By James Rainey, Andrea Chang, Nathan Fenno
Published: May 27, 2014
Los Angeles Clippers co-owner Shelly Sterling is mounting a hurried sale of the team that her husband, Donald, bought 33 years ago and could name a prospective new owner by the end of the week, according to people familiar with the situation.
Shelly Sterling is trying to sell the Clippers in advance of a Tuesday deadline, when the 30 pro basketball teams will vote on whether to strip control of the team from both of the Sterlings, in response to Donald Sterling’s racially charged remarks about blacks.
The developments in the NBA’s biggest-ever ownership crisis came on the same day that a defiant Donald Sterling lashed out at what he called the league’s “illegal termination process.” In a 30-page response to the charges that the NBA formally leveled against him last week, Sterling excoriated the NBA for insisting on his ouster for what he deemed an illegal recording of a “lover’s quarrel.”
In the documents obtained by The Times, Sterling said he had already received offers “in excess of $2.5 billion” for the Clippers.
The whirlwind series of events suggested a potentially rapid resolution to a scandal that appeared as if it might drag on for months or years, though people close to the NBA cautioned that the sale of the team is far from complete and eventually must be approved by the other owners.
The potential price tag for the Clippers and the field of interested parties came into focus Tuesday, with one likely bidder saying that the team would certainly go for well over $1 billion. That would be the highest sale price in NBA history, topping the $550 million sale of the Milwaukee Bucks earlier this month.
Among the possible buyers is Chicago-based Guggenheim Partners — which bought the Dodgers two years ago for more than $2 billion — in partnership with three billionaires who previously said they would launch a bid for the Clippers: Oracle software co-founder Larry Ellison, entertainment magnate David Geffen and multimedia powerhouse Oprah Winfrey.
Another group of potential bidders includes three people who have ties to major league sports: Tony Ressler, the Los Angeles-based co-founder of the investment firm Ares Management, who holds a minority stake in the Milwaukee Brewers; Oaktree Capital Management co-founder Bruce Karsh, who is a minority owner of the NBA’s Golden State Warriors and chairman of Los Angeles Times owner Tribune Co.; and Grant Hill, a onetime NBA all-star who finished his career with the Clippers. Hill and others from the group met with Shelly Sterling on Monday at Nobu restaurant in Malibu.
A bid is also expected from Steve Ballmer, who stepped down as chief executive of Microsoft in February after leading the software company for 14 years. He met with Shelly Sterling on Sunday.
Ballmer last year joined hedge fund manager Chris Hansen in a bid for the Sacramento Kings with the intention of moving the team to Seattle. NBA owners rejected their offer.
Ballmer said in a recent interview with the Wall Street Journal that if he makes a bid and it is successful, he would not move the Clippers. He said the team would lose much of its value by leaving Los Angeles, the nation’s second-biggest media market.
A prospective buyer, who requested anonymity because of the sensitivity of negotiations, said that the process appeared to be moving quickly and the deadline for bids could be as early as Thursday. “We will probably know who bought the team by Friday,” that bidder said.
Any deal for the team would require approval of three-quarters of the NBA’s owners.
The league is also insisting that the Sterlings sell 100% of the team. NBA spokesman Mike Bass said Tuesday that the league would not be receptive to Shelly Sterling maintaining a minority interest in the Clippers, an idea she has not yet ruled out.
The league said it would move forward with next week’s extraordinary hearing to remove the couple from ownership. “Should the Board vote to sustain the charge,” Bass said, “the Sterlings’ interests in the Clippers will be terminated and the team will be sold.”
Reiterating a statement NBA Commissioner Adam Silver made last week, Bass said: “It would be a preferred outcome if the Sterlings were to voluntarily transfer 100% of the ownership in the team to new owners, rather than to have their ownership in the team terminated.”
People familiar with two of the prospective buyers said they believed that Shelly Sterling, who has previously said she did not want to control the team, would be happy just keeping season tickets and a preferred parking pass. Someone familiar with her thinking said the co-owner might still want more.
Shelly and Donald Sterling have been married for 58 years and she holds half of the team through a family trust. Last week, her husband said he had turned over control to her to facilitate a sale.
