-
Brian Windhorst, ESPN Senior Writer
Minnesota Timberwolves and Minnesota Lynx controlling owner Glen Taylor and minority owners Marc Lore and Alex Rodriguez are scheduled to go to arbitration this week as the fight for controlling ownership of the teams enters a new phase.
The hearing is expected to last most of the week, and a decision is expected in December, Timberwolves sources told ESPN. The contract between the parties calls for a three-arbitrator panel (one selected by each side and a neutral arbitrator) to hear the case and decide, sources briefed on the process said.
The arbitration decision is binding, but the case to determine who will ultimately own the teams remains a complicated situation with a murky outlook.
With the hearing set to begin Monday, here’s the latest on where the case stands:
What will the arbitration hearing decide?
The issue is a deadline Taylor determined Lore and Rodriguez missed to close the deal in March. Lore and Rodriguez believe they’d satisfied the terms outlined in the sales agreement, affording them the option of additional time.
In 2021, Lore and Rodriguez agreed to buy the Wolves and Lynx from Taylor at a $1.5 billion valuation. At Taylor’s request, the sale agreement set a schedule of three stages. The first two happened in 2022 and then 2023, as Lore and Rodriguez purchased 36% for approximately $600 million in total. The deal called for them to pay an additional $600 million to control about 80% by the end of March.
Taylor, who has owned the Wolves since 1994 (and the Lynx since their inception in 1999), halted the sale on March 28 because he said Lore and Rodriguez missed the deadline for that final payment. In interviews, he also cited the team’s potential as a championship contender as a factor. Lore and Rodriguez have said in interviews and documents they had the cash to complete the deal but were delayed by the NBA in its approval of the transaction and were thus entitled to an extension.
The two sides will present their cases this week.
Will the arbitrators’ decision determine who gets the teams?
Not totally. This is the most important issue to understand.
If the arbitrators rule for Taylor, he will be able to end the process. He will have voided the sale and will remain as controlling owner. He has said he won’t put the team up for sale again, but there would be nothing preventing him from doing so.
If the arbitrators rule for Lore and Rodriguez, Taylor would be contractually compelled to sell them the controlling share for the previously agreed on $1.5 billion valuation. However, all team percentage transfers are subject to a vote by the NBA’s owners. Lore and Rodriguez would need 23 of the 30 votes to be approved as new owners. Only then would they get the team.
Is it possible the NBA owners would not approve the purchase if Lore and Rodriguez win?
This is the question with perhaps the most intrigue.
Taylor is a former chairman of the NBA’s board of governors and has a long, personal history with NBA commissioner Adam Silver.
Over the course of NBA history, there have been occasional disputes over NBA team sales, but rejecting an enforced sales contract because the current owner changes their mind would be unprecedented — especially because Lore and Rodriguez have already been approved as limited partners and twice the NBA’s owners ratified percentage transfers.
Silver has said the league is not currently involved in the process and is allowing the arbitration to play out.
“That’s a process that exists independent of the league that was set out in the sales agreement … depending on the outcome, only then would the league then continue a vetting process for ownership,” Silver said in September. “It’s pencils down at the league office [until then].”
But behind the scenes there already has been plenty of maneuvering, multiple sources told ESPN, knowing this vote may be coming.
Over the past six months, Lore and Rodriguez have sought to firm up their financial standing by recruiting billionaires Michael Bloomberg, the former mayor of New York, and Eric Schmidt, the former CEO of Google, to become partners. Also, private equity firm Dyal Homecourt Partners, an approved NBA partner that currently owns pieces of the Phoenix Suns, Atlanta Hawks and Sacramento Kings, has secured a position as well.
As a result, Lore and Rodriguez have raised $950 million and have it in an escrow account and have made it clear in documents they plan to offer to buy out Taylor and his partners for the remaining 64% of the teams, sources said. Not just the additional 40% the disputed contract calls for.
Additionally, the group will provide proof of $200 million in working capital to demonstrate to the arbitrators and other owners that the group is in position to fund the team’s operations going forward, sources said.
With a current payroll of more than $200 million and an estimated luxury tax bill of $96 million more, the Wolves are forecast to sustain heavy operating losses this season, sources told ESPN. It was a factor in the team’s recent trade of star Karl-Anthony Towns.
Taylor has the $600 million, raised by selling the shares to Lore and Rodriguez, in his coffers to fund the teams. Lore and Rodriguez have worked to meet with owners and the league office in recent months to demonstrate their position and attempt to shore up support in the event of a vote, sources told ESPN.
It is unlikely this potential high-stakes vote would actually come down to a roll call among owners. Silver and Larry Tanenbaum, the chairman of the board of governors and chairman of Maple Leaf Sports & Entertainment, which owns the Toronto Raptors, would likely lead a process to build a consensus, and the body would act together. However, it’s still possible that it will come to a vote, and it could take some time to play out if Lore and Rodriguez win in arbitration.
Is there a chance of a settlement?
One is always possible.
However, a one-day mediation between the parties in the spring yielded no progress, sources said.
Lore and Rodriguez made a deal that could prove to be very shrewd if they can win this battle and close. Over the past year, the Wolves have been valued at $2.9 billion by Sportico and $3.1 billion by Forbes.
These numbers are influenced by recent team valuation sales, including those of the Suns ($4 billion), Dallas Mavericks ($3.5 billion), Milwaukee Bucks ($3.2 billion) and Charlotte Hornets ($3B).
Getting the team for a $1.5 billion valuation would potentially create instantaneous 10-figure equity in Lore and Rodriguez’s ownership shares. For the same reason, Taylor has plenty of reasons to fight to retain the 40% share he’d previously agreed to sell at a price that is now well below perceived market value, in addition to his desire to remain in control of a contending team.
What else is at stake?
Perhaps the future of valued team president Tim Connelly.
In 2022, the Wolves lured Connelly away from the Denver Nuggets in a five-year, $40 million deal that has proved pivotal in turning around the team’s fortunes.
The deal contained an opt-out clause this past summer because that’s when the ownership transfer was supposed to be settled. When that didn’t happen, Connelly agreed to defer the opt out to the summer of 2025. Regardless of how the next few months play out, he is potentially a coveted free agent.
This post was originally published on this site