Joseph Tsai, the executive vice chairman and co-founder of Chinese e-commerce goliath Alibaba, has reached an agreement in principle to purchase a 49 percent minority stake in the Brooklyn Nets that includes the option to acquire controlling interest of the NBA franchise in 2021, league sources told ESPN.
The purchase price will be based on a $2.3 billion valuation of the team, league sources said. The sales price of $2.3 billion eclipses the NBA-record $2.2 billion that Tilman Fertitta recently paid to purchase the Houston Rockets.
Mikhail Prokhorov will remain principal and operating owner of the Nets for an additional four years, with a presumption that he will sell his majority stake upon the triggering of Tsai's option, league sources said.
Tsai, 53, will not oversee any basketball or business operations as a minority partner in the team, responsibilities that will stay with Prokhorov and his management team until he sells his majority stake, league sources said.
The deal excludes the acquisition of the Barclays Center in Brooklyn, sources said. Prokhorov owns the arena, and it's expected that a new long-term lease for the Nets will be negotiated soon, league sources said.
Without the Barclays Center, the deal represents another big bet on the future of the NBA -- and on the power of Brooklyn as a market. The Nets on their own have been huge money losers since they moved to Brooklyn, according to internal league financial documents obtained by ESPN.
The Nets lost $144 million on basketball-related activities in 2013-14, the largest such figure in the league that season by more than $100 million. Crippling luxury tax payments for a veteran-laden roster contributed to that, but the losses have sustained. Based on the league's operating income figures, Brooklyn lost almost $23.5 million last season, the second-largest loss among all teams, ahead of only the Detroit Pistons.
Brooklyn earned only about $20 million from its local TV deal and pulled in $36 million in net local revenue last season -- the lowest such figure in the league.
Tsai was born in Taiwan, was educated at Yale -- both undergrad and law school -- and holds a Canadian citizenship. He has a rich personal history with athletics, including his days as a high school lacrosse and football player at the Lawrenceville School in New Jersey. Tsai was an avid pickup basketball player at Yale and has been a significant NBA fan for years. His business career has taken him from New York to Asia over the past three decades.
He has expressed enthusiasm over the direction of the franchise with general manager Sean Marks and coach Kenny Atkinson, sources said, and ultimately plans to work on bridging his strong Asian business ties into global business opportunities for the Nets.
Prokhorov bought controlling interest in the Nets in 2010 and completed a deal for ownership of the Barclays Center in 2015. Prokhorov in 2010 set forth on a five-year timetable to try to win a championship. But the Nets ran up one of the NBA's highest payrolls and luxury tax bills, traded and swapped spots on multiple future first-round picks and ultimately delivered only one playoff series victory.
The Nets won 21 games in 2015-16 and 20 last season. This season, the Nets have been one of the NBA's early surprises, winning three of their first five games, including a victory over defending Eastern Conference champion Cleveland.
Since the hiring of Marks as general manager in 2016, the Nets have made significant strides in rebuilding the roster with talented young players, replenishing their pool of draft picks through deals and creating an environment of culture and professionalism. Prokhorov plans to continue with Marks' long-term rebuilding strategy.