Private equity executives weighed in on whether they would buy the Los Angeles Clippers basketball team after being told of the National Basketball Association's lifetime ban of Clippers' owner Donald Sterling while speaking on a panel Tuesday at the Milken Institute Global Conference in Beverly Hills, Calif.
“This is the fourth time this has come up in 36 hours,” quipped Jonathan Nelson, founder and CEO of private equity firm Providence Equity Partners.
In response to a question, Mr. Nelson said he hoped Mr. Sterling would sell the team. Mr. Sterling, who was also fined $2.5 million by the NBA on Tuesday, purportedly uttered racist comments in a recording made public.
If any other business owner had made similar remarks, “no one would care except his employees,” Mr. Nelson said. But since the comments were made by the owner of a national sports team, they “cannot be tolerated,” he said.
That said, most of the panelists agreed with panelist John Danhakl, managing partner at private equity firm Leonard Green & Partners, that a sports team is not appropriate as an investment for a private equity fund, which has a fixed life.
Instead, the pattern of ownership of sports teams is that they are owned by wealthy individuals, said David Bonderman, founding partner of alternative investment firm TPG Capital.
Leon Black, chairman and CEO of alternative investment firm Apollo Global Management, disagreed. He said that things have changed, noting that the purchase of the Los Angeles Dodgers baseball team by a consortium of owners led by investment firm Guggenheim Partners was based on the cash flow from network television contracts.
“More and more, it's all about television contracts and cable contracts,” which can be leveraged, Mr. Black said. “There is some change going on.”
Mr. Nelson added that Providence bifurcated and invested in the media rights when the firm invested in the New York Yankees, creating the YES Network, which broadcasts Yankee games. Providence and co-investor Goldman Sachs sold 49% of the network to News Corp in 2012. Providence also invested in the media rights when it invested in Soccer United Marketing from Major League Soccer two years ago.
Also on Tuesday, UCLA announced it is returning Mr. Sterling's $425,000 initial down payment, as well as the remainder of his $3 million pledge, to support basic kidney research by the UCLA Department of Nephrology.
“Mr. Sterling's divisive and hurtful comments demonstrate he does not share UCLA's core values,” according to a statement.