Ballmer, Sterling trust strike $2B deal
Shelly Sterling announced late Thursday night that she has signed an agreement to sell the Los Angeles Clippers to former Microsoft chief executive Steve Ballmer for $2 billion.
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A source close to the situation told ESPN's Ramona Shelburne that Sterling and Ballmer signed the final papers of the sale shortly before midnight at the offices of her Los Angeles-based attorneys. Sterling announced she was acting under her authority as the sole trustee of the Sterling family trust, which owns the Clippers.
"I am delighted that we are selling the team to Steve, who will be a terrific owner," Sterling said in a statement. "We have worked for 33 years to build the Clippers into a premiere NBA franchise. I am confident that Steve will take the team to new levels of success."
Donald Sterling bought the Clippers in 1981 for $12.5 million.
Ballmer, who previously had been involved in a failed bid to buy the Sacramento Kings and relocate them to Seattle, released a statement saying he was "honored" by the opportunity.
He has said both publicly and privately that he will not relocate the Clippers from Los Angeles.
"I love basketball," he said. "And I intend to do everything in my power to ensure that the Clippers continue to win -- and win big -- in Los Angeles. L.A. is one of the world's great cities -- a city that embraces inclusiveness, in exactly the same way that the NBA and I embrace inclusiveness. I am confident that the Clippers will in the coming years become an even bigger part of the community."
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Shelly Sterling became the sole trustee of the Sterling family trust very recently, sources told Shelburne and ESPN's Darren Rovell, when her husband, the Clippers' controlling owner, was found by experts to be mentally incapacitated. Initially, both Sterlings were the trustees, but the findings by neurologists made Shelly Sterling the sole trustee, empowering her to sell the team to Ballmer.
The rules of the trust did not require a court hearing first to declare Donald Sterling, 80, incapacitated. That allowed Shelly Sterling to negotiate directly with Ballmer and the league to sell the team.
The agreement will be sent straight to the NBA for final approval, sources told Shelburne. It must be approved by the league office, and Ballmer must be approved by three-fourths of the league's owners.
Donald Sterling's lawyer, Max Blecher, confirmed that evaluations were performed on his client, but he wrote to Shelburne in an email Friday that the results of the neurologists' examinations were "grossly exaggerated" and that "Mr. Sterling is far from mentally incompetent." In similar comments to CNN, Blecher said it was determined that Sterling had "modest mental impairment," "a slowing down." The evaluations were performed earlier this month, a source told Shelburne.
Blecher also told CNN that Sterling "doesn't want a fight with Shelly. That's the bottom line."
Bobby Samini, another attorney for Donald Sterling, told the Los Angeles Times, "There's been no sale. There can be no sale without Donald's signature."
Shelly Sterling and Ballmer proceeded with their deal, despite the threat of legal action by Donald Sterling, because they were, as one source put it, "very confident the sale would go through" even if there were "bumps in the road or delays."
Shelly Sterling had pushed to negotiate a sale before Tuesday's board of governors meeting at which both of the Sterlings' ownership interests could be terminated, while Donald Sterling had vowed to fight the league's attempts to force a sale. Through his personal attorney, Donald Sterling sent a 32-page response to the league this past Tuesday, but the rebuttal did not address Sterling's mental capacity as part of his defense. Shelly Sterling told the "Today" show earlier this month that she thought her husband might have been developing dementia.
Blecher had told ESPN in an interview Wednesday that "when this thing first happened, [Donald Sterling] was kind of like in a trance. It was like a state of shock. His whole system was disoriented."
Sterling's mindset at that time led to a May 22 letter from his longtime personal attorney, not Blecher, informing the NBA that his client intended to sell the team and had given his wife authority to negotiate for him. Blecher said Sterling had changed his mind since then and "as time has evolved, he's come to a much more hard-line position" and "was the old Don I knew. ... Now he says, 'Look what they've done to me. I'm not going to take this lying down.'"
