MOSCOW, August 21. /TASS, Andrey Kartashov/. Russian billionaire magnate Mikhail Prokhorov reportedly closed one of the biggest and most lucrative deals in the history of sports last week by selling the NBA’s (the National Basketball Association) Brooklyn Nets and the Barclays Arena for a whopping sum of $3.5 billion.
Prokhorov, 54, scooped up 80% of the then New Jersey Nets in 2009 for $223 million. He also repaid $160 million of the club’s debts back then and became the first foreign owner of a basketball team in the American NBA. After the deal was closed, the team moved to a new arena in Brooklyn, changing their uniforms’ colors and name to the Brooklyn Nets.
Looking back on his purchase of the basketball team, Prokhorov says: "Businesswise, the club and the stadium, which could have been built or not built at all, were both in such poor condition that they were already beyond the boundaries of a distressed asset. Everything entailed risks at that time."
There wasn’t any hundred-percent certainty that the venture would turn out to be a success. Despair was the right word to describe the team’s circumstances that it had been mired in back in September 2009, when the Russian businessman appeared. The words ‘losers’ and ‘Nets’ went hand in hand at that time.
Bob Windrem, the editor and co-founder of NetsDaily, described the situation back then: "When Mikhail Prokhorov agreed to buy the Nets on September 23, 2009, things were a mess."
"A quarter of the team's employees had been laid off and the rest were given Fridays off, at no pay," Windrem continued. "The team's assistant coaches agreed to pool their salaries so all of them could be retained. They had three full-time scouts."
"They played in the IZOD Center, the worst venue - arena or stadium - in North America, as voted by sports business executives. And the team was about to embark on a season that would start with 18 straight losses an NBA record and win a total of 12 games, third lowest total in NBA history."
Asked by a TASS correspondent to recall either one of the most complicated or pleasant memories over the past 10 years, Prokhorov went into detail about the construction of the Barclays Arena.
"A small, but very significant crowd of Brooklyn community organizers were dead set against dismantling the rusty railways and old buildings to clear the area for the construction of the future arena, but the price of the deal was really appealing," Prokhorov said. "I recall gaping at the construction site, which was simply a huge excavated pit, and hoped that everything would turn out to be all right in the end."
Prokhorov joined the Brooklyn Nets and brought in Dmitry Razumov and Sergei Kushchenko to the club’s Board of Directors.
"Prokhorov started toying with the idea of purchasing an NBA team back in 2007,” Kushchenko noted, “and in 2008, during the Summer Olympics in Beijing, we were already holding negotiations on this issue with NBA Commissioner David Stern."
"We were looking over various options at that time," Kushchenko continued. "Among them were the New York Knicks, who asked for a bizarre sum, the Phoenix Suns and the New Jersey Nets. We decided to focus on the New Jersey Nets since it was a completely different market then in addition to the prospect of the new arena’s construction along with a full-fledged business framework."
The basketball team’s debts at that time almost exceeded the cost of the franchise, while the proposed relocation from New Jersey to Brooklyn seemed nearly out of reach due to the endless court battles.
Prokhorov, who struck an advantageous deal on the Russian metals giant Norilsk Nickel at that time, acted generously and decisively. He shelled out $223 million to the former owners of the New Jersey Nets, repaid the club’s debts of $160 million and added $60 million for the club’s incidental expenses. He also swiftly loaned $76 million to the club’s former owners for them to complete the construction of the new arena and allocated $4 million for the team to leave the decaying IZOD Center and stay in Newark, while the arena in Brooklyn was under construction.
In May 2010, Prokhorov assumed control over the Nets, having acquired 80% of the team and 45% of the future arena with an option of buying out 20% of the office and residential buildings located around the arena. Having pushed his way into the realm of the NBA, Prokhorov continued acting decisively.
"It turned out that we did not even have a clue as to what the NBA was about when we embarked on this venture," Kushchenko stated. "It was a whole other world - it was a new universe in terms of technologies, communications and everything else."
"We kept making mistakes during the inception of our project because we had jumped the gun and were hasty with some of our decisions. But as we say in Russia - one must learn from one’s past mistakes - and this is how we have been learning our lessons."
Prokhorov was determined to achieve success in the NBA right off the bat so he spared no expense to reach his goal. The Russian mogul, who was an eligible bachelor at that time, told the mass media that he was ready to get married if the Brooklyn Nets didn’t win the NBA championship. In the following four years, the club qualified only once for the playoffs, but it was knocked out in the second round, despite spending a fortune on enlisting NBA stars such as Paul Pierce, Kevin Garnett, Andrei Kirilenko and coughing up over $120 million in luxury taxes.
"For the next four years, he agreed to trades and signings that brought the Nets veteran players, but cost them big money contracts and forced them to give up future assets," according to Bob Windrem. "He agreed to pay more than $120 million in luxury taxes to the league. The plan failed miserably."
"The veteran players the Nets acquired, like Kevin Garnett, Paul Pierce and Andrei Kirilenko, were too old and out of shape. The team got to the second round of playoffs, halfway to a championship, once, despite all the money he spent."
"The team gained a reputation as being poorly managed. Relations with the commissioners' office soured," according to Windrem. "The NBA had welcomed him not just as the first Russian owner, but the first European owner and the first real international owner. Now, the league wasn't sure the Russians were up to it."
The Russian tycoon learned his lesson and got down to some zealous efforts with the club from scratch. Sean Marks, who was not in the media limelight at that time, was hired as the general manager of the Brooklyn Nets and Kenny Atkinson joined the club as the new head coach. Marks managed to talk Prokhorov into creating a unique culture within the club. The Brooklyn Nets were on a gradual rise in the following three years, improving their results with each season. In 2018, the basketball team caught the attention of Joe Tsai, executive vice president and co-founder of China’s biggest e-commerce company Alibaba Group, who opted to purchase a 49-percent stake in the Brooklyn Nets for $1.12 billion.
Last season, the Brooklyn Nets made it back to the playoffs, but the club failed to clear the opening round. However, in mid-season NBA superstars Kevin Durant and Kyrie Irving joined up and now the team is viewed by experts as a favorite in the upcoming season. The deal on the club’s sale is expected to be finalized in late September.
According to Prokhorov: "I can recall unforgettable moments during the course of the club’s ten-year history, for instance the Jay-Z concert at Barclays Center’s opening ceremony. The Nets’ first home game, after the team moved to Brooklyn donning their new uniforms and rolling out their new colors. Four years of qualifying for the playoffs. There are many moments to cherish."
"I would also like to point out that I have learned many useful lessons during this journey," Prokhorov continued." I had the chance of learning how the NBA works and how business in the United States is run based on decades of its development."
"The process of the team’s evolution taught us many lessons, because we launched the venture under the philosophical motto of ‘win as fast as you can,’ but then we realized that in no way can you rush and skip certain steps in order to create a winning team," the Russian businessman elaborated.
"Three years ago, we changed our approach and now we have one of the most prestigious NBA teams, which the best players wish to join. This new approach also led to numerous business deals, which would help the Brooklyn Nets stay in perfect shape for future success," Prokhorov added.
It can be stated now that within a decade after Prokhorov’s arrival, the Nets transformed into a global powerhouse in sports from a struggling local club. Brooklyn’s current roster boasts a star-studded team, hosts home games at one of the world’s best arenas and is the apple of the international business community’s eye. It took Prokhorov ten years to achieve this goal. Had it been their crosstown rivals, the New York Knicks, it would have taken them an eternity to achieve what the Russian tycoon accomplished in a decade in New York’s most populous borough.