Record $550 Million Milwaukee Bucks Sale Highlights NBA's Prosperity

Apr 17 2014, 10:54am CDT | by

Record $550 Million Milwaukee Bucks Sale Highlights NBA's Prosperity
Photo Credit: Forbes Business

LeBron James took to Twitter last year in January to express his incredulity over the sale of the lowly Sacramento Kings for a huge sum one year after the NBA lockout ended. “So the Kings getting sold for 525M!! And the owners ain’t making no money huh? What the hell we have a lockout for. Get the hell out of here,” tweeted King James to his legion of followers. The Kings sale eventually was completed for $534 million (the NBA eschewed a $625 million bid from a Seattle group looking to relocate the club). James has been quiet on Twitter about the NBA’s latest blockbuster deal, but there is a new poster child for shocking team transactions.

The Milwaukee Bucks and owner Herb Kohl announced Wednesday that the team would be sold for a reported $550 million to a group led by hedge fund titans Wesley Edens and Marc Lasry. The new owners pledged to keep the team in Milwaukee and work towards building a new arena. Kohl paid $18 million for the team in 1985, resulting in a 12.5% annualized return for the former U.S. Senator (9.5% after inflation).

The $550 million total is a record sum for the sale of an NBA franchise (Ted Leonsis paid a grossed up price of around $550 million for the remaining stakes in the Washington Wizards and Verizon Center he didn’t already own). It is a stunning amount for the Bucks, who are universally regarded as having the worst financial situation in the NBA (Forbes valued the club at $405 million in January, last among NBA teams). The Bucks play in the fifth smallest market in the NBA. An average of only 13,000 households watched Bucks’ games last season on Fox Sports Wisconsin, which was the second smallest audience for games behind the Charlotte Bobcats. The Bradley Center, which opened in 1988, is a relic among today’s NBA arenas. The club receives only a small share of  suite, merchandise and concession revenues and overall revenues were the lowest in the NBA last season.

The Bucks’ might be the NBA’s weakest franchise financially, but the overall business of the NBA is booming. The new collective bargaining agreement hatched in December 2011 reduced the players’ share of revenue from 57% to 50%. The deal also severely boosted revenue sharing moving from the NBA’s richer clubs to those less fortunate. Only $55 million changed hands annually under the prior CBA, but low revenue clubs will collectively reap nearly $200 million this season. Teams like the Bucks will receive close to $20 million. The NBA wants every team to turn a profit under the new system, and they all will outside of severe free spenders like the Brooklyn NetsMikhail Prokhorov, who is bankrolling a $180 million roster, including $80 million in luxury tax payments.

NBA owners are also licking their chops when it comes to TV. Most major sports TV rights packages are locked up into the next decade. The NBA is one of the last chances for networks to lock up major DVR-proof programming. NBA teams currently divvy up an average of $930 million annually under their current deals with ESPN/ABC and TNT. The next round of pacts is expected to fetch in the $2 billion a year range. Local TV pacts are also skyrocketing like the Los Angeles Lakers’ 25-year, $5 billion deal with Time Warner Cable.

The NBA’s international opportunities also dwarf their counterparts in the NFL and MLB. There were a record 92 international players from 39 countries on this season’s opening night rosters. More than half the daily page views on NBA.com originate from outside of North America. The NBA is still sorting through its China strategy after launching NBA China in 2008, but the country represents a massive opportunity with 300 million Chinese basketball players. Indian-born Vivek Ranadive, who bought the Kings, wants to make basketball the No. 2 sport in India, behind cricket.

The Bucks’ new ownership group brings deep pockets to Milwaukee. Lasry, who founded Avenue Capital Group in 1995, is worth $1.7 billion. He made $280 million last year and ranked among the highest-paid hedge fund executives in the world. Edens co-founded Fortress Investment Group and has a net worth in the high nine figures. Did they overpay for the Bucks? Time will tell.

