Why the Sacramento Kings Aren't a Lock for Seattle Move

Sim Risso@@SimRissoFeatured ColumnistJanuary 28, 2013

Mayor Kevin Johnson is leading Sacramento's charge to keep the team.
Mayor Kevin Johnson is leading Sacramento's charge to keep the team.USA TODAY Sports

Despite what the national perception may be, those of us in the Sacramento area aren't convinced the Sacramento Kings will be moving to Seattle next season. We've seen enough positive developments and have enough faith in Sacramento Mayor—and former NBA All-Star—Kevin Johnson to think this thing isn't a done deal.

Admittedly, it's an uphill climb to keep the team in California's capital. After all, the Kings' soon-to-be former owners, the Maloof family, have come to terms on a "binding agreement" to sell the team to a Seattle group led by billionaire hedge-fund manager Chris Hansen and billionaire Microsoft CEO Steve Ballmer.

The sale was confirmed by the Maloofs, the NBA and the Seattle group. The pact values the franchise at $525 million, with the Hansen-Ballmer group purchasing 65 percent of the team. That means the group is paying an estimated $340 million for its 65 percent share.

Even though there's the binding agreement between the Maloofs and the Hansen-Ballmer group, NBA Commissioner David Stern has publicly stated that Mayor Johnson would have an opportunity to present a counter-offer to the NBA at the league's Board of Governor meetings. This is noteworthy because it was at the BOG meetings two years ago where Johnson convinced the NBA to prevent the team from moving to Anaheim, Calif.

Furthermore, Stern initiated contact between AEG—the company slated to manage last year's approved arena before the Maloofs backed out of the deal—and Johnson. According to The Sacramento Bee, AEG president Tim Leiweke says the company is still interested in partnering with the city on an arena project.

"We haven't changed our opinion about Sacramento or the arena," Leiweke said.

He went on to add, "To the commissioner's credit, I don't think he ever forgot about Sacramento," later implying that Stern prefers not to relocate franchises.

As part of Sacramento's counter-offer, the inclusion of a plan for a new arena is a necessity. In this respect, the dialogue between AEG and Sacramento is seen as a positive sign.

As we've seen, coming up with an agreement for a new arena in Sacramento has been a daunting prospect. However, in fairness, the Maloofs were a sticking point in a lot of those negotiations. Now that the family has sold the team, they're no longer part of the equation in the arena process.

That still doesn't even begin to address the potential problem of matching the $340 million the Hansen-Ballmer group put up to purchase the team—a figure a local ownership group would have to match to keep the franchise in Sacramento.

On that front, things are also starting to look up for Kings fans. As part of a local ownership group, Mayor Johnson obviously wanted some people that live in the region to be involved. He set out to find some prominent residents to invest in the team.

Apparently the mission was a success for Johnson as he was able to come up with 20 local investors willing to contribute $1 million each.

Now, $20 million (the sum of those investments) is a lot of money to you and I. Unfortunately, beyond the window dressing and publicity that comes with it, it doesn't even make a dent in matching a $340 million price tag. It's less than 10 percent of the money Mayor Johnson has to organize to keep the team, which means there's still a lot of work to be done in corralling enough capital to match Seattle's offer.

Again, Johnson has some potential solutions to this problem. Those "solutions" come in the form of deep-pocketed individuals, who have been termed "the whales." Mayor Johnson has yet to publicly announce who the whales are, but we have some pretty good indications based on some recent reports.

According to Ryan Lillis of The Sacramento Bee, who first broke the story, two wealthy individuals have come forward with an interest in purchasing the team and keeping it in Sacramento. Those men are Mark Mastrov, who founded 24 Hour Fitness, and billionaire supermarket mogul Ron Burkle.

In fact, as was recently reported by Sam Amick of USA Today, Burkle traveled to New York on Jan. 26 to have a meeting with Commissioner Stern at the NBA's offices. The meeting lasted approximately two hours with Burkle's potential bid for the Kings as the main talking point. According to Amick, Burkle was in Sacramento the day before to discuss the situation with Mayor Johnson.

