NBA Commissioner Seeks to Force Turnover of Clippers

NEW YORK (The Deal) -- With the move by National Basketball Association commissioner Adam Silver to force Los Angeles Clippers' owner Donald Sterling to sell his team, industry watchers expect a robust auction that could see the team sell for upward of $1 billion.

"There would be plenty of interest and it would command a pretty strong price," said Larry Grimes, head of W.B. Grimes & Co., an investment bank focused on sports and media businesses." When you look at recent NBA deals, i.e. Milwaukee, even bad teams are getting good valuations."

Silver, who took the helm of the league in January, said Tuesday at a press conference that he would seek approval from the league's owners to force a Clippers sale.

"I will urge the board of governors to force a sale of the team and will do everything in my power to ensure that happens," Silver said. "The process will be begin immediately."


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In response to a question at the news conference, called to announce the decision, Silver explained that Sterling can be removed if three-quarters of the league's owners vote to do so. He added that the ban applies only to Sterling personally, not to members of his family. Silver also said he had "no idea" whether Sterling would fight the move to remove him as owner.

The decision comes after Sterling, a former personal injury lawyer turned real estate mogul, was recorded making racist comments by a former mistress. Sterling has been fined $2.5 million - the maximum penalty allowed by the NBA - and has been banned for life from associating with the league and the team.

"We wholeheartedly support and embrace the decision by the NBA and Commissioner Adam Silver today," the Clippers said in a statement issued Tuesday. "Now the healing process begins."

While the NBA commissioner wants Sterling out, potential buyers should not count on getting a bargain.

"It's certainly not going to be a fire sale; if [Sterling's] past is any indicator I think he would sue the league if it was turned into a fire sale," said Grimes. "He is going to get top dollar for this, baggage or not."


Sterling acquired the Clippers in 1981 for around $12 million, according to Forbes. The magazine most recently estimated a value of about $575 million for the Clippers, but in a major market like Los Angeles, and boasting a roster that finished near the top of the standings in a tough NBA Western Conference, the team could demand a much higher price.

Case in point: the NBA's Milwaukee Bucks franchise said April 16 it agreed to be acquired for $550 million by hedge fund investors Wesley Edens and Marc Lasry.

Forbes valued the Bucks at just $405 million.

"I could see $700 million to $800 million in a sale. When you look at the Forbes valuation and how a team in Milwaukee sold compared to that price. I think a team in L.A. will have no problem beating that premium," said Grimes.

One sports lawyer said the auction would likely attract robust demand, which will drive up the team's valuation, perhaps as high as a $1 billion or more.

The same source expects the Clippers to remain in Los Angeles, noting that the market is certainly big enough for both the Clippers and their storied cross-town rival, the Los Angeles Lakers.

"It's all dependent on the television contracts and you are going to get better contracts in L.A. than say, Seattle, where I know the NBA would love to see a team," said Grimes.

The banker cited the Los Angeles Dodgers and Texas Rangers professional baseball franchises, which sold for record prices on the heels of huge television contracts.

The NBA's national television contract with ESPN and ABC is up at the end of 2015. The Clippers' local television deal with Fox Sports Prime Ticket is set to expire in 2016.

Seattle is the second-largest TV market in the country without an NBA team after Tampa-St. Petersburg, Fla. The city was home to the SuperSonics from 1967 until 2008 when new ownership moved the team to Oklahoma City after failing to obtain public financing for a new arena. The team is now known as the Thunder. 

The Sonics won the NBA title in 1979. Anticipating the eventual return of the NBA, the city of Seattle retains the SuperSonics' banners, trophies and retired jerseys. A new team in Seattle would also have the right to use the SuperSonics nickname and logos.

At Tuesday's news conference, Silver said he had not polled the owners on whether they would support the removal effort. "I spoke to several owners, and I have their full support," he said.

David Anders from Wachtell, Lipton, Rosen & Katz conducted the preliminary legal investigation for the NBA prior to its decision to sanction Sterling.

- Demitri Diakantonis contributedto this report.

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