Joseph Tsai paid $1 billion for a 49% stake in the Nets last year and will pay $1.35 billion for the remaining 51%.Getty images
Kevin Durant and Kyrie Irving have already had a major impact on the Brooklyn Nets — and they haven’t even played a game for their new team.
The offseason signings of those superstar free agents is expected to drive a significant uptick in ticket and merchandise sales for the franchise that will fuel a double-digit increase in overall revenue, despite the expectation that Durant will be sidelined for the season with an Achilles injury.
That rising value was among the factors that motivated Joseph Tsai to accelerate his purchase from Russian billionaire Mikhail Prokhorov of the remaining 51% of the team that he did not already own. Last week, the Taiwanese-Canadian businessman agreed in principle to pay $1.35 billion for that stake, and when added to the $1 billion stake Tsai purchased in 2017, the total sale price of $2.35 billion is now the most ever paid for a professional sports franchise. It tops the $2.275 billion sale of the Carolina Panthers to David Tepper in 2018, and the existing NBA record of $2.2 billion for the Houston Rockets by Tilman Fertitta in 2017.
One high-ranking former league executive believes there remains plenty of room for NBA team valuations to continue climbing. “The limit has not yet been reached,” he said. “The value of live sports content, both locally and nationally, is growing and the league has the potential to significantly increase media rights revenues in markets like China, India and Africa. There’s a big delta between what the league currently draws in international viewers and the number of prospective fans abroad.” The league recently announced a new $1.5 billion deal with Tencent that keeps the company as its exclusive digital partner in China.
Tsai, a co-founder of Alibaba estimated to be worth $9.7 billion, is buying Barclays Center in a separate transaction that values the arena at close to $1 billion, a high price for an asset that is losing money; it has been reported that the building lost $21 million in 2017-18.
Prokhorov, who bought an 80% stake in the team from Bruce Ratner for $200 million in 2009, was supposed to retain majority control of the franchise through the 2021-22 season before Tsai had the option to buy him out. A source suggested that Tsai’s urgency “may have had something to do with the price he paid for the building.” The implication is that to expedite the timeline and for Prokhorov to forego the anticipated appreciation of his basketball team, Tsai was forced to pay a premium on the real estate.
Blue Pool Capital CEO Oliver Weisberg, vice president Rich Tao and general counsel Henry Li put the deal together on Tsai’s behalf. Pavan Surapaneni, partner at Sullivan & Cromwell, represented Tsai in the transaction, as he did during a renegotiation of the Barclays Center lease in 2018. There is a link between Sullivan & Cromwell and the Alibaba co-founder: Tsai was previously an associate of the firm. Prokhorov hired Allen & Co., Hogan Lovells and Brooklyn Sports & Entertainment counsel Maureen Hanlon, Jeff Gewirtz, Kari Cohen and Russell Yavner to work the deal. Wayne Katz, partner at Proskauer, helped to facilitate the transaction on the league side.
Corey Leff is a writer in New York.
