Private equity group seeks minority holding as US basketball league opens door to institutional investors.

CVC Capital Partners is in talks to buy a minority stake in the San Antonio Spurs at a roughly $1.3bn valuation, in a move that signals how private equity is poised to reshape the ownership structures of National Basketball Association franchises.

The Luxembourg-based buyout group is seeking a stake of about 15 per cent in the club owned by the Holt family which founded the Caterpillar industrial vehicles company, according to several people with knowledge of the discussions.

The move highlights the rush of private equity into sport, as the coronavirus pandemic has left clubs around the world seeking new cash injections. Buyout groups have invested in a diverse array of sports, including rugby union, motor racing, football and volleyball.

The talks come as the NBA, which oversees professional basketball in North America, is opening itself up to institutional investment. It recently amended its ownership bylaws to permit any private group to bid for minority stakes in teams, an expansion of a decision to grant exclusive institutional bidding rights to one company, Dyal Capital, last year.

The Spurs, one of the league’s most successful clubs, are five-time NBA champions led by legendary coach Gregg Popovich. CVC, the Spurs, and the NBA declined to comment.

Negotiations with CVC began about a year ago, but stalled because of more stringent league regulations that prevented institutional investors from holding shares in teams.

There is no certainty that a deal will proceed, as negotiations could fall apart again, the people cautioned. Private capital groups are still subject to league approval for minority stake bids.

Previously, basketball team owners have typically been wealthy individuals and families. Steve Ballmer, former Microsoft chief executive, acquired the Los Angeles Clippers for $2bn in 2014, and Qualtrics co-founder Ryan Smith acquired the Utah Jazz last year in a deal worth $1.66bn.

One person with direct knowledge of the matter said that the NBA’s move to relax ownership rules further was prompted in part by complaints from some NBA so-called limited partners — the holders of minority stakes in teams — who were willing to sell their stake but struggled to do so under the current rules.

The NBA amended its bylaws last year to give Dyal, a division of US asset manager Neuberger Berman, the exclusive right among institutional investors to buy minority stakes. A person with knowledge of the matter said some NBA limited partners had grown frustrated that Dyal had not carried out a transaction, since they want to sell what has become a highly valuable asset.

The NBA’s change in ownership rules — which allows private investment groups other than Dyal to negotiate with teams about taking minority stakes — led CVC and Spurs executives to restart discussions over an investment.

A potential deal could see CVC take a seat on the team’s board, though its influence would extend only to commercial decisions on matters such as branding and seat pricing, one of the people said. Currently, the NBA’s rules require minority institutional investors to be passive.

The Holt family would remain the so-called control owner — the first port of call for league officials in any sporting matters.

CVC, a previous owner of Formula One and MotoGP motorsports competitions, has been on a spending spree to expand its portfolio of sports investments.

The consistent returns achieved by NBA franchise owners, and the ability to tap into diverse global fanbases beyond the reach of other sporting investments, are among the deal’s attractions.

In recent years, CVC has invested in rugby union, including the English Premiership Rugby and Pro 14 club competitions, and is in the process of buying a £300m stake in the Six Nations, Europe’s top national team rugby tournament.

This week, CVC completed an investment deal with the International Volleyball Federation, gaining significant commercial power over the sport’s global events. Two people familiar with the matter said CVC’s volleyball deal was worth $300m. CVC is also in the final stages of talks over a €1.6bn investment, alongside Advent International, in Italy’s Serie A football league.


Source: Financial Times

By Kaye Wiggins and Murad Ahmed in London and Sara Germano and James Fontanella-Khan in New York