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Ballmer's Clippers' Offer Bodes Well for MSG, the Knicks' Parent Company

NEW YORK (TheStreet) -- One thing is clear about former Microsoft (MSFT - Get Report) CEO Steve Ballmer's reported $2 billion bid for the L.A. Clippers: He is overpaying.

According to Forbes, the Clippers were recently ranked 13th on the list of the National Basketball Association's most valuable franchises, worth an estimated $575 million. Ballmer is paying more than three times that amount.

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What's more, his $2 billion offer is more than 15 times the Clippers estimated $128 million in revenue and 133 times operating profit of $15 million.

Must Read: LA Clippers Sale Not a Slam Dunk, but Sterling's Wife Is Entertaining Bids

Under normal circumstances, that would be considered a ridiculous deal. But admittedly, this is not normal, and Ballmer is paying a big price to rid the NBA of Donald Sterling. Furthermore, NBA franchises don't trade like stocks; sales are rare, and Ballmer has the wealth to make the deal happen.

Investors who want exposure to an NBA team but don't have Ballmer's fortune can get it via ownership of Madison Square Garden (MSG), which owns the New York Knicks, the most valuable NBA franchise according to Forbes.

The Knicks are worth an estimated $1.4 billion. Putting the team on par with the revenue and operating income multiples that Ballmer is paying for the Clippers would make the Knicks worth $4.3 billion (in terms of revenue) or $12.76 billion (in terms of operating profit). Those valuations may be ridiculous in their own right, but if the Clippers are worth $2 billion, the Knicks should fetch considerably more in a sale.

MSG Chart MSG data by YCharts
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