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Surprising sale

Investment group buys Celtics for $360 million

Posted: Friday September 27, 2002 2:26 PM
Updated: Friday September 27, 2002 9:58 PM
  Wycliffe Grousbeck, Steve Pagliuca Wycliffe Grousbeck (left) and Steve Pagliuca announce their purchase of the Boston Celtics. AP

WALTHAM, Mass. (AP) -- The Boston Celtics, after their best season in 14 years, will be sold to a local investment group for $360 million in a surprise deal announced Friday.

The agreement to sell one of the most storied franchises in pro sports was signed in New York. NBA deputy commissioner Russ Granik said he expects league approval of the deal in a couple of weeks.

Paul Gaston, owner since 1992, is selling the team to a group led by venture capitalists Stephen Pagliuca and Wycliffe Grousbeck, as well as Grousbeck's father, H. Irving Grousbeck, the founder of Continental Cablevision and now a Stanford Business School professor.

Pagliuca and Wycliffe Grousbeck gave no indication at a news conference at the Celtics training facility how much they would be willing to spend on player salaries for a team that reached the Eastern Conference finals last season for the first time since 1988.

"I think you can have a well-run, fiscally sound team and also put a great product on the court," Pagliuca said, "and that's what we're going to do here."

The Celtics finished 49-33 last season and reached the playoffs for the first time in seven years. Wycliffe Grousbeck praised general manager Chris Wallace and coach Jim O'Brien but neither partner at the news conference discussed possible personnel moves.

After the season, the team chose not to re-sign Rodney Rogers and traded for Vin Baker, moves seen by some as aimed at saving the Celtics money under the NBA luxury tax that teams must pay if they exceed a certain payroll total. But their two best players, Antoine Walker and Paul Pierce, remain with the team.

"They're very shrewd business people," Celtics executive vice president Richard Pond said of the partners. "You want to be as successful as you can (financially) and win a championship, obviously."

The partners first approached Gaston in July and were told the team was not for sale. Talks continued, an offer was made in August and an agreement was reached this month, said Robert Caporale, an investment banker hired by the new ownership group to work on the deal. The partners plan to pursue other potential local investors.

"It's a tremendous honor to be here," Wycliffe Grousbeck said.

The first word that a deal was in the works came two hours before the news conference. The need for secrecy was high because the Celtics are a publicly traded company and team officials didn't want people buying shares with inside information.

"I'm shocked because this happened so quickly. None of us had any idea this was going on," former Celtics great Bob Cousy said. "I'm happy it was a local group."

Under the agreement, the group would buy out Gaston as well as the 48 percent stake in the team owned by a publicly traded limited partnership, which will continue to exist but essentially sell the new owners its stake in the team, Pond said.

Gaston succeeded his father, Donald Gaston, as owner.

"You can't schedule big events in your life," Paul Gaston said about the timing of the deal. "It's an emotional day for me and my family and it's not something we certainly have taken lightly over the past few weeks."

The team began selling public shares in 1986, when it won its third NBA championship in five years. Shareholders, many of whom are fans who own a handful of shares to hang on their walls as souvenirs, have no voting rights.

Boston has won 16 NBA championships, more than any other team, and Forbes Magazine recently estimated the value of the franchise at $218 million, 13th in the NBA, and well behind the first-place Los Angeles Lakers at $403 million.

But veteran Boston sports observer Larry Moulter, former president of the Boston Garden, said the $360 million price was fair considering the new owners would get a lease on the FleetCenter and not have to pay rent.

"It's a brand name that doesn't come on the market often," Moulter said. "It's a legacy brand name."

The team is the second Boston sports franchise to change hands this year. The Red Sox were bought by a group led by Florida financier John Henry in February for $700 million, including debt.

Caporale said the Grousbeck group hired his company about six months ago to find a baseball, basketball or hockey team to buy, not necessarily in Boston.

Gaston will depart from a team apparently on the rise after struggles that included the deaths of top draft pick Len Bias in 1986, and star player Reggie Lewis in 1993, as well as the turbulent tenure of coach Rick Pitino.

Irving Grousbeck, who founded Cablevision in Boston in 1963, made inquiries into buying the San Francisco Giants in the early 1990s when the team was threatening to leave the city.

Gaston and then-fellow owners Paul Dupee Jr. and Alan Cohen sold 40 percent of the team for $18.50 per share in 1986, but the novelty of owning a part of the team wore off. And as the team faded into mediocrity on the court in the early 1990s, so did its shares. They closed Friday up 20 cents at $10.60, though that price does not account for splits.

After the announcement Friday, the Celtics released their financial results for the year ending June 30. The team reported profits of $4.6 million, or $1.62 per share, up from a loss of $4 million, or $1.27 per share, a year ago.

Under the proposed sale, shareholders of the public company would receive $173.9 million for their share of the team, which could then be used to offset liabilities. It was not clear how leftover funds would be used.

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