Larry Ellison courted to bid for Sacramento Kings
01/25/2013 12:00 AM
01/27/2013 3:02 PM
The Maloofs' plan to sell the Sacramento Kings to a Seattle group ran into a pair of hurdles Thursday – a possible counteroffer from America's third richest man and a potential legal challenge from at least one of the Maloofs' own limited partners.
Larry Ellison, one of the titans of Silicon Valley, is expected to meet soon with Sacramento Mayor Kevin Johnson about the Kings situation, according to Kings minority owner Bob Cook.
With Cook complaining the Maloofs have improperly shut limited partners out of the bidding, Ellison's potential interest in the team ramps up the drama even higher. The software tycoon is worth $41 billion and was an unsuccessful bidder for the Golden State Warriors in 2010.
Cook said he asked a Bay Area sports attorney to broker the meeting between Ellison and Johnson, and he expects it will occur soon. The mayor has been recruiting deep-pocketed "whales" to present a competing bid to the NBA that he hopes would derail the Maloofs' pending sale to an investor group that would move the team to Seattle.
A spokeswoman for Ellison declined comment. The mayor's office issued this statement: "Out of respect for the private nature of these conversations, we are not commenting on any of the ongoing discussions with potential equity partners, real or imagined."
If he does bid, Ellison apparently would be operating independently of the potential partnership between billionaire Ron Burkle and Bay Area investor Mark Mastrov. An investment banker who knows Burkle and a business partner of Mastrov's say the two men are seriously considering their own run for the Kings at the mayor's urging.
The possible emergence of Ellison could further complicate the Maloofs' efforts to complete their deal with the Seattle group, led by hedge fund manager Chris Hansen and Microsoft billionaire Steve Ballmer.
The Maloofs are already running into interference from their own limited partners, including Cook.
David Flemmer, a court-appointed bankruptcy trustee who controls Cook's 7 percent share of the team, said Thursday the limited partners are being denied their legal rights to match the Seattle offer.
Don Fitzgerald, Flemmer's lawyer, said litigation is possible over the issue.
Flemmer said he thinks the minority owners have "first right of refusal" to buy the Maloofs' controlling interest. The right, guaranteed in the partnership agreement governing team ownership, means the limited partners should be allowed to match the Seattle deal, he said.
"We feel our rights are being trodden upon," Flemmer said. "If they're trying to bypass (the limited partners) on the deal with Seattle, we're going to have issues."
A source connected to the Seattle deal said lawyers for the Maloofs and Hansen's group have reviewed the partnership agreements and believe Flemmer's protests "are a nonissue."
Cook himself said he's still consulting with lawyers but added, "My opinion is we do have a first right of refusal."
The other three limited partners either declined comment or couldn't be reached for comment.
The mayor said the potential legal challenge from the limited partners is separate from his effort to line up competing bids for the Kings.
Speaking at the Capitol after meeting with lawmakers and others on the Kings issue, Johnson said he's been told all the limited partners "are going to do everything they can" to prevent the sale to Seattle but are operating on their own.
Nonetheless, the mayor shares the same goal – frustrating Hansen and the Maloofs.
"It's going to create a little bit more of a mess up in Seattle," Johnson said. "It's mucking it up a little bit."
Michael McCann, a sports-law expert at the University of New Hampshire, said a legal challenge from the minority owners could drag out the Kings saga for an unknown period of time.
"At a minimum, it adds to the complexity of the situation," he said.
The Seattle group announced Monday it has a "binding agreement" to buy the Maloofs' controlling interest. A source said the deal values the entire franchise at $525 million, which implies Hansen is paying $340 million for the 65 percent controlled by the Maloofs.
The remaining 35 percent is owned by Cook, the Benvenuti family, businessman David Lucchetti and Santa Clara developer John Kehriotis.
Cook was part of the group that bought the Kansas City Kings in 1983 and moved them to Sacramento in 1985.
He pledged his 7 percent share as collateral on a $10 million loan in 2007, court records show. He defaulted on the loan, and now Flemmer is preparing to auction off the share to repay Cook's creditors.
Fitzgerald, the trustee's lawyer, said Flemmer has asked the Maloofs to supply financial documents regarding the Seattle deal – documents he considers essential to running the auction properly.
If the Maloofs refuse, Fitzgerald said he plans to seek a court order forcing the family to relinquish the information.
As it is, the pending auction of Cook's share could provide Johnson's big-money investors with a window into the Kings' finances.
The Maloofs have given Flemmer inside data about the team, according to Fitzgerald. Qualified bidders for the Cook share are already being allowed to examine the financial information after signing confidentiality agreements, he said.
Flemmer said "several entities" have signed confidentiality agreements in anticipation of making a bid.
He wouldn't identify them, but previously has said Burkle and Hansen both have expressed interest in buying Cook's share.
Bids are due April 1, and the auction is scheduled for April 19.
That's the second and final day of the NBA board of governors' meeting in New York – the venue where the fate of the Kings may be decided. Johnson and his bidders are expected to present their case for keeping the Kings in Sacramento at that meeting, while Hansen and the Maloofs will make their own argument for the Seattle deal.
Ellison is ranked No. 3 on Forbes magazine's roster of the wealthiest Americans. The Oracle executive recently purchased the Hawaiian island of Lanai for a reported $500 million to $600 million.
He was in the running to buy the Warriors and actually outbid the winners, Joe Lacob and Peter Guber, according to Bay Area media reports. Ellison lost out on the team because his final bid was reported to have arrived too late in the process.
Ellison has connections to Sacramento. He underwent surgery at UC Davis Medical Center in 1992 after being hurt in a bicycle accident. Grateful for the treatment he received, he donated $6 million to the school, and the ambulatory care center is named after him.
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