Alex Meruelo’s Bid To Buy Atlanta Hawks Falls Apart

For more on the future of the Hawks, visit Peachtree Hoops and SB Nation ATL.

Or maybe forever. From the Atlanta Journal-Constitution:

This could be a bit of posturing to dim the bright lights of desperation that would shine after Meruelo’s exit. But if it’s not, if Levenson and the Atlanta Spirit really do intend on keeping the franchise hostage, then may God have mercy on Hawks’ fans ... because management doesn’t intend to.

Meruelo announced a “definitive” agreement to purchase the team on August 7, but the deal stalled during the NBA approval process. The league required the deal to include conditions that were not a part of the original agreement, the AJC reports. A 75-percent majority is required to approve any new owners, but according to the report, the league had enough issues with the arrangement that a vote never took place.

The news means that the Atlanta Spirit Group, for the time being, remains the owners of the club.

Meruelo, who owns the La Pizza Loco chain, agreed to buy the team from the Atlanta Spirit group for an unspecific amount in August. Even then, Forbes was skeptical of the deal, reporting that the Spirit group would be financing part of the deal and that there was actually very little (if any) cash changing hands. Essentially, Meruelo would be taking on the Spirit’s debt.

In a statement to ESPN, Meruelo assuaged concerns that he doesn’t have the financial wherewithal to run the Hawks in a “first-class manner.”

According to Ozanian, nearly 40 percent of the purchase price, which has been estimated at nearly $300 million, will be financed by Atlanta Spirit LLC over a term of five years. The unusual seller financing could lead to the NBA’s Board of Governor’s to more closely scrutinize the sale to Meruelo, who has made his fortune as a real estate developer and as the owner of a successful pizza chain, La Pizza Loca.

Meruelo is purchasing controlling interest in both the Hawks and Philips Arena, which carries over $120 million in debt, from the same ownership group that sold the NHL’s Atlanta Thrashers, who were relocated to Winnipeg, Manitoba.

According to Marc Ganis of sports business consulting firm SportsCorps, the $300 million represents the “enterprise value”, which includes Meruelo assuming nearly all of the debt on the team and arena from Atlanta Spirit LLC, which purchased the operating rights from Time Warner in 2004 for $208 million.

Debt on the 12-year-old Philips Arena is estimated to be around $120 million.

At one point, due to there being too many tough questions, Hawks TV play-by-play announcer Bob Rathbun jumped in and asked Meruelo to reveal his biggest secret. Meruelo’s answer?

Sweet secret, bro. Then again, would you expect anything else from a man who made his money by creating a pizza joint.

“I will never stop trying to win a championship for Atlanta,” Meruelo said, while wearing a red Hawks hat.

Meruelo said he first registered interest in the Hawks six or seven months ago, but that he couldn’t come to an agreement on the price with the Atlanta Spirit group. The Spirit then entered exclusive negotiations with a bidder, but that fell apart in recent months. At that point, Meruelo came back to the table and worked out an agreement. NBA.com’s David Aldridge has reported that the pricetag came in over $300 million, not including substantial debt that Meruelo will assume.

David Aldridge of NBA.com and TNT is the first to report a figure on the sale of the Atlanta Hawks to California businessman Alex Meruelo: Aldridge’s source claims a sale price in excess of $300 million for the Hawks and Philips Arena, which doesn’t include a good deal of outstanding debt Meruelo will assume. (The Atlanta Spirit group owes a reported $120 million bonds on Philips; that debt is repaid with a portion of arena revenue.) Depending on how Philips, a 12-year-old building with a strong reputation in terms of condition and amenities, is valued, that appears to be a hefty pricetag for a mid-rung team with historically iffy attendance.

The Atlanta Spirit group bought the Hawks for $208 million in 2004.

Meruelo is the seventh new owner to join the league in the last two years, and is its first Hispanic owner. There was initially a concern that he might think about moving the team to Anaheim, but the debt he will assume, as well as the NBA’s relocation fee, makes that next to impossible. The sale is pending owners’ approval, but all indications are it will be approved sometime in 2011, depending on the trajectory of the NBA lockout.

For more on the Atlanta Hawks’ sale and all its implications, visit SB Nation’s Hawks blog Peachtree Hoops, as well as SB Nation Atlanta.

Of course, the NBA lockout is still on. It’s more “on” than ever: there has been one bargaining session in 38 days since the lockout began, and that simply preceded a federal lawsuit filed by the NBA which alleged bad faith. The NBA owners still claim they need a reworked system that ensures profitability; the NBA players are still unwilling to hand over a substantial portion of their future paychecks because some owners made bad decisions (either buying into the league or paying the wrong players).

Alex Meruelo’s entrance will not help one little bit of this.

Meruelo says he has no plans to move the Hawks, and it’s hard to imagine that the NBA would want to leave a market like Atlanta, especially considering that Philips Arena is just 12 years old and remains competitive with newer buildings in terms of amenities.

But, as Foley describes, the costs of relocation would likely be prohibitive.

When California businessman Alex Meruelo officially becomes the next owner of the Atlanta Hawks -- provided he passes the NBA’s review process, which few fail -- he will be the league’s seventh new franchise owner in just the past two seasons.

How this incredibly new class of owners affects the trajectory of the league remains to be seen.

With the news that the Atlanta Hawks have been sold to a non-local, California businessman Alex Meruelo, Atlanta fans might worry about losing another team to relocation, much as they lost the Atlanta Thrashers to Winnipeg. But Meruelo told the Atlanta Journal-Constitution he wants to bring an NBA championship to Atlanta.

Telling the AJC’s Mark Bradley “I will be in complete control of the team,” Meruelo, who stands to become the NBA’s first Hispanic owner, began his tenure as the next Hawks owner by doing the sort of public relations work that gets sports columnists on the owner’s side. Bradley compares him favorably to the Liberty Media group that runs the Atlanta Braves, and the conversation is written up in glowing terms.

In case you were wondering, the Hawks will not suffer the same fate as the Thrashers and get shipped out of town. Atlanta is a very important market to the NBA, and they’re much more interested in improving the lackluster product than they are in moving to another locale. With a large population, lots of people with money, and now no major winter competitor for peoples’ hard earned dollars, the Hawks have a lot of room for growth, which is probably what makes them such an attractive investment proposition for Meruelo.

For more on this developing story and the Atlanta Hawks, visit Peachtree Hoops and SB Nation Atlanta.

The Atlanta Spirit group recently sold the NHL’s Thrashers to a Winnipeg-based group; the NHL quickly approved relocation out of Atlanta. The Hawks won’t be moved, though: Atlanta is too important a market for the NBA, despite lousy crowds at Phillips Arena over the years.