SBD/Issue 60/Franchises

NBA Formally Announces Plans To Buy Hornets, Find New Owner

NBA Paid More Than
$300M For The Hornets

The NBA yesterday completed a deal to buy the Hornets from George Shinn for more than $300M, the first time the league has taken ownership of a franchise. NBA Commissioner David Stern said that there is no timetable on the league selling the team. “It is unusual for us as a league,” Stern said, adding that the NBA is not in a hurry to sell the team and is not currently soliciting buyers. The NBA stepped in to buy the franchise after minority investor Gary Chouest could not agree on a deal to buy the franchise from Shinn, who Stern said was no longer able to absorb further financial losses. “We have the luxury of time,” Stern said. “We decided that rather than saddle the franchise with more losses, it would be prudent for us to step in.” The league's takeover is subject to a vote by the NBA BOG, which likely will occur next week. The NBA confirmed that it has retained Wild Vice Chair Jac Sperling, a native of New Orleans, to be the Hornets' Chair & Governor, while Hugh Weber will maintain his role as team President (John Lombardo, SportsBusiness Journal).

IN STABLE CONDITION: Stern said that the move was "made to stabilize the Hornets after a lengthy ownership transfer failed to be finalized and absolve the franchise of significant debt problems that might hinder its overall value and ability to be sold." Stern: "In order to make things move as smoothly as possible, we thought it best if we moved in -- and we're confident that whatever we decide to do here, it will not be harmful to the overall league or franchise values." He indicated that the league "doesn't have a timetable in place to seek a buyer, but [the] NBA's objective is for the franchise to remain in New Orleans for the long term." Stern said that he "will have to look at new revenue streams that could include inducements from the state as a way to strengthen the team's financial outlook." He added, "I think that the state will be a party along with the team and possibly the city to a broader deal -- but that's one of the issues. And I think it's a fair issue, and the governor knows we're coming." Sperling said, "The league has assured me that management will have the necessary resources to build on that success and grow the business through increased ticket and sponsorship sales, keep the team competitive and further the team's relationship with the fans of New Orleans" (New Orleans TIMES-PICAYUNE, 12/7).

UNCHARTED WATERS: In N.Y., Belson & Beck note the NBA is "moving into potentially choppy waters in buying a team for the first time." In recent years, MLB and the NHL have been "embroiled in the complex, expensive and often embarrassing process of owning or financing teams," including the Expos, Rangers and Coyotes. In buying the Hornets, the NBA is "trying to avoid the public problems that these clubs encountered." Still, it remains to be seen whether the Hornets "will be allowed to substantially increase payroll." Authority "over trades and the payroll will rest primarily" with Weber and Sperling. But NBA Senior VP/Marketing Communications Mike Bass said, "Franchise-altering decisions will ultimately be reviewed by the league" (N.Y. TIMES, 12/7). Stern said that he "wasn’t worried that getting involved with a team in crisis would create an unwanted precedent for other cash-strapped teams." He said that he is "confident every other team in the league has the funds to withstand any losses." Stern noted that Shinn "had the idea of a league takeover in October, when it looked unlikely he would find a buyer that would keep the team in New Orleans." Stern said the Hornets’ credit line had "reached its maximum and borrowing money would just add to the losses the team had already accumulated" (WSJ.com, 12/6). Mavericks Owner Mark Cuban said, "It's a very smart move by the league" (NBA.com, 12/7).

Despite Strong Record And Presence Of
Chris Paul, Hornets' Attendance Still Off

WHAT MAY THE FUTURE HOLD? CBSSPORTS.com's Ken Berger wrote, "The future of the NBA in New Orleans, one of America's finest and star-crossed sports destinations, took a definite turn toward life support Monday when Stern announced that the league is stepping in to save the Hornets from themselves. The question now is: Who, if anyone, will come forward with the deep pockets and patience to keep the team in Louisiana?" Despite a "compelling team with [a] marketable superstar in Chris Paul who has orchestrated the best start in franchise history, the Hornets remain among the worst teams in the NBA in attendance." It clearly is "in nobody's interests to operate a team in a market where it is doomed to lose money forever" (CBSSPORTS.com, 12/6). SI.com's Ian Thomsen wrote the NBA bringing in Sperling is a sign that it "will be focusing on the local market." But unless a "prospective owner steps forward with the goal of keeping the team in Louisiana, the NBA can't afford to cut short its options." Thomsen: "Its ability to move to a larger market is one of the most attractive qualities of this franchise, and the NBA isn't going to reduce the value of a franchise -- which would hurt the value of the league is a whole -- in order to keep the Hornets in a city it has called home for only five years." Unless fans "swarm to the New Orleans Arena in order to keep their franchise at home for the shortterm, the new owner of the Hornets will place New Orleans in a pool among larger available markets," including Chicago, Anaheim, San Jose and K.C. (SI.com, 12/6). FANHOUSE.com's Sam Amick cites a league source as saying that there is "reason to believe the league is looking strongly at the possibility of moving the team to Kansas City and the Sprint Center" (FANHOUSE.com, 12/6).

ON HIS WAY OUT: YAHOO SPORTS' Adrian Wojnarowski writes for Shinn, the Hornets "were little more than a prop to celebrate him as an upstanding pillar of the community." He is selling the team to the NBA and "gets to make believe he did it because he cares about the franchise staying in New Orleans." Wojnarowski: "Another load of garbage out of him, another con on another city. Stern made this easy for Shinn, who does a public service and cashes out of the NBA. ... Maybe the Hornets will find a buyer to keep them in New Orleans, but that appears a most improbable ending to this story. For George Shinn and David Stern, New Orleans served its purpose. The photo-op’s over" (SPORTS.YAHOO.com, 12/7).

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