April 13, 2012 6:55 PM
Covington, Proskauer Advising on Sale of NBA's New Orleans Hornets
Posted by Brian Baxter
Tom Benson, the 85-year-old billionaire owner of the National Football League’s New Orleans Saints, momentarily put aside any legal troubles emanating from the league’s inquiry into the conduct of his football players and coaches by purchasing the National Basketball Association’s New Orleans Hornets for a reported $338 million, including the assumption of about $100 million in team debt.
Covington & Burling and Proskauer Rose, two firms that boast two of the most prominent sports law practices in the country, have landed lead advisory roles on the transaction, which comes about a year and a half after the NBA took control of the Hornets from former owner George Shinn.
The Am Law Daily reported two years ago on Shinn’s efforts to sell the Hornets to former minority owner and offshore oil and gas and Louisiana shipbuilding tycoon Gary Chouest. But that deal, which saw New Orleans–based firms Liskow & Lewis and Phelps Dunbar grab lead roles for Shinn and Chouest, respectively, fell through, and the NBA bought the team from Shinn for a reported $318 million in December 2010.
Since then the league has been searching for a wealthy patron to take the Hornets off its hands, while promising to keep the team in New Orleans. The NBA appears to have finally found that individual in Benson, a San Antonio native whose ownership of the Saints has turned a once-moribund franchise into one of the NFL’s most profitable. (The Saints won the Super Bowl in 2010 but the league has suspended several coaches and revoked draft picks from the team as part of its Bountygate inquiry.)
Covington corporate partner Bruce Wilson and special counsel Scott Roades—promoted from associate on April 1—are leading a team from the firm advising Benson that also includes television contracts partner Peter Zern, tax partners Jeremy Spector and Robert Heller, employee benefits partner Michael Francese, and finance partner Michael Cutler.
"I am very grateful to Bruce Wilson and the Covington team," Benson said in a statement. "Their advice and counsel were key to getting this deal done."
Wilson told The Am Law Daily on Friday that the firm began seriously advising Benson on his bid for the Hornets earlier this year. Covington, which has served as longtime outside counsel to the NFL on various matters over the years, already had enjoyed a close relationship with the Saints owner, the past chair of the NFL's finance committee.
Noting Covington’s relationship with the NFL—former commissioner Paul Tagliabue is senior of counsel at Covington—Wilson declined to comment on whether the firm spoke with Benson about the Bountygate probe.
By buying another team in New Orleans, Benson will not have to worry about cross-ownership rules that sometimes prevent owners of sports teams from owning franchises in two leagues located in different markets.
“Since this is the same market, neither [the NBA nor the NFL] has any concern,” Wilson says. “There are real synergies to ownership of two teams in the same city.”
Covington’s sports group has plenty of experience providing due diligence counsel to leagues on the sales of their teams between private buyers. The firm advised the NFL on the $760 million sale of the Jacksonville Jaguars last year and $1 billion sale of the Miami Dolphins in 2009. But the Hornets deal was one of the first times that Covington represented a private buyer negotiating directly with a league to buy a franchise.
“It was a competitive bidding process, but both sides really wanted to make a deal,” Wilson says. “The two sides worked together and there was no acrimony during the process.”
While Wilson says he had “no visibility” on other bidders for the Hornets, various news reports named Chouest and Los Angeles businessman Raj Bhathal as the other top candidates vying to buy the team, which is currently in last place in the Southwest Division of the NBA’s Western Conference.
Benson received personal counsel on the sale of the Hornets from his longtime attorney Stanley Rosenberg, a senior partner at San Antonio’s Rosenthal Pauerstein Sandoloski Agather, and tax lawyer Paul Cordes, Jr., of New Orleans’s Guarisco & Cordes. Saints general counsel Vicky Neumeyer also advised Benson on the Hornets transaction, Wilson says.
Proskauer Rose corporate partner Wayne Katz and associate Frank Saviano are leading a team from the firm representing the NBA on the sale of the Hornets. The firm has enjoyed a long-standing relationship with the NBA, most recently helping the league negotiate a new collective bargaining agreement last year to save the 2011–12 season.
NBA commissioner David Stern became the youngest lawyer in Proskauer’s history (at the time) to make partner at the firm at 32 during the early 1970s. Stern left Proskauer in 1978 to become the NBA’s general counsel, moving into the commissioner’s chair six years later. Another former Proskauer partner, NBA executive counsel for business and finance Harvey Benjamin, took the lead in-house for the league on the Hornets negotiations.
Richard House serves as general counsel of the Hornets, who since December 2010 have been chaired by Jac Sperling, a New Orleans native and former Hogan & Hartson partner named by the league to restore the team’s financial viability.
Last month Sperling announced that the Hornets had reached an agreement with the state of Louisiana on a new long-term lease binding the franchise to 18,500-seat New Orleans Arena through 2024. The deal calls for the state to invest roughly $50 million to fund improvements for the facility through a proposed bond issue.
In exchange, the agreement contains no escape clause that would allow the Hornets to flee the Crescent City for other cities seeking NBA teams, such as Anaheim, Kansas City, San Antonio, and Seattle.
Covington's Wilson says that Benson's credentials and commitment to keeping the Hornets in New Orleans speak for themselves. On Friday, Sperling and Hornets president Hugh Weber issued a leader to Hornets fans thanking them for their support while the team searched for a new owner.
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