July 1, 2010

Reports say that the sale of the Golden State Warriors will not be finalized until August, at the earliest.  So we’ve got some time to predict what will happen with the sale, as of July 1, 2010.  While this isn’t the boldest of proclamations, it would be remiss to dismiss how this is really going to play out.

We are now privy as to who the Final Four potential buyers are: Oracle CEO, Larry Ellison; 24-Hour Fitness founder, Mark Mastrov; Mandalay Entertainment CEO, Peter Guber; and founding partner of TPG Capital (and its Asian affiliate Newbridge Capital), David Bonderman.  With David Bonderman’s group as the last to be identified, the sale is now in the binding bid stage, as Marcus Thompson reports.

It is long rumored that Larry Ellison is the frontrunner of this little game of Who Wants to be an NBA Owner?, orchestrated by Galatioto Sports Partners.  But, you can’t count out the others.  What was once a group of about a dozen potential buyers has now been dwindled down to four.  And to even be considered a potential buyer is probably, as Ron Burgundy would put it, “kind of a big deal.”  In other words, Chris Cohan wants to sell his team at a record price, beating out the $401M Robert Sarver paid to buy the Phoenix Suns, so these remaining guys have been qualified to do so.  They are real.

No one knows what the final price is or what price Chris Cohan has in mind, but everyone at this point knows that the team will be sold for certain.  Despite retaining the services of a broker, there was a little uncertainty a short while ago whether Chris Cohan would actually sell the team because the timing of the sale announcement was almost in direct parallel to the timing of season-ticket renewals.  Now it’s pretty clear the Warriors are in full-sale mode and the four groups are in full-buy mode.

(But never say never).

Technically, the Warriors’ franchise is up for grabs.  Realistically, there is only one guy for the job.

This is about the inevitability that Larry Ellison will be the new Warriors’ owner.

He is the sixth richest person in the world and the others quite frankly are in the “not” category.  He is a shrewd businessman with a win-at-all-costs mentality and prefers hostile takeovers, but as he states, “…you can’t have a hostile takeover of a basketball team.”  Some people are confused as to why there is even a bidding process and why Larry Ellison doesn’t blow the other groups out of the water with a bid none of them can compete with.  While Ellison’s wealth cannot be questioned, perhaps his win-at-all-costs mentality could.  Most recently, his desire to be on top was exhibited with his America’s Cup win over Ernesto Bertarelli where he spent over $100M to do so.

So, why can’t he just do the same when it comes to buying the Warriors?

Why is he even playing this game with Cohan?

Ellison is merely playing within the rules.  He’s also not stupid.  You don’t become the sixth richest person in the world by accident.  I will presume it’s done with tenacity AND grace.

Ellison already offered $315M, which was the Forbes valuation as of December 9th, 2009, to Cohan last year.  Cohan rejected this offer.  Fans sitting courtside near Larry Ellison at the Warriors-Cavaliers game on January 11, 2010 overheard him saying to another fan that Chris Cohan simply doesn’t want to sell.  (They also overheard him saying Chris Cohan is an alcoholic who showed up at a dinner party drunk.  Also, Ellison would fire Don Nelson if he was owner…I’m just saying).  So, there was no reason for Ellison to force anything or offer a ridiculous amount of money that would only benefit Cohan.  Unlike the America’s Cup, winning the bidding process isn’t the goal.  The goal is to run a successful franchise that wins games and makes money.  So by putting in an inordinate amount of money to acquire the team, which he is capable of doing, would be counter-productive to that goal.

Is Ellison’s view of owning the Warriors a fun venture like the America’s Cup or a business venture like taking over Sun Microsystems?  I think it’s a little of both.  Owning an NBA team should be fun, right?  It’s basketball, it’s a game.  But it also has potential to bring in major revenue when done right when factoring in television contracts, market size, corporate sponsorships (anyone heard of Oracle Arena?), merchandising, and advertising.  The Warriors are in the 5th largest sports market in the nation behind New York, Boston, Chicago, and Los Angeles, I guessing.  There is some business potential here in the Bay Area.  These are the sentiments echoed by second-fiddle buyer, Mark Mastrov, who many believe has the heart and drive to be a successful Warriors owner given his local ties and history of being a Warriors’ fan.

Given Ellison’s wealth, owning and operating the Warriors franchise would merely be a blip on his checkbook, but that still doesn’t mean he should do it foolishly.

That means he’s not going to outbid himself as he’s the only one so far to put in a real offer ($315M).

Ellison most recently partnered with the Warriors 20% minority owners, who in the past have attempted to buy-out Cohan.  This was a clever move by Ellison.  He exposed the aversion between Cohan and the minority owners but also gained inside knowledge of the Warriors operations.  Also, as Tim Kawakami points out, “Any potential buyer must be prepared to buy 100 percent of the team.”  So by partnering with the minority group, Ellison got a 20%-off coupon and the minority group got an option to stay with Ellison or to be paid by Ellison.  Ellison also makes it harder for the other buyers to come up with a competitive bid as they need to do so for the 100%.  The move to partner with the minority group was genius.

If Ellison bought the entire 100%, the minority group would still benefit as Ellison’s bid will be the highest at the end of the day.  There is no tampering rule when it comes to selling a team.  Chris Cohan has the freedom to gather all binding bids and use it as leverage to cultivate the highest bid from Ellison.  And let’s face it, Larry Ellison is the only person amongst this group that has the proven moxie to win this game of NBA ownership.  The other players, as legit as they are, do not have the track record to be able to beat Ellison in this game nor do they have the track record of obscene success he has.  The burden of proof is on them.

Local media has a conservative view on who’s going to be the next owner – at least on paper – that something atypical will happen.  It’s not.  Everything we’ve seen thus far is merely an indication of the inevitable.  The Force is with Ellison.  David Stern wants it this way, the fans want it this way, the minority group wants it this way, and Cohan wants it this way.  Only a man of Ellison’s stature could command this type of symphony.  It’s just a matter of time and time is on Ellison’s side while Cohan desperately waits with sweaty, greedy hands on what Ellison, with tact and grace, will offer.

The only thing Ellison has to lose is an ego-boost and we know that isn’t happening.  I believe there are many facets to Ellison’s ego and it’s not just the gung-ho, look-at-how-big-my-yacht-is type.  He seems to be carefully crafting his way to NBA ownership, in Zen-like fashion.

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