Bidding for Clippers was ‘like speed dating’

The billionaire suitors came one after another, pulling up to the beachfront mansion just steps up the coast from the exclusive Malibu Colony. A lucky few had been asked to meet with Shelly Sterling
Jun 10, 2014

 

LOS ANGELES—The billionaire suitors came one after another, pulling up to the beachfront mansion just steps up the coast from the exclusive Malibu Colony. A lucky few had been asked to meet with Shelly Sterling — the Los Angeles Clippers were for sale.

Steve Ballmer visited first, on the Sunday before Memorial Day. Afterward, he and Shelly Sterling went to a favorite haunt, Nobu, where the elite nibble on Lobster Shiitake Salad ($46) in a wood-paneled dining room just above the waves.

The former Microsoft executive recalled that she seemed bittersweet about selling the basketball team but determined to see it go to a worthy successor. Ballmer was charmed by her fervor for the Clippers.

The next day, one of Los Angeles’ wealthiest men, Patrick Soon-Shiong, visited the Sterling home. Former NBA player Grant Hill and investment powerhouse Tony Ressler had to wait their turn outside.

“It was like speed dating,” one of the participants said, adding: “I’m sure it was exhilarating to her to have the undivided attention of all these very important people, these outliers.”

Those who visited agreed: Shelly Sterling seemed calm and in control.

That the team came on the market was a huge surprise. That Shelly Sterling was steering the sale was even more unexpected.

Donald Sterling, 80, had been the controlling owner and public face of the team for more than three decades; his 79-year-old wife was the Clippers’ voluble cheerleader.

Her distinctive head of platinum blond hair shone at courtside during home games and she chattered endlessly: clucking at opposing players, picking minutely over her own team’s strengths and weaknesses. When the Clippers won she gathered with friends for a celebratory toast.

It was in late April that Donald Sterling’s outsized passions and prejudices, heard on an audio recording released by a gossip web site, embarrassed and angered the NBA. Commissioner Adam Silver resolved to oust him. After nearly a month of outrage, the disgraced owner told his real estate attorney to draw up a short letter.

“Mr. Sterling agrees to the sale of his interest in the Los Angeles Clippers,” read the May 22 directive, adding that Sterling gave his wife the right to negotiate with the NBA regarding “all issues in connection with a sale.”

This account of the frenetic week that followed is drawn from interviews with many of the principals in the hurried transaction. Most signed non-disclosure agreements with Shelly Sterling and asked to remain anonymous to describe the competition to buy the Clippers.

In control on the basketball front, at long last, Shelly Sterling wasted no time.

She quickly chose Bank of America Merrill Lynch, long a steward of the family’s finances, and Greenberg Glusker, the law firm representing her in her own struggles with the NBA, to conduct the sale.

The bank’s president for the Greater Los Angeles area, Raul Anaya, told the billionaires who visited with Shelly Sterling that they had a shot at a rare prize. Another NBA franchise would probably not come up for sale again in Los Angeles in their lifetimes.

The advisers helped guide the Malibu meetings, though Shelly had made it clear that the sit-downs would not be all business. Ballmer, 58, later described the interactions as “incredibly good.” “She’s a heck of a Clippers fan,” he said. “She really likes the team and the players.”

Right up front, Shelly wanted assurances that Ballmer would not move her team to Seattle, where he lives. Ballmer had made a failed attempt a year earlier to buy and move the Sacramento Kings. Ballmer said that, at the price he expected he might have to pay, it made no economic sense to take the team out of big-market Los Angeles. Shelly liked what she heard.

The next day, she particularly enjoyed the chance to talk shop with one of her old employees, former Clipper Grant Hill, who had partnered with Ressler. Hill emphasized that no one else bidding for the team could claim as deep a connection. Only he had worn a Clippers jersey.

Several of the bidders figured that, if the competition were close, a personal connection with Shelly might make a difference. But another said the deal would be all about money. “They would sell to anyone if the price was right,” the bidder said. “The rest is window dressing.”

A day after the last meeting, the contenders finally saw a deal sheet. Crucially, from their viewpoint and the NBA’s, Shelly had dropped her insistence on keeping a stake in the team. Her attorney, Pierce O’Donnell, came up with a clause in the sales agreement that would allow her to maintain an honored place in the Clippers organization, with prime seats, special parking and more, including the title of “owner emeritus.”

One key provision called for the new owner to create a foundation, with Shelly’s collaboration, that would help the poor, minorities and abused spouses. The new owner would commit to fund it at up to 10 percent of the value of the accepted offer, meaning the foundation stood to launch with millions of dollars.

The arrangement would allow Shelly to stay close to the Clippers and show the world she wanted to do right by minorities, regardless of her husband’s noxious words and a history much of the public had learned: that both Sterlings had previously been accused of housing discrimination. With the unwanted loss of her team in the offing, she “would get a measure of vindication,” said one of the bidders.

Even as the NBA cooperated with Shelly Sterling behind the scenes and signaled its support of the foundation, the league kept up the public pressure. Its June 3 hearing — intended to remove both Sterlings from ownership — would still take place. With that deadline looming, Shelly Sterling’s team gave bidders until Wednesday, May 28, to submit offers.

The Milwaukee Bucks sold earlier in May for $550 million, a record for the pro basketball league. But commentators expected a sale price of up to $1 billion. Then ESPN basketball savant Bill Simmons upped the ante, predicting the Clippers could go for $1.75 billion or higher.

The deal required an immediate deposit into escrow of $300 million. The balance would be paid in cash.

