Steve Ballmer, the former CEO of Microsoft, has reportedly won a bidding war on May 29 to purchase the Los Angeles Clippers from embattled owner Donald Sterling. According to reports, Ballmer would pay $2 billion for the Clippers, about 10 percent less than what the Guggenheim Group paid for the Los Angeles Dodgers last year.
The $2 billion purchase price would be the highest-ever for a professional basketball franchise.
Several news sources confirmed Shelly Sterling, who claimed she was solely authorized to find a buyer and move forward with the sale, accepted Ballmer’s offer. Shelly Sterling is the estranged wife of Donald Sterling.
The sale agreement between Ballmer and Shelly Sterling was forwarded to the NBA league office in New York City, where the Association’s 29 other owners will formally vote on whether to ratify the sale of one if its Los Angeles franchises to the former CEO of Microsoft.
With a formal sale agreement now being considered by the professional basketball league, the NBA cancelled a June 3 hearing where the Association was planning to vote on whether to formally force Donald Sterling to sell the Clippers.
However, with the NBA now considering Ballmer’s $2 billion bid, there was no need to have a hearing and force a sale.
Despite the sale agreement, the cancelled hearing, and the NBA apparently ready to vote on whether to approve the sale, Donald Sterling formally filed a lawsuit against the Association, seeking at least $1 billion in damages.
The lawsuit alleges breach of contract, anti-trust, and civil rights violations.
Donald Sterling’s attorney, Max Blecher, told ESPN the lawsuit was not connected to Ballmer’s potential purchase of the Clippers but instead challenged Shelly Sterling’s negotiations to sell the basketball franchise.
Specifically, multiple news reports indicated Donald Sterling either suffered from Alzheimer’s disease or was otherwise mentally incapacitated. Accordingly, if true, it was determined by the Sterling family trust that Donald Sterling could no longer be in charge of the Clippers, opening the door for his estranged wife to assume control of franchise as the trust’s sole trustee.
By acting as a sole trustee of the entity that legally owned the Clippers, Shelly Sterling was fully acting on her own authority to enter into negotiations with Ballmer while leaving Donald Sterling completely out of the picture.
It follows Donald Sterling’s blessings would not be required for the sale of the Clippers to Ballmer.
Ballmer reportedly outbid a group colloquially known as “Team EGGO” – which included Oracle head Larry Ellison, music mogul David Geffen, the Guggenheim Partners group, and Oprah Winfrey – and another set of investors reportedly lead by Steve Karsh and Tony Ressler.
The Team EGGO group reportedly bid $1.6 billion, while the team of Karsh, Ressler, and other were reported to have offered $1.2 billion.
If Ballmer indeed gets the necessary approvals and ultimately takes over as owner of the Clippers, there has been some speculation he could relocate the team to Seattle, which has been without an NBA franchise since the Supersonics relocated to Oklahoma City in 2008.
However, Ballmer publicly stated he would be keeping the Clippers in Los Angeles.
Even if Ballmer wanted to move the Clippers to Seattle, complicating matters is the team’s current nine-year lease agreement with Staples Center.
Also, Ballmer does have a lucrative incentive to keep the Clippers in Los Angeles. The franchise’s television contract reportedly expires at the end of the 2015-16 season. Other local teams had signed major television deals in the past year. The Los Angeles Lakers, for example, agreed last year to a $3 billion cable deal with Time Warner Cable.
Similarly, the Los Angeles Dodgers came to terms with Time Warner Cable during the off-season to be featured on an all-Dodgers all-the-time channel. The deal would pay the Dodgers $8.35 billion over 25 years.
While it would be pure speculation to assume the Clippers would be able to yield as much money in its next television deal, the New York Times recently reported the franchise is project to earn as much as $60 million annually with whoever agrees to broadcast the franchise’s games.
The Clippers’ current television deal yields the franchise about $18 million annually, according to the New York Times.
Last year, Ballmer led a charge to purchase the Sacramento Kings and relocate that franchise to Seattle. However, the NBA ultimately approved the sale of the Kings to Vivek Ranadive for $534 million. The sale, announced on May 31, 2013, was then the highest-ever purchase price for an NBA franchise.
Earlier this year, that record sale price was broken by the Milwaukee Bucks, which was purchased by Wesley Edens for $550 million.
If the NBA ultimately approves the $2 billion sale price, it would be about 3.6 times higher than what the Milwaukee Bucks sold for just a few weeks ago.
