By Professor Fred Whitted NORTH CAROLINA (BASN) — The title above...
Johnson seeks buyer for Bobcats
CHARLOTTE – Charlotte Bobcats majority owner Bob Johnson has stepped up efforts to sell the team, recently hiring a sports investment banker to look for a buyer.
Sal Galatioto, president of New York-based Galatioto Sports Partners, confirmed to the Observer Thursday that he’s representing Johnson in a potential sale. Galatioto declined to comment further on the situation.
Johnson told Observer columnist Scott Fowler last month that he’d like to sell controlling interest to minority owner Michael Jordan, the former NBA star who oversees the team’s basketball operations. Since then, according to multiple NBA sources, Johnson has begun looking for other potential buyers.
Jordan wasn’t available for comment Thursday. An NBA spokesman confirmed that the league is aware Johnson is seeking investors and that Galatioto is assisting him.
Johnson said last month that he owns about 70 percent of the team. The Observer reported in April that minority partners have been told to expect roughly $35 million in cash losses the next two seasons.
Roughly a year ago, while addressing the Observer’s editorial board, Johnson implored the Charlotte business community to provide more financial support for his team.
Team spokesman Michael Thompson e-mailed the Observer Thursday to say Johnson was not available for comment. That same e-mail stated that Johnson’s company “does not comment on rumors.”
A source close to Johnson, speaking on condition of anonymity, said, “It’s true, he’s committed to selling the team,” adding, “He’s lost passion” for owning it.
The challenge will be affixing a value on the team that Johnson and a buyer would accept. A source with long ties to the NBA, who has inquired about the Bobcats’ availability, said Johnson wants between $325 million and $350 million.
That would approximate the original $300 million expansion fee Johnson paid the NBA, starting in 2003, plus his initial $30 million investment in working capital.
However, it’s questionable whether a buyer would accept that valuation in the current economy. Forbes magazine, in its annual valuation of NBA teams, estimated in December that the Bobcats are worth $284 million, or 29th among 30 teams (topping only the Milwaukee Bucks).
Forbes also estimated that more than half that $284 million value is debt. Presumably, a new majority owner would take on that debt as part of the purchase price.
The Bobcats laid off about 35 non-basketball employees in September, shortly before the start of training camp, after a consultant compared the team’s work force to NBA staffs in comparably-sized markets.
With the economy in recession, Johnson faces the prospect of covering tens of millions in future losses. A group of about 20 minority owners has generally declined to help cover those losses. Johnson promised, in an interview with the Observer last month, that he would never move the team out of Charlotte.
Galatioto made it clear in a November interview with The Wall Street Journal that this would be a challenging time to get a good price for any major-league team.
“Part of the problem is how difficult and expensive it is to get financing,” Galatioto told the Journal. “If you are a seller, is this the time to bring your team to the market?”
“When the cost of credit is up, the price of the team goes down. It’s like a house and a mortgage. The more you are paying on the mortgage, the less you can pay for the house.”
Asked in that same Journal interview what he’d advise a potential team-seller, Galatioto replied: “I wouldn’t advise a seller to go into the market right now and sell.”
Galatioto’s company has been advising investment banker Tom Ricketts in his efforts to buy the Chicago Cubs from Tribune Co. Former NBA deputy commissioner Russ Granik joined Galatioto Sports Partners in 2006 with the title of vice chair.
It’s unlikely a change in ownership would result in the team leaving Charlotte. The team’s arena-lease with the city calls for severe financial penalties should the team move out of Time Warner Cable Arena. Also the NBA would have to approve a move, and few cities without teams have an NBA-quality arena.
The appeal to buying the Bobcats is taking control of Time Warner Cable Arena, a modern, amenity-filled NBA facility, and the fact that the team could be on the verge of its first playoff appearance.
However, Charlotte has had a tepid response to the Bobcats. This past season their average home attendance was 14,526, 26th among 30 NBA teams.
The Bobcats were essentially flat in home attendance compared with last season and down nearly 2,000 per game from 2005-06, their first season in the uptown arena.