Russia's richest man, Mikhail Prokhorov, reached a deal to buy control of the New Jersey Nets basketball team, as well as fund the development of a real estate project in Brooklyn, New York.
A letter of intent was signed to create a partnership for the development of Atlantic Yards, a 22-acre residential and commercial real estate project in Brooklyn and Barclays Center, the Nets' future home, the parties said on Wednesday.
Forest City Ratner, the Nets, which developer Bruce Ratner owns, and Prokhorov's Onexim Group said in a statement that the deal will ensure the team moves to Brooklyn as planned.
Under the agreement, Onexim, an investment group, will invest $200 million and make certain contingent funding commitments to buy 45 percent of the arena project and 80 percent of the National Basketball Association team, the parties said. It also gives Onexim the right to purchase up to 20 percent of the Atlantic Yards Development Co, which will develop the non-arena real estate.
I have a long-standing passion for basketball and pursuing interests that forward the development of the sport in Russia, Prokhorov said in the statement. I look forward to becoming a member of the NBA.
The deal is expected to close by the first quarter of next year and would make Prokhorov the league's first owner outside North America. NBA rules require background checks on a new owner as well as approval by 75 percent of the 30 owners.
Interest in basketball and the NBA is growing rapidly on a global basis and we are especially encouraged by Mr. Prokhorov's commitment to the Nets and the opportunity it presents to continue the growth of basketball in Russia, NBA Commissioner David Stern said.
The 44-year-old Prokhorov is worth $9.5 billion, down from $22.6 billion in 2008, according to the May Russian edition of Forbes.
Towering over colleagues at 6 feet, 9 inches tall, the former chief of the world's largest nickel firm, Norilsk Nickel, used to play basketball when he was younger.
Russian oligarchs spent heavily on yachts, mansions and sports clubs as their investments rose with soaring commodity prices in recent years. In the highest-profile deal, Roman Abramovich bought London soccer club Chelsea in 2003.
While many of his Russian peers sought state bailouts, Prokhorov, also a former banker, is flush with money after cashing out of assets in 2008 before the global crisis caused commodity prices to crash.
Forbes in December ranked the Nets as the 26th most valuable NBA team with an estimated value of $295 million.
In addition to the arena, Forest City Ratner proposes constructing 16 office and apartment buildings, as well as upgrading subway, utility and other infrastructures.
Legal disputes, financing problems and challenges from local community groups have dogged the project for years. Opponents of the project vowed on Wednesday to keep fighting the development plan despite the deal with Onexim.
In June, Ratner dropped architect Frank Gehry to cut costs, further irking critics as Gehry's design was a key factor in winning public support for the project in the first place.
Ratner has a year-end deadline to start building the arena or lose $700 million of tax-free financing that a state agency has said it plans to issue in the fourth quarter.
The Raine Group and Goldman Sachs advised Ratner and the team, while Hogan & Hartson advised Onexim.
(Reporting by Ben Klayman, editing by Matthew Lewis)