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"Commissioner [Adam] Silver has consistently said the preferred outcome to the Clippers proceeding would be a voluntary sale of the team," the league said in a statement issued Friday afternoon, adding that its advisory/finance committee met via conference call in the morning to discuss Shelly Sterling's agreement with Ballmer. "We await the submission of necessary documentation from Mrs. Sterling. In the meantime, the June 3 special meeting of the NBA Board of Governors remains as scheduled."
If the NBA decides to go ahead with the board's meeting and gets the necessary 75 percent minimum vote to oust the Clippers ownership group, neither Donald nor Shelly would have the right to sell the team and this whole process could start over again with the league conducting the sale, according to a source with knowledge of the situation.
The Sterlings would still receive the proceeds but would have no say in the process, the source said.
While there remains concern -- and even an expectation -- that Donald Sterling will continue his fight, sources said all parties involved in the sale felt confident it will proceed.
Silver publicly stated May 20 that the league preferred a voluntary sale, not a sale forced by the league after a vote by the board of governors. However, the league had devised a complex legal strategy to oust Sterling, sources said, had it come to that.
Under the agreement signed Thursday, Ballmer will own 100 percent of the team. Shelly Sterling requested as part of the sale that she continue to have an association with the team, and Ballmer was able to satisfy those terms, sources said.
ESPN reported earlier Thursday that Ballmer's $2 billion bid was the highest submitted, topping those from groups led by music mogul David Geffen ($1.6 billion) and L.A. investors Tony Ressler and Bruce Karsh ($1.2 billion).
News of Ballmer's $2 billion bid was first reported by the Los Angeles Times.
Magic Johnson, who was referenced in the racist remarks Donald Sterling made that resulted in the owner's ban from the NBA, expressed his excitement over Ballmer's bid in several tweets Thursday evening.
Steve Ballmer owning the Clippers is a big win for the City of LA and all the people who live in the City of Angels!- Earvin Magic Johnson (@MagicJohnson) May 30, 2014
The $2 billion price tag for the Clippers and ranks among the richest ever for a North American professional sports franchise.
The Los Angeles Dodgers were sold to the Guggenheim group in 2012 for $2.15 billion, but that price included land, parking lots and TV deals, making it more expensive. The only real estate involved in the Clippers deal is the team's training facility in Playa Vista.
The Clippers deal would be the most paid by far for an NBA team and follow the $550 million paid for the Milwaukee Bucks earlier this year.
Ballmer, 58, was Microsoft CEO from 2000 to 2014 and is worth $20.3 billion, according to Forbes.
He would become the richest majority owner in major U.S. sports, passing his former boss, Seattle Seahawks and Portland Trail Blazers owner Paul Allen (who is worth $16 billion, according to Forbes). Ballmer was the only investor who did not immediately seek out other partners when preparing a bid.
The $2 billion deal also seemed to rankle a few NBA players as the current collective bargaining agreement, now three years old, cut the players' guarantee of basketball revenues from 57 percent to 50 percent, saving owners hundreds of millions in salary costs after they had complained about losing money.
2 billion for the clippers??? Hmm I thought the owners were losing money??? The next collective bargaining agreement is gonna be crazy- Ty Lawson (@TyLawson3) May 30, 2014
The CBA contains an opt-out clause for either side in 2017.
Ballmer told The Wall Street Journal earlier this month that, should he obtain the Clippers, he would not attempt to move the franchise from Los Angeles, saying that would be "value destructive."
Most Valuable NBA Franchises
|According to Forbes.com |
*Valued at $575M at time of report
Geffen's group also included Oracle CEO Larry Ellison; Oprah Winfrey; Guggenheim executives Todd Boehly and Mark Walter; Steve Jobs' widow, Laurene Jobs; Steve Wynn's ex-wife, Elaine Wynn; and Beats by Dre co-founder Jimmy Iovine.
Former NBA All-Star Grant Hill was part of the Ressler-Karsh group.
On a $2 billion sale, the Sterlings would pay approximately $662 million in capital gains taxes, according to accountant Robert Raiola, sports and entertainment senior group manager at O'Connor Davies LLP in New Jersey.
ESPN.com's Ramona Shelburne and Darren Rovell contributed to this report.