Why Danny's Picks From The Nets May Become Untouchable In Trade Talks

http://nypost.com/2014/06/24/nets-owner-to-trim-spending-to-get-1b-valuation/



Nets owner to trim spending to get $1B valuation
By Josh KosmanJune 24, 2014 | 10:51pm
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Nets owner to trim spending to get $1B valuation



Brooklyn Nets owner Mikhail Prokhorov, with hopes of winning a $1 billion valuation for his team, has agreed to end his free-spending ways, The Post has learned.

The 49-year-old Russian billionaire feared the red ink spilled by the team — in large part because of his history of deficit spending — would discourage some potential bidders from forking over enough cash for Bruce Ratner’s minority stake to gain the 10-figure value, sources said.

Ratner’s Forest City Enterprises announced earlier this year it would sell its 20 percent stake in the Nets.

It needs to get $200 million for the team to hit Prokhorov’s target.

The $1 billion valuation would be only half of what former Microsoft Chief Executive Steve Ballmer just agreed to pay for the LA Clippers.

The Clippers, though, are profitable and the Nets are far from it. Also, there is a roughly 20 percent discount when selling minority stakes, sources said.
“If it were a control sale, I think you could get $1 billion easily,” a potential suitor said. “This [minority-stake evaluation] is a little tough.”

Suitors are concerned they not only would need to invest $200 million, but then cover their share of any losses, which last year stretched to about $50
million, sources said.

Last year, the NBA hit the Nets with a luxury tax bill of more than $90 million after the Prokhorov-run team spent $102 million on payroll, well over the $72 million maximum allowed before incurring penalties.

Despite leading the league in payroll, the Nets barely made it past the Toronto Raptors in the first round and lost in five games to the Miami Heat in the second.

Now, Prokhorov has indicated to suitors he will not be so free with the cash, sources said.

Prokhorov, who bought a controlling stake in the Nets in 2010, has quietly indicated he will keep his payroll under the luxury-tax threshold starting in the 2015-16 season, one source with direct knowledge of the auction said. “It will take a year to get to the salary cap,” the source said.
In addition, the billionaire owner has expressed a willingness to cover more than his share of team losses for at least a year, the source said.

“A new investor could be protected completely,” a buy-side banker added.

Still, despite potential bidders being told Prokhorov would reel in spending, one well-placed source is skeptical the team owner will agree to such frugality.

The NBA salary cap — and the threshold before a luxury tax would kick in — is expected to rise next year, which could also help Prokhorov obtain the $1 billion valuation.

The loss-making Nets are projecting they will swing to more than a $50 million profit in the 2016-17 season through a combination of cost-cutting and sweeter media deals, according to the sales books being distributed to potential bidders on the Ratner stake, according to two sources who have seen the books.

Brooklyn currently gets a relatively puny $20 million a year from its local TV deal with the YES Network, sources said, but that is due to be reset to about $50 million beginning in 2017.

Also, a new league-wide NBA deal is expected to put an additional $30 million a year into each team’s coffers.

Forest City and the Nets declined comment, and its banker, Evercore Partners, did not return calls.




bob




.

How is the headline related to the content of the article?  I couldn't find the word "Celtics" anywhere in the piece.

Sam

sam wrote:How is the headline related to the content of the article?  I couldn't find the word "Celtics" anywhere in the piece.

Sam

sam,


It doesn't address the Celtics specifically. It is an article, from the NY Post for the benefit of Nets fans, that talks about Prokhorov's priority on increasing profits by cutting spending in order to bump up his appraisal value. What's the biggest expense with sports teams? Salaries. You cut salaries and the chances are that your W-L record will take a hit because you get what you pay for.

If the Nets tank because Prokhorov puts short-term profits and valuation ahead of team growth then his draft picks could be worth a lot more, even if we trade them all.


bob


.

I see your reasoning, Bob.  Thanks.

Sam