Jordan Paid $25M Cash For Charlotte Franchise

Last week the media went nuts over a Forbes.com report from Michael Ozanian that claimed Michael Jordan bought the Charlotte Bobcats from Robert Johnson for only $175M - after Johnson originally paid $300M for the team.

Michael Jordan Worst Jeans Ever

More alleged details from Ozanian on the deal have since emerged.

In a comment to his own, original post at Forbes.com about the deal, Ozanian reports Jordan’s, “deal will include about $25 million of equity and assumption of $150 million of debt.

More excerpted comments from Ozanian:

Just got a phone call from an NBA flack. Claims my $175 million figure is wrong and real figure is much higher. When I asked him what “enterprise value” the Jordan deal places on the Bobcats he would not say. Remember folks, the only appples-to-apples comparison of transaction prices that is correct is enterprise value (equity plus net debt). Not some ginned up figure leagues throw out that involve infusions of working capital, etc. The league is very embarrased by the $175 million because lots of teams want investors and this deal is not good for valuations.

There were few people interested in the team because about one-third of the teams in the NBA are looking for investors and the economy is still bad. One bidder were willing to pay a bit more than Jordan, but not much. The $230 million or whatever figure that some are speculating on that Jordan is paying for the team does not includes about $70 million of working capital that the new owner would likely have to invest in the team over time to cover losses and improve the team. But the value of the team based on Jordan’s deal is $175 million or a little less.

What does that all tell me? That the NBA biz model for a good many teams is broken and that franchise valuations are wildly deceiving. And valuation is the only way owners effectively make money in the business.

As I wrote in 2008, the NBA as its currently constituted, will not last. Teams will go away, and if you listen to Charles Barkley, that’s a good thing.