Will Sac-Town Find Sweetness in a Poison Pill?
If schadenfreude is your guilty pleasure, then mark Thursday 31 January on your calendar.
That's when the bankruptcy auction for 7% of shares in the Sacramento Kings takes place. What happens then will be a key to whether this vagabond franchise -- aka Rochester Royals, Cincinnati Royals, Kansas City (and sometimes Omaha) Kings -- will remain in town or become the second coming of the Seattle SuperSonics.
Because this is a Maloof brothers deal, nothing is ever binding and firm, even when the contracts stipulate that it is binding and firm. To wit:
- When the Maloofs pieced off their ownership of the team -- no doubt to raise cash for whatever they planned to bungle next -- they included a standard 'right of first refusal' clause in the sale, which allows current shareholders to have first consideration if a fellow shareholder ever decides to sell his stake in the team.
- Sacramento developer Bob Cook bought a 7% stake in the Kings, and that standard clause was in effect by definition; these shares are now controlled by a court-appointed trustee.
- This pre-existing condition most likely trumps any external purchase-and-sale agreement signed between the Maloofs and a Seattle-based consortium led by hedge-fund wizard Chris Hansen, who has enjoined the deep-pocketed likes of Microsoft's Steve Ballmer 8.0 and old-money Nordströms.
- White knights have appeared on the horizon in the billionaire forms of Ron Burkle, erstwhile supermarket magnate and owner of the Pittsburgh Penguins (saving them from bankruptcy and preventing a possible move to Portland, incidentally); Mark Mastrov of 24-Hour Fitness; and Larry Ellison, the Oracle founder reputed to be the third-richest dude in the world once drug lords and worldwide royalty are excluded.
The humor in this scenario features the Maloofs banking a $30million non-refundable deposit from the Hansen group on Friday 1 February, most likely to cover whatever they happen to be bungling at the moment. Part of it might even be used to cover the $1million hit they just took from the Nevada Gaming Commission for a drug-sales-and-prostitution sting at their Palms casino in Las Vegas.
The humor may include Ellison's penchant for tweaking anyone wearing a Microsoft beanie. His past already includes building his superyacht one foot longer than Paul Allen's then-record superyacht. Ellison may toss in a few million just because Ballmer is involved on the other side.
Bankruptcy courts aren't so humorous. Ask the Phoenix Coyotes. Their bankrupt owner at the time, trucking mogul Jerry Moyes, thought he had a sale to now-faded BlackBerry geek Jim Balsillie, who was already taking deposits for season tickets in Hamilton, Ontario where he planned to move the team. In short, the judge said no, the process slowed as a result, and the morass lasted long enough for the Coyotes to remain in Arizona with a hopeful new owner.
The court-appointed trustee handling the auction in Sacramento will only be concerned with selling the 7% stake in the Kings to the highest bidder. His mandate is to recover as much money as possible for the debt holders. Barring any existing fine print about bankruptcies and shareholders rights therein, control of this stake could determine if the NBA will have a Kings or SuperSonics team next season. If a local group including any of the white knights prevails, it could be used to invoke the right of first refusal clause to make a counter-offer for the Maloof's majority holding.
And do know the NBA is taking all this seriously enough that it's considering a pushback of its franchise re-location and transfer of ownership deadlines. This comes after David Stern met with Burkle and talked with Ellison.
Through all the weaselry of their ownership, the Maloofs had never offered the team for sale before. If any universal good can come out of this fighting for big boys' toys, it's that the scourge of their very presence could be wiped from the sports world.
However, this is a Maloofs deal. Nothing is ever cut and dried, so stay tuned.