Prokhorov’s NBA Nets Say Russian Ownership Move May Never Happen

Photographer: Layne Murdoch Jr./NBAE via Getty Images

Deron Williams of the Brooklyn Nets goes up for a layup against the New Orleans Pelicans during a game on March 24, 2014. Close

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Photographer: Layne Murdoch Jr./NBAE via Getty Images

Deron Williams of the Brooklyn Nets goes up for a layup against the New Orleans Pelicans during a game on March 24, 2014.

The Brooklyn Nets might not be moving to Russia after all.

A day after billionaire Mikhail Prokhorov, the National Basketball Association’s first foreign owner, said he intended to transfer the team to one of his Russian companies, Onexim Sports & Entertainment said such a move -- which would be the first of its kind in major U.S. professional sports -- might never happen.

“This is a long process which may or may not come to fruition,” Onexim, the team’s parent company, said yesterday in a statement. “Of course, no steps in this direction could or would be taken without the full knowledge and approval of the NBA.”

Chuck Baker, a partner with DLA Piper’s Global Sports media and entertainment practice, said in a telephone interview that he would be hard-pressed to believe the NBA would allow such a change.

“While they have the power to revoke a franchise, I’m not certain that will be exercised here,” he said. “But we are in uncharted territory.”

The proposed transfer of ownership would allow Prokhorov to heed Russian President Vladimir Putin’s ban on politicians having foreign accounts and equity and his call for Russian-owned companies to be registered and pay taxes locally.

Owners’ Approval

Chris Weafer, a partner at Macro Advisory in Moscow, said Prokhorov is tailoring his comments to his audience.

“It seems that Mr. Prokhorov has had a reality check,” Weafer said by e-mail yesterday. “What seemed like a slam dunk patriotic move in Russia today has proven to be something of a foul move among Nets supporters in New York.”

Joel Litvin, the NBA’s president of league operations, said the Nets haven’t submitted an application to change their ownership. If they did, 75 percent of owners, or 23 of the 30, would have to approve it, Litvin said, adding that no specific rule exists barring a non-U.S. entity from owning a team.

“The board would decide whether there’s a problem with it,” Litvin said in a telephone interview. “They would look to see whether this would affect the league’s ability, for example, to enforce its rights against the Nets. In the unlikely case the Nets didn’t make a revenue-sharing or tax payment, would the presence of the company in Russia affect our ability to enforce the rights of the other 29 teams.”

Litvin said the league “did a lot of research” into Canadian law before placing teams in Vancouver and Toronto, adding, “We got comfortable with Canadian-based companies owning NBA teams.”

The NBA now has one team in Canada, the Toronto Raptors. The Vancouver Grizzlies moved to Memphis in 2001.

Economic Sanctions

Prokhorov, who ran for Russian president in 2012, may also be looking to keep his investment out of the reach of U.S. lawmakers as President Barack Obama threatens to step up economic sanctions against Russia in response to its annexation of Ukraine’s Crimea peninsula, according to Veles Capital (VELESCA) and Sberbank Asset Management.

The conflict already has cost Prokhorov, Russia’s eighth wealthiest man. His net worth has slumped $811 million this year as the selloff in Russian markets eroded the value of his holdings in stocks including OAO Uralkali, the world’s biggest potash maker.

Prokhorov -- who is worth $12 billion according to Bloomberg Billionaires Index estimates -- declined to comment on whether his decision to register the Nets in Russia was related to the sanctions.

Approval Unlikely

“Preliminary discussions with the NBA were held in spring 2013, and at that time, the league indicated its willingness to work with us in the event we needed to re-register the ownership vehicle of the Nets as a Russian entity to comply with the Russian law,” said the Onexim statement.

David Stern, who stepped down as NBA commissioner on Feb. 1, declined to comment on Onexim’s assertion that the league indicated a willingness to assist.

Richard Peddie, the former chief executive officer of Maple Leaf Sports & Entertainment, which operates basketball’s Raptors and hockey’s Maple Leafs, said in an e-mail it’s unlikely enough owners would approve Prokhorov’s request.

“Can’t see many owners liking it,” he said. “With Crimea and all the sanctions it could be huge. Due diligence will be unlike anything in history of the league.”

To contact the reporter on this story: Scott Soshnick in New York at ssoshnick@bloomberg.net

To contact the editors responsible for this story: Michael Sillup at msillup@bloomberg.net Jay Beberman, Tal Barak Harif

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