Anaya’s Bank of America team quickly weeded out a Mississippi stock trader who insisted he could deliver $3 billion, even though no one had ever heard of him or his fortune. Also rejected: a nebulous Canadian group that wanted to finance a purchase — over 99 years.

Soon-Shiong did not submit a bid. The medical entrepreneur already held a minority stake in the Los Angeles Lakers and wanted to remain “100 percent committed” to the team, a spokesman said. Larry Ellison, co-founder of software giant Oracle Corp., had been connected to another group of bidders, but in the end did not take part. He also covets the Lakers, a friend said. Ellison did not respond to a request for comment.

As the bidders prepared to make their offers, the Sterlings were fighting over who controlled the team. Now Donald was saying he hadn’t relinquished his right to have final say on a deal.

That didn’t stop Shelly, who hunkered down with her advisors at the Century City offices of Greenberg Glusker reviewing the bids.

The Ressler-Hill team had another prosperous partner in Bruce Karsh, head of Oaktree Capital Management, whose many holdings include a major stake in Tribune Co., owner of the Los Angeles Times. The group felt it had a glowing home-town appeal with connections that included Ressler’s service on the boards of Cedars-Sinai hospital and the Los Angeles County Museum of Art. Hill brought the basketball chops.

The Ressler team had some concern about the Clippers’ revenues. A confidential report reviewed by the Los Angeles Times showed overall revenue that ranked just 10th best among the NBA’s 30 teams — particularly low considering the L.A. market is the nation’s second-largest.

Ressler, who co-founded Ares Management, and his partners prided themselves on their discipline. They knew they would have to pay a premium but would not venture anywhere near the $2 billion they viewed as “fantasyland.” The group saw its $1.2-billion offer as “very aggressive.” It more than doubled the previous record high paid for an NBA franchise.

Shelly was pleased but strongly believed $2 billion was still within reach.

Speculation in the days before the offers tabbed two contestants as the most serious. One was Guggenheim Partners, the company that two years earlier wowed the sports world with its record $2.15-billion purchase of baseball’s Dodgers. Guggenheim now had a big interest in L.A. sports and a new cable station, SportsNet LA, that needed to be filled with content.

The other was a group led by entertainment magnate David Geffen. Geffen had a house just down the beach from the Sterlings and a heavyweight set of partners — first rumored to include Ellison, along with TV personality Oprah Winfrey. Geffen, worth more than $6 billion, had been fixated on the Clippers for years and in 2010 offered Donald Sterling $600 million. Sterling was tickled by the big number but said “no.”

Geffen recognized Guggenheim as highly motivated and the biggest threat to his own ownership dreams. So instead of trying to beat them, he sought to join them. In the end, Guggenheim Partners did not bid, but its co-founder Mark Walter and President Todd Boehly did.

The two men, along with Geffen and Laurene Jobs, widow of Apple co-founder Steve Jobs, had equal shares. A sizable but lesser stake would go to Nancy Walton Laurie, an heir to the Wal-Mart fortune. Four others — Winfrey, Hard Rock Cafe co-founder Peter Morton, music impresario Jimmy Iovine and Elaine Wynn, ex-wife of casino czar Steve Wynn — agreed to buy in for $50 million apiece.

The Geffen group offered $1.6 billion. Winfrey’s business manager had told her that the price tag had gone crazy high, but she insisted she loved basketball and wanted to be part of the deal. She faxed her authorization from the set where she was filming the movie “Selma.”

Camped out at the Peninsula Hotel in Beverly Hills during the bidding, Ballmer had no partners and no major ties to Los Angeles. What he did have was a fortune estimated at more than $20 billion.

He also had a passion for basketball. He played in early-morning pickup games and raucously supported teams all the way down to the rec-league level. Ballmer also had time. He was 58 and recently retired.

The tech magnate had an aspirational view of the Clippers — what might be, more than what was. He figured the furor over the Sterlings had made the team a national brand, with a big upside in television revenue and even sponsorship deals overseas.

A couple of his advisers had told the famously bombastic Ballmer, about a month before the bidding began, that it could take “Dodger money” — a seemingly outlandish $2 billion — to win the Clippers. They remembered this: Ballmer did not blink.

 

His bid at the Wednesday deadline was more than $1.8 billion.

A day later, word was that even that game-changing figure had not dissuaded some potential bidders, who were threatening to make a late run. That afternoon Ballmer called the Greenberg Glusker offices to say he was in for $2 billion.

The Geffen and Ressler teams said they weren’t even asked to respond. Not that they would have gone higher. By offering nearly four times what an NBA team had ever gone for, Ballmer ended all discussion.

Shelly Sterling had hoped her husband would sign the deal sheet. But he continued to balk.

She and her lawyers believe that the family trust, which owned the team, would give her an avenue to complete the sale. She had said in interviews that she worried about her husband’s health and had persuaded him in May to get a medical examination. The subsequent brain scan and checkups with two neurologists had resulted in their finding that he was no longer capable of managing his affairs.

So on the day she accepted Ballmer’s offer, Shelly Sterling and her lawyers sent papers to her husband’s lawyers. The documents said that because of Donald’s mental condition, she was asserting herself as sole trustee of the family trust. Her team believed that gave her the power to sell any asset.

Ballmer left the Peninsula for the nearby offices of Shelly’s attorneys. Just before midnight on May 29, less than 40 hours after the bidding began, he signed an agreement to become owner of the Clippers.

A vote by other NBA owners would still be needed to ratify the sale. Donald Sterling has yet to sign off. But Shelly Sterling is confident the deal will get done and she will retake her place at courtside, this time as the Clippers owner emeritus.

 

 

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