Private equity firm Arctos Sports Partners has added to its National Basketball Association (NBA) investment portfolio having agreed a deal to take a 17% stake in the Sacramento Kings, according to Sportico.
The acquisition reportedly values the franchise at $1.8bn and is believed to be the largest private equity investment since the NBA relaxed its ownership rules to allow institutional investors.
Sportico adds that the transaction is still subject to a vote by the league and the NBA committee that reviews such deals has sent a memo to owners recommending its approval.
The Kings, who finished 12th in the Western Conference last season, are currently owned by Vivek Ranadive, the founder and former chief executive of Tibco Software. Sportico notes that the franchise has dozens of minority owners and Arctos’ deal is ‘rolling up some of those stakes’.
The sports business outlet reports that four Kings limited partners (LPs) will exit as part of the acquisition. Arctos will purportedly buy out three LPs and receive three board seats, with the remaining one selling to Ranadive.
Subscribe to our Newsletter to increase your edge. Don’t worry about the news anymore, through our newsletter you’ll receive weekly access to what is happening. Join 120,000 other PE professionals today.
It is set to be the latest Kings minority stake acquired by a private equity firm after the Wall Street Journal (WSJ) reported in July that Dyal Capital Partners was set to buy a 5% stake in the franchise.
For Arctos, the deal will add to its NBA franchise investments, after Sportico reported in April that the firm was purchasing approximately 5% of the Golden State Warriors in a deal that valued the team at $5.5bn. In August, the Institutional Investor magazine also noted that Arctos has taken stakes in 12 US sports teams in the last 20 months, including Major League Baseball’s (MLB) Boston Red Sox.
The decision from the NBA to soften its stance on institutional investors comes amid soaring franchise valuations, which have made it hard for minority owners to sell their shares. According to Sportico’s valuations, the average NBA franchise is now worth almost $2.4bn.
Currently, the NBA rules on private equity investors state that a fund can buy as much as 20% of a franchise and it may own equity in up to five teams. Additionally, no team can have more than 30% of its equity owned by private equity funds.
Source: SportsProMedia
Can’t stop reading? Read more
Sports’ Saturday: Top sports news in private equity
Sports' Saturday: Top sports news in private equity Justin Ishbia, founder of private equity firm...
J.C. Flowers to retain control as Jefferson Capital launches $1.1bn Nasdaq IPO bid
J.C. Flowers to retain control as Jefferson Capital launches $1.1bn Nasdaq IPO bid J.C. Flowers...
Apollo and Irth Capital eye Papa John’s in $1.7bn take-private bid
Apollo and Irth Capital eye Papa John’s in $1.7bn take-private bid Apollo Global Management and...