Report: Lead banker in Suns’ sale worries potential buyers

Nov 2, 2022, 8:20 AM
Navid Mahmoodzadegan and Craig Wadler attend Paris Photo Los Angeles UTA Reception at Paramount Stu...
Navid Mahmoodzadegan and Craig Wadler attend Paris Photo Los Angeles UTA Reception at Paramount Studios on April 30, 2015 in Los Angeles, California. (Photo by Stefanie Keenan/Getty Images for Reed Expositions France Paris Photo)
(Photo by Stefanie Keenan/Getty Images for Reed Expositions France Paris Photo)

A banker leading the sale of the Phoenix Suns and Mercury by advising current owner Robert Sarver has worried some potential buyers because of a conflict of interest, according to sources of Semafor reporter Bradley Saacks.

That is because that banker, Moelis & Company executive Navid Mahmoodzadegan, is also an advisor to Jahm Najafi, a Suns minority owner. Najafi has publically criticized Sarver starting when news of an upcoming ESPN story on Sarver’s workplace behavior went public in November 2021.

Najafi released another public statement on Sept. 15 of this year, when the NBA’s investigation into allegations of Sarver using racist and sexist language, among other indiscretions, was released in summation to the public. A week of mounting public pressure led to Sarver’s decision to sell the team.

Saacks writes that potential buyers believe Mahmoodzadegan’s relationship with Najafi and Sarver could sway the sales process:

Mahmoodzadegan is also an advisor to Najafi, working with the billionaire on the failed SPAC that Najafi launched with former NFL star Colin Kaepernick. The worry, according to potential buyers and their advisers, is that the banker might steer the sale towards a buyer Najafi approves, rather than the highest bidder or most natural fit.

“You just don’t know how much Najafi will be a part of any negotiation, or if you’re negotiating with Sarver or Najafi,” said a person who has been in touch with potential buyers.

Both Sarver and Najafi declined to comment for Semafor’s story.

A “person familiar with Sarver’s thinking” told Saacks that Ken Moelis, the founder of Moelis, said he and Mahmoodzadegan would work personally on the sale of the Suns. The source added that Sarver picked Moelis because he likes the company’s West Coast location in Los Angeles, and that the bank’s reputation will keep any potential conflicts of interest out of the sale.

“(Sarver) ultimately knows it will come down to the highest bidder,” this person said, and that Sarver has a fiduciary duty to the rest of the owners — including Najafi — to get the best deal possible.

Forbes valued the Suns recently at $2.7 billion, though it is possible the franchise will sell for much more.

Another unique feature of the sale of the team is how minority owners are involved in the process of Sarver’s sale, The Athletic’s Daniel Kaplan wrote this week.

The Suns play in a major media market, the NBA is the most global of the U.S. major leagues, and most importantly, is on the verge of a new round of media deals that could triple the current rights fees.

But there is another reason why the price, or more pointedly the valuation, could set a record: Owners of 60 percent of the team do not have what is known as “tag-along” rights, meaning only 40 percent of the club might get sold, three sports investment bankers said.

They said Sarver owns 35 percent of the team, but his shares are the control ones. A five percent stake held by private equity firm Dyal has the provision that if the controlling owner sells, its shares must also be bought by the new owner. But the remaining limited partners do not have the tag-along provision.

Sarver could require in any transaction that all the shareholders are bought out, but it is not obligatory.

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Report: Lead banker in Suns’ sale worries potential buyers