You can follow me on Twitter or subscribe to my Facebook profile. Read my Forbes’ stories here.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Insomnia triples risk of motor accident deaths
London, Nov 1 (IANS) Developing a healthy sleeping habit could be a life saviour as researchers have found that insomnia significantly increases risk of death caused by motor vehicle crashes and other unintentional fatal injuries.
 
 
Resveratrol could impede benefits of exercise
Toronto, Nov 1 (IANS) Contrary to popular belief, adding resveratrol (RSV) to your exercise routine may not enhance the effects of physical activity, said a study.
 
 
Tectonic event led to burst of animal life during Cambrian Age
New York, Nov 1 (IANS) A major tectonic event may have triggered the rise in sea level and other environmental changes that led to the Cambrian explosion, the sudden burst of animal life 530 million years ago, showed a research.
 
 
NASA's Mars spacecraft ready for test flight
Washington, Nov 1 (IANS) The US space agency National Aeronautics and Space Administration (NASA) has fully assembled the Orion spacecraft for a test flight Dec 4.
 
 
 

Latest from the Network

Insomnia triples risk of motor accident deaths
London, Nov 1 (IANS) Developing a healthy sleeping habit could be a life saviour as researchers have found that insomnia significantly increases risk of death caused by motor vehicle crashes and other unintentional...
Read more on Business Balla
 
Emma Watson, Judi Dench win Britannia awards
Los Angeles, Nov 1 (IANS) British actresses Emma Watson and Dame Judi Dench were two of the six honourees at the annual Britannia Awards. The annual ceremony was hosted by BAFTA (British Academy of Film and Television...
Read more on Celebrity Balla
 
All's still not good between Avril, Chad
Los Angeles, Nov 1 (IANS) Trouble continues to plague singers Avril Lavigne and Chad Kroeger's paradise even as the news of their split continues to do the rounds. After a little over a year of marriage, the duo is...
Read more on Celebrity Balla
 
Kutcher, Kunis researched parenthood
Los Angeles, Nov 1 (IANS) Ashton Kutcher and Mila Kunis equipped themselves well before becoming parents to daughter Wyatt Isabelle Kutcher. He says Google is like their "manual". They find the parenting experience "...
Read more on Celebrity Balla
 
Resveratrol could impede benefits of exercise
Toronto, Nov 1 (IANS) Contrary to popular belief, adding resveratrol (RSV) to your exercise routine may not enhance the effects of physical activity, said a study. Resveratrol occurs naturally in the skin of red...
Read more on Celebrity Balla
 
13 killed in Libya clashes
Tripoli, Nov 1 (IANS/EFE) At least 13 people were killed in violent clashes between Islamist militias and Libyan security forces in the struggle to control Benghazi city. Rtd Libyan general Khalifa Haftar Friday...
Read more on Politics Balla
 
Amanda Bynes released from psychiatric facility
Los Angeles, Nov 1 (IANS) Troubled actress Amanda Bynes has been released from a psychiatric facility here. Three days after a judge ruled that she needed to spend at least another month in the facility, Bynes asked...
Read more on Celebrity Balla
 
20 militants killed in Pakistan clash
Islamabad, Nov 1 (IANS) At least 20 militants and four security personnel were killed Saturday in a clash in Pakistan's federally administered Orakzai Agency, an official said. Three security personnel were also...
Read more on Politics Balla
 
Ben Affleck broke Jennifer Lopez's heart
Los Angeles, Nov 1 (IANS) Singer-actress Jennifer Lopez says Ben Affleck was the first man to break her heart and admits that she didn't give herself enough time to "heal". The 45-year-old, who got divorced twice...
Read more on Celebrity Balla
 
IS poses grave threat to Pakistan, says MQM chief
Islamabad, Nov 1 (IANS) Pakistan's Muttahida Qaumi Movement (MQM) chief, Altaf Hussain, has said that the Islamic State (IS) is the new threat to Pakistan, media reported. Addressing a press conference in Karachi via...
Read more on Politics Balla