Sonics sale a 'dream' deal for Schultz
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Howard Schultz has been a Sonic season-ticket holder since moving from New York in 1982 and dreamed about owning the team. After becoming a multimillionaire as Starbucks chairman, Schultz mentioned his thoughts to NBA Commissioner David Stern during a social function in Los Angeles two years ago.
Meanwhile, the Sonics had been draining money from the Ackerley Group, whose chairman, Barry Ackerley, owned the team. This summer, Schultz received a call from Stern revealing that his shot had arrived.
"He was thrilled," Stern recalled yesterday. "I told them to call me when it's done."
After a month of complicated negotiations that weren't finalized until yesterday, the Ackerley Group sold the Sonics and the Seattle Storm of the WNBA for $200 million in a deal that doesn't include the team plane or KJR Radio.
"For me and my family, this is a dream come true," Schultz said, sitting at a dais with the former owner. "I'm a fan at heart. I realize the challenge of winning basketball. I'm going to be supportive but also respectful. I've got a lot to learn.
"To be honest with you, I never believed that I would be in this position today."
Schultz, 47, becomes the majority owner and chairman of the board in a group of about 10 investors that includes Sonic General Manager Wally Walker. The new entity is called the Basketball Club of Seattle, LLC.
The other members weren't identified because the NBA Board of Governors and the Justice Department must approve the sale, which is considered a formality. The sale is expected to be official by the end of the first quarter of this year. The new owners were described as mostly local business people.
The final group started out as two separate camps that looked into buying the franchise beginning in early September: Walker used his business ties and financial background to gather investors. Schultz and a few business associates comprised the other group.
Schultz and Walker - friends for 15 years through business circles - met in November to discuss business and basketball philosophies. Afterward, they decided to join forces, with Walker becoming team president and chief executive officer while having a minority share.
"We saw that we had a lot of common vision," Schultz said yesterday.
Chris Ackerley, co-president of the Ackerley Group, was the lead negotiator for his father, Barry.
"In most business negotiations, there's peaks and valleys, and it's a process," Chris Ackerley said. "But continually through the process both groups worked amicably in completing the deal."
Whether the team plane would be included in the deal was one of the final complications. But instead of having the deal held up, both sides decided to negotiate later on the plane.
"Part of the problem is the plane has been out of town," said Barry Ackerley, referring to Seattle's recent five-game road trip, which concluded Wednesday in Washington, D.C. "They haven't really seen the plane. So that part of the deal is being worked on."
The Sonics will be able to use the plane - one of the few private planes in the NBA - for the rest of the season.
Schultz's group becomes the third owner in franchise history. On Nov. 18, 1983, Ackerley bought the club from its first owner, Sam Schulman, for $11 million in cash and $11 million in deferred compensation. (Because the guarantees of the deferred compensation did not come through, Ackerley ended up paying only $11 million.)
"It's a bittersweet day for our family," Barry Ackerley said yesterday.
He became teary-eyed while reading a statement and needed to pause to collect himself.
The Ackerleys began looking seriously at selling the team following a board meeting in early October. The Sonics and Storm have a combined operating loss of at least $7 million so far this fiscal year. And according to estimates by financial analysts, they could lose as much as $11 million.
The Ackerley Group, a holding company that includes television, radio and billboard advertising, is expected to pay debt with the $200 million.
The Sonics' financial woes started after they missed the playoffs in the 1998-99 season. The following season the team had one of the worst attendance declines in the NBA.
"This is the right thing for our shareholders," Barry Ackerley said yesterday, "and the right thing for the community of Seattle."
After the October board meeting, Barry Ackerley asked Stern - a friend of 18 years - to recommend someone with local business ties. Stern recommended only two people.
"Howard was No. 1," Stern said. "With his business commitments to the community and what his plans were for the team, I thought he was perfect."
Although Stern declined to name the other person, it's believed to have been Microsoft Chief Executive Steve Ballmer. Schultz first spoke to Barry Ackerley about buying the team on Labor Day. They held several conversations to get to know Schultz better. But the former owner wasn't aware that Schultz had serious interest until hearing his name from Stern.
"We've known him," Barry Ackerley said of Schultz, who has had courtside seats not far from Ackerley's for several years. "But we never really talked about basketball other than the games."
Although negotiations started last month, they were kept quiet until news reports Monday about a possible sale.
"This is the surprise press conference of the week," Ackerley's spokeswoman, Kathy Savitt, said sarcastically to start yesterday's press conference, which drew more than 100 journalists.
Schultz said: "Many of my close friends didn't know a word about it until reports came out. From the e-mails, they said, `I'm not surprised.' "
Schultz wasn't certain about buying the team until conferring with his wife, Sheri, about the consequences on his 14-year-old son, Jordan, and 11-year-old daughter, Addison.
"We talked about what it was going to be like for them," said Schultz, who holds 7.8 million shares of Starbucks stock worth about $345 million as of yesterday. "I don't think I made the decision until after that discussion."