SBD/April 17, 2014/Franchises

Herb Kohl Sells Bucks To Hedge Fund Execs For $550M, Team Likely Staying In Milwaukee

Estimated costs for a new downtown Bucks arena have been set at $500M
N.Y.-based Fortress Investment Group co-Founder Wesley Edens and Avenue Capital Group Chair & CEO Marc Lasry have "agreed to buy" the Bucks for $550M from Herb Kohl and to dedicate at least $100M to "construction of a new arena" in Milwaukee, according to Sean Ryan of the MILWAUKEE BUSINESS JOURNAL. Kohl also will give $100M "of his own money toward construction" of a new facility. Kohl yesterday said, "I believe these two men are the right people with the right fit at the right time." The new owners "come on board as Milwaukee debates how to raise money to build a new arena to replace" the BMO Harris Bradley Center. The cost of building a new arena downtown "has been estimated" at about $500M (BIZJOURNALS.com, 4/16). FS Wisconsin's Jon McGlocklin said Edens and Lasry "seem to be very excited" about owning the team and "very much up to the task." McGlocklin: "They've made not only a commitment to this city through the Milwaukee Bucks, but to the new building that we feel is of course needed here" ("Hawks-Bucks," FS Wisconsin, 4/16). In Milwaukee, Bob Wolfley writes Kohl was 50 years old "when he bought the Bucks" for $18M in '85, and sells the team 29 years later for $550M. Wolfley: "That's accrued asset value" (MILWAUKEE JOURNAL SENTINEL, 4/17). 

DEAL DETAILS: In Milwaukee, Charles Gardner notes a new era for the Bucks yesterday "started with a bang" as Lasry and Edens were "introduced with plenty of fanfare at an afternoon news conference" at the BMO Harris Bradley Center. The move is "subject to league approval and the 54-year-old Lasry and 52-year-old Edens are scheduled to meet with league owners" today in N.Y. Kohl said that he did "not think a vote would be taken on the sale this week." The ownership change "creates plenty of uncertainty for the Bucks management" as "big changes" are coming. Kohl: "What will be their style? I don't know. They have a right to do it any way they want. They will own the team." Edens said that "pending league approval of the purchase, he and Lasry would begin to speak with the basketball staff and others in the organization." Edens said, "We're all about hiring the right people and having the right people in place" (MILWAUKEE JOURNAL SENTINEL, 4/17). FS Wisconsin's McGlocklin said, "These next few months will certainly be interesting being involved in the Milwaukee Bucks organization. You know Senator Kohl feels he picked the right people, and keeping the team here makes it the right people" ("Hawks-Bucks," FS Wisconsin, 4/16). 

MORE MONEY FROM WALL STREET: The WALL STREET JOURNAL's Spector & Chung write Lasry and Edens "made a big bet on an underperforming asset," but they were "enticed by the prospect of building a new arena." Lasry: "That's one of the things that attracted us." Lasry added that he and Edens "started talks to buy the team about four months ago." The two become the "latest Wall Street money managers to dabble in professional sports" (WALL STREET JOURNAL, 4/17). In Milwaukee, Kathleen Gallagher notes Edens and Lasry are "high-ranking, basketball-loving executives at big financial firms that manage billions of dollars for clients around the world." Lasry is the "better-known of the two in the investment world" with a reported net worth of $1.7B while Edens has a reported net worth of $2.5B. Lasry: "We have a strong desire, I think at times an insane desire, to succeed." He added of Milwaukee, "We're going to be spending a huge amount of time in this city." Lasry and his sister, Sonia Gardner, "founded Avenue Capital Group" in '95 with about $10M in cash. Lasry also is a "longtime Democratic Party donor who was reported to be one of President Barack Obama's top choices to be ambassador to France" (MILWAUKEE JOURNAL SENTINEL, 4/17). BLOOMBERG NEWS' Scott Soshnick notes Basketball HOFer David Robinson, who co-founded Admiral Capital Group, "never hesitated to solicit financial advice" from Lasry. Robinson said, "I have this thing in my right hand in the NBA; he has in the left hand the financial world -- maybe we can share a little bit" (BLOOMBERG NEWS, 4/17).

A CHANGE IS GONNA COME: BLOOMBERG BUSINESSWEEK's Ira Boudway noted the deal would "set a new record price for an NBA team," topping the the $534M that Vivek Ranadive and his group paid for the Kings last year. Edens and Lasry are "paying a record price for the least-valuable asset in the league." Boudway: "Half a billion dollars may seem like a lot for a rundown Milwaukee entertainment business, but it’s not bad for a share in a global media property with an enterprise value" of roughly $20B (BUSINESSWEEK.com, 4/16). Wisconsin Gov. Scott Walker said he will work with the new ownership to see how he can help the team "flourish in the state.'' He said of the sale, "I think it's a big deal" (ESPN.com, 4/16). In Milwaukee, Matt Velazquez writes under the header, "Change Has Bucks Fans Hoping For Best." Paul Henning, speaking on behalf of the SaveOurBucks.com fan group, said of Edens and Lasry, "Their commitment to the Milwaukee community seems genuine. Them throwing down a $100 million gauntlet, Herb Kohl throwing down $100 million on the table, that's huge" (MILWAUKEE JOURNAL SENTINEL, 4/17).
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