Frank Deford, one of the most distinguished sportswriters in America, wondered aloud this week in a commentary on National Public Radio, “But who, for example, would dish out a couple hundred million now to buy a team in the NBA at a time when pro basketball is as out of fashion as day-trading.”
The answer, it appears, is at least two of the wealthiest men in Memphis: AutoZone founder Pitt Hyde and Southeastern Asset Management President Staley Cates. Ironically, Cates is known as a talented “value” investor in stocks that are supposedly underpriced. The Vancouver Grizzlies are one of the worst teams in a league whose image and television ratings are plummeting.
Go figure.
Other Memphis media reported this week that Hyde’s other partner is Andy Cates, Staley’s younger brother. Reliable Flyer sources who have been involved with the so-called “pursuit team” said Southeastern Asset Management CEO and founder O. Mason Hawkins is a partner. But his spokesman, Lee Harper, denied Friday that Hawkins is or ever was an active partner, secret partner, silent partner, or any other kind of partner.
The would-be Memphis investors have been involved in the pursuit of the NBA for several months, first with the Charlotte Hornets, which are staying put, then with the Grizzlies and their owner, Michael Heisley. Staley Cates is a highly regarded mutual fund manager who is occasionally featured in investment magazines but rarely appears in the local press. Hyde, in contrast, has been actively involved with AutoZone Park, AutoZone’s downtown headquarters, the NFL drive, the National Civil Rights Museum, and support for public education. He was also a key backer of building The Pyramid, which he called “a slam dunk” at the time.
Southeastern Asset Management is manager and adviser to the Longleaf Partners Fund, the Longleaf Small-Cap Fund, as well international and realty funds. Unlike CEOs of public companies, whose wealth in stock can be readily calculated from public disclosure forms, Cates’ wealth is harder to gauge. But Southeastern has earned around $50 million a year in fees in recent years.
Calls to Staley Cates Friday were not returned.
The identities of the potential buyers is much more than an interesting guessing game. Unlike the construction of The Pyramid and the pursuit of an NFL team, which were publicly vetted by their political and private-sector backers for years, the NBA quest has been something of a stealth project until this week. If the bidders are successful, they will essentially be handing Memphis, Shelby County, and Tennessee taxpayers a major-league franchise and saying, here it is, now build us a $250-million arena and line up for tickets.
One problem with that approach is that no one knows how much demand there is in Memphis for the NBA. League television ratings are down, the Grizzlies have never had close to a winning season, and season tickets cost upwards of $2,000. As Deford said on NPR, “The question now is, as the world economy stutters, as Wall Street staggers, as every other industry pays the piper, will the business of sports finally show some losses.”
Whether a new arena and, say, a sales tax increase to pay for it would pass a public referendum, as Commissioner Buck Wellford proposed, is questionable to say the least.
Hyde said this week he has two other investors, and shortly thereafter the Cates brothers stepped forward, supposedly to keep the mystery from being a distraction. Some Memphis businessmen were not convinced.
At a mid-week meeting of business leaders at The Crescent Club, FedEx CFO Alan Graf announced the company’s willingness to make a substantial investment in naming the team and the new arena. He said the investment would be a good deal for FedEx, and that one of its biggest shareholders, Southeastern Asset Management, agreed. The project was praised as a great example of supply-side economics by Hawkins, accordiing to someone who was at the meeting.
FedEx is not investing in the ownership of the team corporately or, so far, via key individuals. But Hyde said he would welcome additional investors. He also said, however, that he did not expect to make money on the deal.
