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Minnesota Timberwolves Receive Bidder Interest

Stocks in this article: BX

NEW YORK (The Deal) -- One month after the Milwaukee Bucks fetched a record price for a National Basketball Association franchise, ownership of the Minnesota Timberwolves is considering various strategic options for the team, according to sources.

Less than two years after his attempt to sell the franchise foundered, Timberwolves owner Glen Taylor has received renewed bidder interest, sources said. One source said the Timberwolves were approached earlier this month by an investor consortium looking to buy the franchise outright.

Timberwolves chief marketing officer Ted Johnson told The Deal that the team is "fielding requests and entertaining requests" but that no sale process is currently taking place, and the team has not hired an investment bank to sell its assets. Johnson declined to address any specific bidders, only saying that Taylor will consider offers from potential minority investors.

This isn't the first time Taylor has flirted with the idea of exiting his investment. He considered selling the entire franchise in 2012, then considering potential buyers including Flip Saunders, who approached him with an investment consortium looking to buy the franchise. He ultimately declined to sell, instead taking Saunders on as team president and a minority investor in 2013.

Perhaps emboldened by the $550 million price tag that the league's worst team, the Milwaukee Bucks, fetched from hedge fund investors Wesley Edens and Marc Lasry on April 16, Taylor is once again reviewing the team's strategic options.

The Timberwolves could also be seen as a relative bargain compared to another NBA franchise on the block, the Los Angeles Clippers.

NBA commissioner Adam Silver is forcing Clippers owner Donald Sterling to sell the franchise after Sterling, a former personal injury lawyer turned real estate mogul, was recorded by a former mistress making racist comments. Industry watchers previously told The Deal that the Clippers could fetch over $1 billion in a sale.

Despite the Timberwolves' performance in the standings and at the turnstiles - one report recently pegged gate receipts at $18 million, making for operating losses of $2.7 million - Forbes magazine valued the franchise at $430 million in January 2014. The team that plays in Minneapolis' Target Center isn't profitable and spends roughly $70 million on salary annually - a healthy percentage of that going to possibly soon-to-be departed star center Kevin Love.

The Timberwolves, on the face of it, are a turnaround play in a league where small-market teams have for the most part struggled. For the season that just ended, the team finished with a 40-42 record, ranked 27th out of 30 NBA teams, and missed the playoffs for the 10th straight season.

Forbes pegged the Timberwolves valuation higher than that of the Bucks ($405 million), so it wouldn't be a surprise if the Timberwolves came close to or topped the $550 million valuation the Bucks received in a sale. Private equity executives have been striking deals for NBA franchises and have been actively pursuing deals in the NBA in recent years, sending values higher.

For one, Alec Gores and his firm has ties to the Minnesota area--ex-Gores Group executive Scott Honour resigned at the private equity firm in 2012, declaring his candidacy for Minnesota governor the following year--and Gores' brother, Tom, spent $325 million in 2011 to invest in the Detroit Pistons. Tom Gores runs Los Angeles-based leveraged buyout shop Platinum Equity Advisors.

Other PE investors have taken stakes in foundering NBA franchises, hoping to turn around underperformers, perhaps as they would private equity portfolio companies. Many have started at the bottom of the NBA's standings, seeking discounts. Perhaps telling, the five teams with the lowest attendance for the NBA's past season - Detroit, Minnesota, Milwaukee, the Atlanta Hawks and the Philadelphia 76ers - also count a slew of LBO pros among their executive ranks.

The 76ers were acquired by an investment group led by Apollo Global Management executive Josh Harris and Blackstone Group (BX) pro David Blitzer in 2011 for a reported $280 million. Meanwhile, the Bucks' new owners, Lasry and Edens, respectively serve in senior leadership at Avenue Capital Group and Fortress Investment Group.

Under their new owners, the 76ers fortunes have not improved; the team went on to progressively lose more games year over year each season after the PE investment, and won the second-fewest games in the NBA for the regular season that just concluded--only the Milwaukee Bucks fared worse.

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