A spokeswoman for Mr. Tsai didn’t respond to a request for comment.

Mr. Tsai agreed to purchase his initial stake in the team in 2017. It included an agreement that he could complete the full purchase of the team in 2021. With this deal, which has been hinted at for months, Mr. Tsai will take control of the team over a full year early.

The previous record sale price for an N.B.A. franchise was the $2.2 billion that Tilman Fertitta paid for the Houston Rockets in 2017. David Tepper also paid $2.2 billion, an N.F.L. record, for the Carolina Panthers in 2018.

That two years later the Nets cost more than the Rockets demonstrates how potential owners believe the N.B.A.’s value is on the rise. At the time they were sold, the Rockets were one of the league’s best teams, played in one of the largest markets in the United States, employed perhaps the league’s best player in James Harden, and had won multiple titles.

The Nets play in a modern arena in New York, but they are the city’s less popular N.B.A. team, by far. Both in Brooklyn and at its previous home in New Jersey, the Nets franchise has struggled to attract fans to its games. The Nets have mostly had losing records, though there were periods of success, including in the early 2000s with Jason Kidd. They made a surprising playoff run last season.

The multibillion dollar deal for the team, in spite of that history, illustrates the value of scarcity. Roughly one N.B.A. team is sold each year — N.F.L. franchises come to market even less often — while the pool of potential owners is expanding because of those enriched by the tech boom and the desire to court foreign owners like Mr. Prokhorov and Mr. Tsai.

“I don’t think there is an N.B.A. team that would sell for under a billion,” Mr. Galatioto said. “I would be shocked for that.”

Mr. Prokhorov, a Russian national who made his fortune in nickel mining, spent just $223 million in 2009 — and agreed to assume certain debts — to purchase 80 percent of the Nets and 45 percent of the Barclays Center operating rights, from Bruce C. Ratner. Six years later, Mr. Prokhorov bought Mr. Ratner out of both entities at a much higher valuation.

The league’s first owner from outside of North America, Mr. Prokhorov began his tenure relatively engaged, attending games and overseeing the construction of the Barclays Center. But in recent years he has become distant, appearing infrequently and dispatching his lieutenants to attend Board of Governors meetings on his behalf.

Mr. Tsai, a 55-year-old billionaire, splits time between China and the United States. He is a basketball junkie who watches the Nets on N.B.A. League Pass while on the road. He attended high school and college in the United States, and his wife, Clara, grew up in Kansas as a Kansas Jayhawks fan.

Mr. Tsai is still the executive vice chairman at Alibaba but has hinted that he could be nearing retirement. “Over time, I suspect that I will delegate those day-to-day responsibilities to people in the company,” he said in an interview earlier this year.

Mr. Tsai sits on the board of directors of N.B.A. China, helping the league expand its footprint in perhaps its most important overseas market. The N.B.A. recently announced a five-year streaming deal in China with Tencent, worth a reported $300 million annually. The league also will play its first preseason games in India this year and is beginning a sustained push to expand into Africa.

Asked about his rights in regards to Nets ownership in May, Mr. Tsai was fairly candid.

“Under the terms of the transaction, fully public, I have the option to buy the remaining 51 percent by early 2021,” he said. “I have that right, and that’s basically it. That’s what I want to say.”

At the time, reports suggested that Mr. Tsai was attempting to purchase Barclays Center as well, though he declined to go into specifics. Mr. Tsai also owns the W.N.B.A.’s Liberty, which he purchased from the Madison Square Garden Company earlier this year.

Source link

No comments