The arbitration hearing to decide the Timberwolves’ ownership dispute began on Monday and is expected to last most of the week. The decision by the three-person arbitration panel is expected to be announced next month, according to ESPN’s Brian Windhorst.
The dispute between minority owners Marc Lore and Alex Rodriguez and principal owner Glen Taylor moved to arbitration in July. A one-day mediation in the spring failed to make any progress, Windhorst writes.
The dispute has been ongoing since the tail end of last season. Taylor nixed the previous tiered payment agreement with Lore and Rodriguez, citing a breach of contract and a failure to meet a payment deadline. Lore and Rodriguez disputed that characterization, stating that they had the funds necessary to become majority owners but were awaiting NBA approval and should have been entitled to an extension.
The third payment in dispute would increase Lore and Rodriguez’ share from 36% to about 80% and the purchase agreement stipulates that they could buy out Taylor’s remaining 20% stake anytime before March 2025.
Windhorst and The Athletic’s Jon Krawczynski provided more details of the process:
- If the arbitration panel rules in Taylor’s favor, the process essentially ends. Lore and Rodriguez could remain as limited partners or try to sell their shares. Taylor would have to approve the sale of their shares, according to Krawczynski. However, if Lore and Rodriguez get a favorable ruling. Taylor would be contractually compelled to sell them the controlling share for the previously agreed upon $1.5 billion valuation. The franchise’s value is substantially higher now, which is a major factor in Taylor’s decision to try to halt the sale. Lore and Rodriguez would still need 23 of 30 votes from the league’s owners to finalize the acquisition, since all team percentage transfers are subject to a vote, Windhorst notes.
- Those transfer rules could present a sticky situation, due to Taylor’s long-standing relationships with the other owners and commissioner Adam Silver. There have been plenty of back-scene developments due to that possibility, according to Windhorst. Lore and Rodriguez have worked to meet with owners and the league office in recent months to demonstrate their position and attempt to shore up support in the event of a vote. It’s likely that Silver and BOG chairman Larry Tanenbaum will try to build a consensus in lieu of an owners’ vote.
- Lore and Rodriguez have been firming up their finances by recruiting billionaires Michael Bloomberg, the former mayor of New York, and Eric Schmidt, the former CEO of Google, as well as private equity firm Dyal Homecourt Partners. They have amassed $950MM in an escrow account for not just the 40% needed to take majority control, but enough to give them 100% ownership of the team.
- The team is facing a luxury tax bill of $100MM and total operating losses of more than $150MM this season, according to Krawczynski. That’s one reason why the Timberwolves moved Karl-Anthony Towns in a blockbuster trade with the Knicks.
- Team president Tim Connelly could have opted out of his contract this year but agreed to defer the opt-out until the 2025 offseason. If he doesn’t like the direction the way things are going, he could choose to opt out this time around, regardless of who’s running the franchise at that time.