CVC Capital Partners is talking to leading US professional basketball team San Antonio Spurs for a 15% minority stake at a circa $1.3 billion valuation. The move may change private equity’s involvement in the NBA through modifying teams’ ownership structures. It also exemplifies the trend of private equity entering sport, as franchises all around the world find themselves strapped financially due to the pandemic.
Negotiations began a year ago between CVC and the Spurs, but at the time the NBA, which oversees basketball in the US, didn’t allow institutional investors to hold shares in teams. But when the bylaws changed, CVC began negotiations anew.
The NBA had previously decided grant to grant Dyal Capital exclusive institutional bidding rights for minority stakes in teams. However, it recently expanded the decision to include all institutional investors.
It is not guaranteed the deal will go through, as the NBA still has to approve all bids.
If a deal is successful, CVC would get a board seat but would only have influence on commercial issues like branding and ticket pricing. Present NBA rules stipulate minority investors must be passive.
What makes the deal attractive for CVC are the consistent financial returns and being able to leverage a fan base beyond their other sport investments, which include rugby, football, and volleyball.