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Volume 23 No. 1
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NBA’s global value plays role in sale of Bucks

The pending sale of the Milwaukee Bucks is one of the first team deals in the NBA to assign significant value to the league’s emerging overseas business.

Keeping the team in Milwaukee is a stipulation Kohl insisted upon in the sales agreement.
Photo by: LEE MATZ

For years, buyers have been hesitant to ascribe hard dollars in a club purchase to the international business because there is no cash flow that comes directly to teams from that business, and much of the value is prospective.

“There were clearly some bidders in the process just looking at the operations of the Milwaukee Bucks in the Milwaukee region. Period. End of discussion,” said Steve Greenberg of Allen & Co., who advised the team on the $550 million sale to hedge fund owners Wesley Edens and Marc Lasry. The deal, announced April 16, must still be approved by NBA owners. “Those who got to the levels we ultimately got to placed a value on what I called leaguewide assets,” Greenberg said. “In the case of the NBA, that is clearly the international business.”

Many in the finance world of selling and buying sports teams were surprised at the $550 million price for the Bucks, the highest yet for an NBA team, topping last year’s $535 million sale of the Sacramento Kings. Milwaukee is one of the league’s smallest markets, the team needs a new arena, and it is not one of the top brands in the league.

One source pegged the price he advised his clients as being $425 million for the club.

Greenberg said the buyers did not place a specific value on the international business, just as most MLB team purchasers do not place one on MLB Advanced Media, a similar structure in which team owners get no direct financial benefit from a strong league business.

Edens has visited China 11 times in the last two years as part of his business, so more than many incoming owners, he may have understood the opportunity. Edens co-founded New York-based Fortress Investment Group, which last year had $61.8 billion in assets under management. Lasry is the chairman and co-founder of New York-based Avenue Capital Group, which has $13.6 billion in assets under management.

Bucks owner Herb Kohl retained Allen & Co. in December. In a sales prospectus sent to nine bidders, the investment bank spelled out the growing value of the league’s international business.

The NBA last year reportedly had $150 million in estimated revenue from its China business alone, with expected annual double-digit percentage increases in revenue ahead. That, along with an expected new domestic television deal that could double the league’s current eight-year, $7.5 billion deal that expires after the 2015-16 season, drove the value of the Bucks, despite Kohl’s restriction the team stay in Milwaukee.

Allen & Co. knew Edens through previous non-sports dealings. Lasry, Greenberg said, had previously expressed interest in buying professional sports franchises.

Edens and Lasry did most of the negotiating directly with Kohl and Greenberg. The pair retained Inner Circle Sports as the deal drew to a close.

The new owners of the Bucks plan to assume the team’s $125 million of debt and borrow another $50 million, finance sources said. At a valuation of $550 million, that means Lasry and Edens will be paying Kohl $425 million. Of that, they are financing the $50 million and paying for the rest from personal equity.

The NBA limits how much teams can borrow to $175 million. The $125 million the duo is inheriting is borrowed through the NBA leaguewide credit facility. It could not be determined from whom they are borrowing the $50 million.

They also have pledged $100 million to the construction of a new arena in Milwaukee to go along with another $100 million funded by Kohl.