Ellison loses out on bid for Warriors
- July 15, 2010
Despite weeks of being proclaimed the next owner of the Golden State Warriors, software billionaire Larry Ellison was outmaneuvered in the end by a Hollywood mogul and a low-profile venture capitalist from Sand Hill Road.
The Warriors announced Thursday that owner Chris Cohan struck a deal to sell the Oakland-based basketball franchise for a record $450 million to a group that includes Kleiner Perkins Caufield & Byers managing partner Joseph Lacob and veteran film producer Peter Guber, the CEO of Mandalay Entertainment Group.
The outcome was a surprise to many long-suffering Warriors fans, who had been hoping the hapless team would benefit from Ellison's deep pockets and business acumen. It also was a stunning setback for the intensely competitive Ellison, who is CEO of Silicon Valley powerhouse Oracle and the world's sixth richest man.
In a statement issued after the announcement, Ellison wished the team well but complained that he was passed over despite submitting "the highest monetary bid." He added, "In my experience, this is a bit unusual."
Lacob, meanwhile, called the deal "a dream come true."
A longtime Bay Area sports fan who is also part-owner of the Boston Celtics, Lacob added in an interview: "We did our due diligence. I think we wanted it more than the other guys and I think we are more knowledgeable than all these other guys."
Lacob declined to discuss specific plans for the team, which has maintained strong fan support despite one of the worst playing records in the NBA. In his 16-year tenure as Warriors owner, Cohan has been widely criticized for botching draft picks, hiring underperformers and letting good players get away.
"I'm not going to talk about that," said Lacob, when asked about any upcoming changes. "But we've thought about this. We're fans just like everybody else. We think we understand what has to be done."
None of the parties would comment on specifics of the bidding. But sports consultant Sal Galatioto, who represented Cohan in the negotiations, said Ellison's final bid came too late. Interviewed on the sports radio station KNBR, Galatioto said Ellison's offer may have been "slightly higher" but it came after Galatioto had already negotiated a detailed agreement with Lacob.
"I was in contact with Larry's people throughout. They had ample opportunity to bid, they knew the deadlines," Galatioto said.
"Even if you're LeBron James, and the clock runs out and you wait three minutes after the game's over and you step out onto the court to take a shot, does that shot count?" Galatioto asked. "I'm sorry, but if there are rules in the game, everybody plays by those rules."
Financial experts said it's also possible the two competing offers were structured in different ways. Stanford sports economist Roger Noll said Lacob's group may have offered terms that were more attractive to Cohan, whose complicated finances, including scrapes with tax authorities, are widely believed to have factored in his decision to sell the team. Cohan bought the Warriors in 1995 for $119 million.
"Usually a very big factor driving the structure of a deal is the tax implications for both parties," said Noll, who noted that the announcement did not specify whether the $450 million will be paid in cash upfront or whether some of it will be paid over time.
The previous record price for an NBA franchise was the $401 million paid for the Phoenix Suns in 2004. The most recent sale involved the Charlotte Bobcats, for which a group led by Michael Jordan paid $275 million in March.
Paying $450 million for the Warriors "seems a bit rich to me," said Paul Staudohar, author of several books on sports finance and an emeritus professor at Cal State East Bay. The team was valued at $315 million by Forbes Magazine in December.
Still, he said, the Warriors have maintained solid attendance in recent years. And statistics for the last 10 years show that NBA teams have seen their revenue grow faster than professional football, baseball or hockey franchises.
Lacob, who has an MBA from Stanford and serves on the boards of several tech companies, called the Warriors "a very good opportunity as a business enterprise," with a wealthy fan base and the potential for lucrative sponsorships.
"All I can say is we wouldn't be doing it if we didn't think it was a fair price," he added.
The 54-year-old Lacob oversees investments in medical technology, Internet business and alternative energy for Kleiner Perkins, one of the valley's most successful venture capital firms. He also has a track record in professional sports as a primary investor in the women's American Basketball League and as one of several Silicon Valley executives and financiers who own a minority share of the Celtics.
"Joe Lacob is an extremely talented individual," said Jim Breyer, a fellow Celtics investor and partner in the venture capital firm Accel. "It's great news for Warriors fans."
Lacob is a season-ticket holder for the Warriors and for the basketball team at Stanford, where he's donated money to support a number of campus programs.
Guber, his partner in the Warriors deal, is a much more well-known figure — at least in Hollywood, where he's held top posts at several studios and served as producer or executive producer of numerous films, including "Rain Man," "Batman" and "The Color Purple."
The 68-year-old Guber formed Mandalay Entertainment Group in 1995 and has expanded the business from film and television production to include sports and online media ventures. Mandalay's sports division owns a half-dozen minor league baseball teams.
There were two other finalists in the bidding for the Warriors: groups led by Texas financier David Bonderman and 24 Hour Fitness founder Mark Mastrov.
Many felt Ellison would inevitably emerge as the new owner because of his seeming ability to pay whatever price Cohan asked. Ellison, whose personal wealth is estimated at $28 billion, spent several hundred million dollars on a years-long campaign to win the America's Cup sailing trophy, eventually succeeding this year.
As a result, the news on Thursday left fans with mixed reactions. Cohan had been hugely unpopular among many of the team's followers. Some voiced disappointment on talk radio and sports blogs, saying they had been looking forward to Ellison taking over the team.
But many others echoed a fan named "Don," who posted his reaction on the Mercury News website Thursday: "As long as it isn't Cohan, we can be happy. Clean slate. It really didn't have to be Ellison."
In a statement released by Galatioto, Cohan thanked Warriors fans and called them the "best fans in all of sports."
The sale must be reviewed by the NBA Board of Governors, but approval is considered likely. Lacob also must sell his stake in the Celtics.
There was no word Thursday on whether the Warriors home court in Oakland will continue to be called Oracle Arena. Ellison's company paid a reported $30 million for the naming rights in 2006, in what was described as a 10-year deal.