The uncertainty surrounding the potential acquisition of the Minnesota Timberwolves by a minority owner of the Memphis Grizzlies has exposed turmoil within the Memphis ownership group, clouding future control of both franchises, sources told ESPN.com.
Grizzlies minority owner and co-executive chairman Steve Kaplan, a California venture capitalist, had planned to sell his Grizzlies stake to buy 30 percent of the Wolves with a path to eventually take over as the Wolves' controlling owner. However, sources tell ESPN's Brian Windhorst and Zach Lowe, a dispute between Kaplan and Grizzlies owner Robert Pera over shares of the team led to behind-the-scenes trouble that took months to resolve.
It was recently settled after Kaplan threatened to initiate an arbitration procedure, sources said. The terms of the settlement are confidential, and multiple sources declined to comment on them. NBA owners cannot formally sue each other under league rules, and minority owners typically must sell shares of one team before buying into another.
The resulting delay has put Kaplan's deal with Wolves owner Glen Taylor in jeopardy. Kaplan and an investor went to Minneapolis earlier this month to meet with Taylor to salvage the process.
Meanwhile, sources say Pera has been distant from Memphis over the past year and has excluded minority owners from any meaningful participation in team decision-making, which is his right as controlling owner. Kaplan is worried that the market for his minority interest will dry up once potential buyers complete their due diligence on Pera's ownership techniques, sources said.
In selling his minority stake on the open market, Kaplan has been asking for close to $100 million for his 14 percent share -- pegging the team's value at roughly $700 million. Kaplan's figure is a big-enough number to turn off some potential investors, sources said.
The drama could drag on, particularly because of an unusual clause in the Memphis ownership agreements that Kaplan can trigger in October 2017 -- on the five-year anniversary of their purchase of the team with Pera.
At that time, Kaplan and fellow minority owner Daniel Straus, an East Coast health care magnate and the team's vice chairman, have an option to make a bid for controlling interest in the team at a price of their choice, sources said. At that point, Pera would have two options: buy out Kaplan and Straus at that named price, or sell his shares to them based on the same valuation. Control of the decision ultimately would rest with Pera.
The so-called "buy-sell" clause is merely an option, and it is unclear whether Kaplan or Straus would ever trigger it -- especially because Pera could simply force them to pay up if they named a wildly high price.
It is relevant because it would give Kaplan a possible path to team ownership if his deal to buy into the Wolves doesn't finalize.
Kaplan had been making plans to become involved with the Wolves and consult on front-office, coaching and roster moves, sources said. He was expected to spend time traveling with the team to get to know the players during the season. Those plans have been scrapped, and inside the Wolves there is a growing assumption that Taylor will remain as primary decision-maker for the near term. This has been received as good news by incumbent general manager Milt Newton and interim coach Sam Mitchell, sources say.
Taylor has put the Wolves up for sale in the past only to change his mind later. Amid the Grizzlies' drama and the Wolves' collection of young talent, Taylor has slowed the sale process and is now reconsidering whether he wants to sell at all, two sources close to the owner say.
After looking to sell to local buyers, Taylor took the Wolves off the market in 2014 when he sold a share of the team to Flip Saunders and made him team president. Saunders planned to take several years to attempt to assemble his own group to buy the team from Taylor while rebuilding the roster in the wake of the Kevin Love trade, sources say. He recruited Wolves legend Kevin Garnett to return to the team and possibly eventually become an investor. But Saunders died in October, leaving Taylor to re-evaluate his options.
The seeds for all of this were planted in 2012 when Pera, who founded a technology company in San Jose, bought controlling interest in the Grizzlies. He had planned to buy the team on his own from outgoing owner Michael Heisley, but a sudden downturn in Pera's finances between the time the deal for the sale was struck and when it closed forced him to bring on nearly 20 other owners to meet the $377 million purchase price.
The arrangement, which took months to assemble and nearly fell apart several times, got Pera his dream of owning a team. But it left him relatively weak because of the partnership deals he had to strike. Shortly after Pera took over, the Grizzlies made several cost-cutting trades, including moving Rudy Gay to the Toronto Raptors and trading away a future first-round pick to the Cleveland Cavaliers to reduce payroll.
Other minority partners include Justin Timberlake, Ashley and Peyton Manning and former Grizzlies player Elliot Perry, plus influential Memphis business leaders. Pera didn't have previous relationships with most of them, and he ended up owning less than 30 percent himself.
Pera took his company, wireless technology provider Ubiquiti Networks, public in 2011 with a stock price of $15. Within six months, the stock hit $34 and he became a billionaire at age 34. He immediately used his new wealth to pursue the Grizzlies franchise, which had been on the market for years. By the late summer of 2012, though, Ubiquiti's fortunes turned, and the stock plunged to less than $9. It decimated Pera's net worth and endangered his purchase, but he was determined to acquire the team.
Ubiquiti's performance has been volatile ever since, soaring in 2014 but then falling back and recovering again. Last year, Ubiquiti said it had been scammed out of $46.7 million in an email spoofing fraud.
Pera's purchase of the Grizzlies ultimately worked out. In less than four years since Pera bought the team for $377 million, Forbes valued the team at $780 million in January.
Sources: Delay in Wolves' sale exposes Grizzlies' ownership drama