Steve Ballmer Makes Bad NBA Owners Richer
Steve Ballmer just saved us all.
The former Microsoft chief executive officer has signed a binding contract with the Sterling family to purchase the Los Angeles Clippers for a whopping $2 billion. The agreement comes just days before the NBA's Board of Governors was set to vote on whether the league should force the sale of the team in light of principal owner Donald Sterling's racism scandal.
Everybody wins in this situation, which showed signs of spinning out of control as Sterling publicly wavered between acceptance and all-out rejection of the sale, and speculation loomed over the possibility that his wife, Shelly, would try to draw out the negotiation process as long as possible. If his purchase is approved, Ballmer will have spared us the sideshow of a lengthy legal battle that most analysts agree would have still resulted in the forced sale of the Clippers.
The team and its fans can now return to focusing on basketball with an owner who has long desired to be part of the NBA. The rest of the league emerges victorious -- the spotlight will soon shift back to the playoffs, which have been among the more eventful in recent memory. The biggest winners are the individual teams that will see their values skyrocket accordingly after this sale, which shattered the record set in April when the Milwaukee Bucks were sold for $550 million. (Kudos to former NBA general manager and Bloomberg View contributor David Kahn, who ends up looking like Nostradamus after predicting the Clippers would sell for $2 billion when everyone put their price at half that.)
As in life, the rich get richer: Big-market teams stand to benefit the most, especially the New York Knicks and the crosstown Los Angeles Lakers. ESPN's Darren Rovell speculated this morning on Sportscenter that the Lakers could now be worth more than $3 billion should the Busses ever decide to relinquish their family jewel. The Knicks, meanwhile, are currently the most valuable team in the league; according to Forbes, they're worth $1.4 billion, a number sure to balloon given the Clippers' previous valuation at $575 million. The Street's Jonathan Heller estimates that the Knicks' worth could skyrocket to $4.3 billion in terms of revenue and $12.76 billion in terms of operating income given the Clippers' bump. That's not terribly great news for Knicks fans, however, who'd like to see James Dolan suffer some kind of penalty for being such an inept owner, but if this Donald Sterling business has taught us anything, it's that the NBA isn't exactly a meritocracy.
Speaking of Sterling, he may be publicly shamed and forever a pariah, but he, too, comes out of all of this ahead, having purchased the Clippers for $12.5 million in 1981. Even after a hefty capital gains tax of close to $662 million, he'll make out like a bandit with more than $1.3 billion in profit. Not bad for a 30-year tenure that largely consisted of actively running his team into the ground.
So Ballmer gets that $2 billion toy he's always wanted and the rest of us can get back to the playoffs. Adam Silver can take pride in having weathered his first major storm at the helm of the NBA -- heck of an initiation, commissioner. And Microsoft is emerging as the league's unlikely savior, with Ballmer following in the footsteps of Paul Allen, who has owned the Portland Trailblazers since 1988.
Now, if only we can get Bill Gates to buy the Knicks.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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Kavitha A Davidson at email@example.com