Rockets' Popularity in China Could Push Price Past $2 Billion

(Bloomberg) -- The sale of the Houston Rockets could set a National Basketball Association record, surpassing the $2 billion that Steve Ballmer paid for the Los Angeles Clippers, according to sports consultants.

Rockets owner Les Alexander said Monday that he was selling the franchise, which Forbes magazine says is valued at $1.65 billion. The sale price will likely be higher, said former Rockets President George Postolos, thanks in part to the team’s popularity in China, where former Rockets star Yao Ming is immensely popular.

The Rockets, who last won an NBA title in 1995, recently gave star guard James Harden the largest contract in NBA history, a four-year extension that brings the deal to a reported $228 million. The team also recently traded for nine-time All Star point guard Chris Paul.

“With the Rockets’ history, having had Yao Ming and the team’s high profile in Asia -- James Harden, Chris Paul and the high profile they have on the current roster, all the other attributes of the franchise -- they’re gonna be very attractive,” said Postolos, now a sports consultant. He said the price will likely approach what Ballmer paid in 2014.

The planned sale comes as franchise values across major professional sports are skyrocketing. The past five years have seen a number of record-setting transactions in the NBA, topped by the Ballmer purchase. The NBA just finished the first season under a new $24 billion TV deal, a threefold increase over the previous agreement.

“The market is primed for it,” said consultant Marc Ganis, who has been involved in sports and entertainment deals in China for the past two decades. He said that soaring valuations, plus the team’s added appeal to an overseas investor, could result in the team fetching more than $2 billion.

Asian Popularity

Yao, a 7-foot-6-inch All-Star center, spent his entire eight-year career in Houston, fueling the franchise’s popularity in Asia. His presence is one reason why Toyota Motor Corp. put its name on the team’s arena. Another former Rockets star, Tracy McGrady, had a successful career in China after leaving the NBA. There’s also a large Chinese-American community in Houston. Ganis said he wouldn’t be suprised if Yao were part of a group that bid on the team.

The NBA has spent decades cultivating fans in Asia. The league made its first deal in China in 1988, sharing a portion of advertising revenue in return for games being broadcast on the country’s CCTV. It later became the first U.S. league to open an office in China, and the first to play there. The league played two preseason games in China last year, both featuring the Rockets.

The NBA has also spent time wooing and vetting potential ownership groups. Last year, Lizhang Jiang, general manager of Shanghai Double-Edged Sports, became the first Chinese owner of an NBA team when he bought a minority stake in the Minnesota Timberwolves.

Influential Owner

A former bond trader, Alexander bought the team in 1993 for $85 million. NBA Commissioner Adam Silver praised him as someone who helped expand the league’s international appeal.

“He has been an active and influential owner whose vision helped to grow the game globally, especially in China,” Silver said in a statement.

Alexander has put team president Tad Brown in charge of coordinating the sale, in conjunction with the league office. Alexander said in a telephone interview that he wouldn’t be hiring a bank to assist in the sale, as owners often do.

The Atlanta Hawks were the last NBA team to be sold, fetching a $730 million price from Tony Ressler in 2015. That sale also included $120 million in arena debt.

To contact the reporters on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net, Scott Soshnick in New York at ssoshnick@bloomberg.net.

To contact the editors responsible for this story: Janet Paskin at jpaskin@bloomberg.net, Mark Schoifet, Drew Armstrong