Can Ballmer Keep the Sonics in Seattle?
Microsoft (MSFT) CEO Steve Ballmer is working the phones, recruiting powerful friends, and trying to pull off a headline-grabbing hostile takeover of sorts. No, this isn't related to Microsoft's $42 billion bid for Yahoo! (YHOO). On Mar. 6, Ballmer publicly unveiled an improbable $300 million effort to keep the city's National Basketball Assn. franchise, the Seattle SuperSonics, from bolting to Oklahoma City.
The Sonics owner, Oklahoma City businessman Clay Bennett, informed the NBA last fall that he intends to move the club to the Oil Patch. Two years ago, Bennett paid $350 million to buy control of the team from an investment group led by Starbucks (SBUX) Chairman Howard Schultz. Today, he doesn't see a profitable future in Seattle, largely because of the city's antiquated KeyArena, where the poor-performing Sonics play. Bennett wants out of a lease that doesn't expire until 2010, and the two sides are headed toward a trial on the matter that's scheduled to start in June. On Mar. 14, the Sonics and Oklahoma City reached a preliminary agreement on a lease at the Ford Center pending NBA approval of the team's move. The NBA's ruling board of governors is set to meet on Apr. 17-18 to consider Bennett's petition.
Ballmer, a huge basketball fan, has recruited Costco Wholesale (COST) CEO Jim Sinegal , wireless telecom billionaire John Stanton, and Seattle real estate developer Matt Griffin to help fashion a $300 million facelift at the KeyArena that would include an expanded retail and restaurant space, additional parking, and a practice facility for the team. The investor group led by Ballmer, which also hopes to persuade Bennett to sell it the SuperSonics, is putting up $150 million and wants the city and state to come up with the other half. Ballmer declined to comment.
An Ultimatim for Lawmakers
The city of Seattle is on board, but so far not the Washington state legislature. Ballmer's group has suggested that the state raise its $75 million share by giving King County, which includes the city of Seattle, the authority to extend a tax on car rentals and restaurant sales put in place to pay off bonds to build the city's baseball stadium, Safeco Field. The legislature has balked. So Ballmer issued lawmakers an ultimatum on Mar. 9: Put up the cash by Apr. 10, just before the NBA board of governors meets, or his offer expires. Governor Christine Gregoire and the state's legislative leaders have said there's too little time to study the offer. Instead, they suggest creating a task force to consider a broad range of uses for the tax dollars from arts to youth sports and low-income housing to cleaning up Puget Sound.
Even if Ballmer gets the money, there is another huge obstacle left. "Mr. Bennett has stated that the team is not for sale," says Mike Bass, an NBA spokesman. (Bennett declined to comment.) And the league, which likes to protect its owners, isn't much interested, either. NBA Commissioner David Stern declined to comment but said during a February news conference that "it is apparent to all who are watching that the Sonics are heading out of Seattle." That was after Stern learned of Ballmer's plans, which hadn't yet surfaced publicly.
Ballmer may be calculating that a well-funded arena package, plus the fact that Seattle is a far bigger market than Oklahoma City, might give the NBA pause. Bennett may be willing to sell if he can't bust his lease in Seattle and weaker franchises in New Orleans, Memphis, and Sacramento become available.
An Example for Other Cities?
Even though Seattle residents are decidedly mixed on the Sonics pending departure, Ballmer partner Griffin, who's acting as a spokesman for the group, believes that "it'd be in [the NBA's] best interests to keep the team in Seattle." However, others think NBA officialdom wouldn't mind using Seattle as an example to other cities that won't invest to keep their local arenas first-rate. "It's always good to drop the hammer just to show it can be done," says Rick Eckstein, an associate professor at Villanova University and co-author of Public Dollars, Private Stadiums: The Battle over Building Sports Stadiums.
Seattle leaders might not be in such a jam had Ballmer or another prominent city business executive acquired the team back in 2006 when it was for sale. Now, a lot of things need to go right—and quickly—for the Sonics to stay in Seattle. The odds aren't great. "You never say never in one of these deals," says Seattle Mayor Greg Nickels. But even Griffin thinks the chances are remote. "It's less than 50-50," he says. And that's what you call a low-percentage shot.