“Donald Sterling has authorized Shelly Sterling in writing to negotiate the sale of the Los Angeles Clippers, including his 50% ownership of the team,” Pierce O’Donnell, Shelly Sterling’s attorney, said Tuesday. “Shelly is managing the sale of the Clippers. While no formal offers have yet been received, Shelly and the NBA are working cooperatively on the transaction.”
Donald Sterling remains the controlling owner of the team in the eyes of the NBA, but league officials said they would not stand in the way of any legitimate sale.
The Clippers had their best regular season ever and were in the first round of the playoffs when a recording of Donald Sterling’s disparaging remarks about blacks was posted on the celebrity website TMZ.
The rant caused anger among fans, a threatened boycott by players and the flight of sponsors, and led to sanctions by the NBA against Donald Sterling — a $2.5-million fine (which Sterling refused to pay), a lifetime ban from the league and the pending forced sale.
Much of the defense that Sterling emailed to the NBA hours before a midnight deadline Tuesday centered on his complaint that he was being punished for remarks he made in private to V. Stiviano.
Stiviano, 31, has been his frequent companion and sometime assistant. She has described her relationship with the 80-year-old real estate magnate as platonic, akin to a father and daughter. But Sterling has said he was enamored of the young woman from Boyle Heights.
Stiviano has previously said she routinely made recordings of Sterling and at times used them to try to coach him to be more politic in his comments. She said he knew about the recording she made in September 2013, which began with his anger over a photo she had posted on Instagram of herself with former Laker Magic Johnson.
Complaining about Stiviano’s Instagram photos, Sterling said in the recording: “Yeah, it bothers me a lot that you want to … broadcast that you’re associating with black people. Do you have to?”
Sterling reiterated in his written defense Tuesday that he did not know Stiviano was recording him. He said that California law not only prohibits recordings without an individual’s permission but forbids such content to be used “in any judicial, administrative, legislative or other proceeding.”
Citing California case law, Sterling’s response called the NBA’s use of his private conversation against him “nothing less than a direct and blatant invasion of Mr. Sterling’s California constitutional guarantee of privacy.”
The response went on to claim Sterling was “distraught” when he made the statements because Stiviano told him she planned to bring “four gorgeous black guys to the game” and that his emotional state should be viewed by the NBA as a mitigating factor.
While making a blanket rejection of the six counts leveled against him by the NBA, Sterling said he was hindered from conducting his own investigation because he’s “locked out of his office at Staples Center” — part of his ban from the league.
Sterling said he does not have high expectations for the hearing before his fellow owners next week in New York. The response claimed that no American court “will enforce the draconian penalties imposed on Mr. Sterling in these circumstances.”
“Indeed,” the response continued, “we believe that preservation of Mr. Sterling’s constitutional rights requires that these sham proceedings be terminated in Mr. Sterling’s favor.”
If the NBA owners vote to terminate the Sterlings’ ownership, the league would then conduct the sale of the team on its own. The proceeds would still go to the couple.
Donald Sterling paid $12.5 million for the Clippers in 1981. The potential windfall from a sale would come at some cost, though, Sterling noted in his filing with the league. He said the forced sale would mean the family would pay $300 million to $500 million in capital gains taxes.
Two potential buyers were meeting into the night Tuesday, and considering a combined offer, according to one of their representatives. Another interested buyer said he had reviewed the books and was not impressed by the Clippers’ narrow profit margin. Another likely bidder said he believed no one had yet seen the team’s finances.
The Guggenheim group has extra incentive to be in the mix.
Guggenheim created SportsNet LA after the firm and Magic Johnson bought the Dodgers two years ago. Time Warner Cable, which is handling distribution for the Dodgers, paid more than $8 billion for a 25-year deal, according to a valuation by the Dodgers and Major League Baseball.
Time Warner Cable SportsNet LA launched in February, but it has struggled to attract distributors because of its high price tag. The addition of Clippers coverage would make the channel more appealing to other distributors such as DirecTV and the Dish Network, which aren’t carrying SportsNet LA.
Michael Rapkoch, president of Sports Value Consulting, said adding a basketball team to SportsNet LA’s lineup would nicely complement its current baseball offerings.
“The seasons don’t necessarily overlap that much. If you have a sports network, you’ve got to have something 12 months out of the year,” he said. “To be able to add on a basketball team would be great.”