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One of the arguments Donald Sterling made in court during this month's trial to determine whether Shelly Sterling had the right to sell the Los Angeles Clippers under the letter of the Sterling Family Trust is that he could have negotiated a higher selling price for the franchise.
Steve Ballmer, you'll remember, agreed to purchase the franchise for $2 billion, an agreement that is currently being held up by the ongoing trial. Donald Sterling agreed to that price but later insisted in court he could have sold the team for more.
That seemed somewhat unlikely considering Ballmer's bid was said at the time to be significantly higher than the next-highest offers ($1.6 billion and $1.2 billion). It seems even more unrealistic after details on "Project Claret" emerged Wednesday.
Project Claret is a bid book submitted into evidence by Shelly Sterling on Tuesday, and shows that Ballmer significantly overpaid for the franchise based on immediate-return expectancy:
Ballmer's $2 billion final bid is 12.1 times the expected 2014 revenues of the team, according to the numbers given to the bidders by Bank of America, which conducted the sale on behalf of the Sterling trust.
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Valuation multiples are usually based on total revenues, so the $164.9 million before player costs are extracted equals more than 12 times less than the $2 billion sale price.
A banker not involved with the process also told ESPN that "No team in the history of sports has sold for six times total revenues," so Ballmer's 12-times revenues purchase is double what the market established.
There are myriad other factors to consider in a sale, but Donald Sterling's claim that he could have gotten more seems even more tenuous now. Even the long-term outlook with a new television deal doesn't change things (emphasis added):
By using extremely generous projections, including a new local TV deal that Bank of America projects will go from $25 million to $125 million a year, and a 200 percent increase in the rights fees for a new NBA TV deal, which will begin in the 2016-17 season, an additional $160 million in annual revenue is added to the team in future years. Bank of America says the new national TV deal could bring $90 million each to teams in the league, up from the current $30 million. Including all these projections, the bank concludes that Ballmer's eventual $2 billion is still more than seven times the revenue multiple of the enterprise value of the team.
The trial remains ongoing, and closing arguments are set to be heard July 28. Lawyers for Shelly Sterling and Ballmer have pushed for a quick decision, as Ballmer's offer is said to expire on Aug. 15.
There are also a number of other lawsuits pending from Donald Sterling, with damages sought from the NBA, Adam Silver, Shelly Sterling, and the Clippers organization.
You can view the entire Project Claret document in PDF here.
