Inside The Koch Family’s $5.8 Billion Valuation For 15% Of Brooklyn Nets’ BSE Global

The investment by Julia Koch and her family into BSE Global will significantly deleverage the holding company to the Brooklyn Nets and New York Liberty and shows just how hot the NBA is right now.

After speaking with several sources familiar with the transaction, which was announced yesterday, Forbes has learned the specifics of the transaction: The Koch family will write a $688 million check to Joe Tsai, Clara Wu Tsai and their family, owners of BSE Global, which, aside from the two basketball teams, also owns the operating rights to the Barclays Center in Brooklyn. Tsai paid $3.2 billion (or 10.5 times revenue) for the Nets and arena operating rights in 2019.

BSE Global currently has $1.43 billion of debt, of which $550 million is a shareholder loan to the Tsai family. Julia Koch’s investment will be used to pay off $492 million of the shareholder loan and the other $196 million of Koch money will sit on BSE’s balance sheet. The sale values BSE at $5.8 billion, which is known as the pre-money valuation. The post-money (after the transaction) values BSE at $6 billion. The post-money valuation was first reported on Tuesday by Sportico, which also noted that the Koch family is getting the right of first offer on any future control sale of BSE. The table below is how the balance sheet could change with the additional capital.

The transaction values BSE at roughly 14 times revenue, a very rich multiple for a non-control stake. Consider that more than 90% of BSE’s revenue comes from the Nets and the arena. The Nets, worth $3.85 billion according to Forbes’ most recent valuation, lost a little bit of money during the 2022-23 season while the Barclays Center lost a lot of money. As the graphic below shows, the $5.8 billion valuation is an astronomical amount for a non-control stake in a professional sports team. (Note: the Arizona Coyotes sale multiple of 8.3 is due to the team playing the 2022-23 season at Mullett Arena, which has seating capacity of 4,600.). In fact, it would be pricey even it was for a control stake—in any sport. For example, the only team to fetch a price for over 13 times revenue was Matt and Justin Ishbia’s $4 billion purchase of the Phoenix Suns last year.

The reason for the rich valuation for BSE, of course, is the NBA’s upcoming new media rights deal, which is expected to be worth around $76 billion, three times its current deal. In other words, the 30 NBA teams, which are currently each getting an average $90 million a year for national media rights, will be getting close to $300 million when the next deal is signed.

But then again, maybe this transaction is not “pricey.”As one sports investor said, “If you go back and look at the last 10 years, most of the value has come from revenue multiple expansion, not revenue generation. If teams traded at 4 times revenue 10 years ago, and 10 times revenue last year, is 14 times revenue just the latest iteration? Any reason it can’t get to 20 times revenue, especially if the number billionaires in the world keeps growing but there have [only] been two new Big Four pro sports teams added in the last 10 years?”

He may have a point.

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