As Amick notes:

Stern has had consistent communication with Sacramento Mayor Kevin Johnson, a former NBA All-Star, during this situation, but his decision to grant Burkle a meeting is seen by Johnson's camp as the latest sign that — despite the widely held belief the team will wind up in Seattle — their effort is being legitimized by the league.

There's also the issue of the team's minority shareholders, who still hold a 35 percent interest in the team. As part of their agreement to purchase the Kings, these individuals feel they have the "right of first refusal" to match any offer for the club. It's a right they were never granted prior to the franchise's sale to Seattle.

One such person is Bob Cook, who owns a 7 percent share in the team. According to The Sacramento Bee, Cook says he "and other minority owners have 'first right of refusal' to buy the club. He said that right is guaranteed in the partnership agreements governing ownership of the team."

For their part, the Seattle group isn't worried about the right of first refusal, calling it a "non-issue," according to Chris Daniels of King5.

That may be the case that the right of first refusal is a non-issue. However, it is fair to point out, as Ryan Lillis did, that there is a fairly recent precedence for a minority owner using his right of first refusal to purchase an NBA team.

Read more here: http://www.sacbee.com/2013/01/24/5138478/limited-partners-have-first-right.html#storylink=cpy


Cook has also worked to facilitate a meeting between Larry Ellison, the founder of software giant Oracle, and Johnson, according to The Sacramento Bee. No meeting has been confirmed between the two sides, but it is certainly noteworthy. After all, Forbes Magazine names Ellison as the third-richest man in the US with an estimated net worth of $41 billion. In fact, Ellison's net worth alone trumps that of Hansen and Ballmer's combined.

If Ellison did become involved, he would reportedly partner with Cook, instead of the group headed by Burkle and Mastrov.

Lastly, Seattle's situation is worth considering. It's no secret the reason the SuperSonics left the Pacific Northwest was because of repeated failed attempts to get a new arena approved and built. An arena plan has been ratified by the city this time around. However, a Seattle Longshore union filed a lawsuit to prevent the arena from being built.

According to the Puget Sound Business Journal, a second lawsuit was filed on Jan. 16, which claims the proposed arena would violate Initiative 91. Initiative 91 was passed in 2006 and states that the city must make a profit on any investment in a sports facility. As it stands now, the court proceedings are slated for Feb. 22.

Reportedly, the city has filed a motion to dismiss the suites.

As far as what all of this means in the grand scheme of things is difficult to say. But there have been enough positive developments from the Sacramento side for fans of the team to remain optimistic.

Between the emergence of Burkle and Mastrov, the right of first refusal involving minority owners and AEG's continued commitment to build an arena in Sacramento, it's obvious the city isn't giving up without a fight.

Seattle still has the upper-hand because of its binding agreement with the Maloofs. But ultimately it's going to come down to the Board of Governors meetings in April. That's where this whole thing is going to be decided. And as a Kings fan, you've got to think you have a puncher's chance in that setting, especially considering Mayor Johnson's prior success in persuading the Board of Governors to prevent a previous relocation by the Kings.

On top of that, Commissioner Stern's willingness to facilitate the process leads many to think the Kings have a chance of staying. The prevailing thought seems to be if relocation was a foregone conclusion—regardless of whether Sacramento matched Seattle's offer—Stern wouldn't be encouraging Johnson because of his immense respect for the man, both as a former player and a mayor of the state capital.

Based on what we've seen, it's looking positive as far as Sacramento raking together enough money to match the $340 million the Seattle group put up. But that still doesn't mean the BOGs, who have the final say in the matter, will side with Sacramento.

At this point, there are no guarantees either way—that's a good thing for Kings fans.

Follow me on Twitter: @SimRisso

Read more here: http://www.sacbee.com/2013/01/15/5116279/aeg-interest-in-sacramento.html#storylink=cpy

Read more here: http://www.sacbee.com/2013/01/15/5116279/aeg-interest-in-sacramento.html#storylink=cpy


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