Editors Note: After this piece was published, we followed up with a companion piece that talks in more detail about how the Bucks themselves make an attractive hedge fund target in a sense, and some of the potential risks of selling to Lasry and Edens.

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Most of you following the Bucks on social media received the news regarding the names of the front-runners to purchase the Bucks, as reported by Bill Simmons in his weekly “Mailbag” column over at Grantland. That said, we aren’t sure this giant tree falling in the forest made an impact locally, so we’re here to offer some thoughts on it.

A week ago this time, Simmons set Bucks Nation ablaze with his report that the Bucks were very close to being sold, for a price in the $525 million dollar range. That lead off a speculative frenzy as to who the potential buyers might be. We thought Rich Kirchen of The Business Journal might have nailed it with his profile of Chicagoan Dr. Richard Chaifetz, a self made millionaire who has in the past few years been linked to groups trying to purchase the Minnesota Timberwolves and St. Louis Rams.  Not the case, as Simmons followed up yesterday with his reporting that:

The guys who thought they had it as recently as two days ago? Hedge-fund billionaires Marc Lasry and Wes Edens, who slid under the radar this entire time and thought they landed the Bucks with an offer in the $550 million range (slightly more than Vivek Ranadivé paid for the equally unappealing Kings). As recently as Wednesday, Lasry and Edens were expecting the NBA to vote on their bid at next week’s Board of Governors meeting.

So … what happened?

Apparently there’s been a late flurry of offers from at least two other parties — not the Seattle guys — and now, incredibly, the price might be climbing and/or Kohl might be wavering to see if he should play this out longer. I thought I had this story nailed two days ago; now, I’m not sure. Will Lasry and Edens land the Bucks? Will someone else swoop in? What promises will be made to Adam Silver, who has demanded a new arena in Milwaukee by 2017 at the latest … or else? And can the Bucks and Kings really go for a combined $1.1 billion or more???? Good Lord! My money is still on Lasry and Edens, but I can’t believe this process is still dragging along. You know, kind of like the Bucks.

There were a few bombshells in the information above. First, the names of the two prospective purchasers that he still considers the front runners, Marc Lasry and Wes Edens. 99.9% of Southeastern Wisconsin residents had not heard of those guys before yesterday. That said, everyone on Wall Street recognizes the names. These two are big hitters in the world of hedge funds and are billionaires.

Here is Wes Eden’s Business Week bio. We will try to condense that long bio down to the important facts. He’s 52 years old and grew up near Helena, Montana. He went to school at Oregon State before taking his first job with a Savings and Loan in California. He was with Lehman Brothers, BlackRock and then co-founded Fortress Investment Group in 1998. Eden’s and his partners have approximately $55 billion under management. Here is a video interview with him from 2010, discussing stock valuations. For those who want some additional background on how Edens made his money in the hedge fund world, here is a 2009 Vanity Fair article profiling he and his partners, and how they built up Fortress. Despite his towering presence in the world of finance, Edens has a fairly low profile otherwise.

The other name in the bid Simmons referenced is Marc Lasry. Like Edens, Lasry, age 53, is also a billionaire.  He made his money founding Avenue Capital Group. He was born in Morocco and came over to the US as a young child. Lasry graduated from Clark University and initially drove a delivery truck for UPS, before attending New York Law School and becoming a bankruptcy attorney. It is likely this career choice lead him into the world of distressed assets and later hedge funds. His firm reportedly manages approximately $12.8 billion and Forbes reported that he personally made an estimated $280 million last year. Of course that only ranked him #24 in earnings among hedge fund managers in 2013, well behind the leader, George Soros, who reportedly made $4 billion.

We could go on and on about the background of both of these men in the financial world, but we will lose readers by the sentence, as we list their various activities on Wall Street. The important thing to note is that these are two self-made guys, who are extremely bright. They also are extremely wealthy. We aren’t talking Herb Kohl wealthy, but rather Mark Cuban wealthy, or likely greater.

They present an interesting cultural dynamic for the city of Milwaukee. These two are part of the “1%” or perhaps the “.0000000001%.”  They’ve made their money in very different ways than blue collar Milwaukee typically has. While there has been some level of significant wealth created the last 20-years in the financial services sector here, a great deal of the historical Milwaukee wealth was created by the manufacturing barons of the past century. Lasry and Edens are Wall Street in every sense of the word.

Politically both Lasry and Edens align with Senator Kohl, as both men are strong financial supporters of Democratic candidates, including President Obama. Eden’s firm employed Senator John Edwards as a consultant for a time, and Lasry’s firm employed Chelsea Clinton from 2006 to 2009.

Here’s how we view their bid for the Bucks:

Strengths:

Their Wealth. If Lasry and Edens purchase the team, they will be among the wealthiest of NBA owners. This will provide some contrast to Senator Kohl, who while wealthy, has most of his money tied up in the form of his ownership of the Bucks. We don’t forsee Lasry and Edens running a luxury tax payroll like Nets owner Mikhail Prokhorov, but they also won’t be fretting over the team running a loss in any given year.

Smarts: Edens and Lasry have gone head to head with the best on Wall Street and globally for years. While they’ve both had their share of high profile losses, they are survivors of the 2008 financial meltdown. For Bucks fans who would like the team to hire only the best and brightest in the front office, while likely utilizing analytics, these two would seem to be a match made in heaven.  How would we surmise they might be open to statistics and analytics?  There is this blurb from a New York Post story last year:

Lasry has been known to play in informal games with other wealthy investors, including Boaz Weinstein, founder of hedge fund Saba Capital Management, and David Bonderman, head of private-equity giant TPG Capital.

“I have a rule. Never play cards with Marc for money,” Bonderman told the trade publication Institutional Investor in 2007.

The publication reported that Lasry often hosts winner-take-all card games in his Upper East Side mansion, where the stakes can get as high as $20,000 per hand.

Last year, Lasry spoke on Bloomberg TV of his love for poker.

“Poker is math, so I enjoy playing it because I think there’s a lot of math involved,” he said. “And it’s fun. It’s fun to play with others.”

While at times controversial, these two are extremely bright guys. Bucks fans won’t have to worry about them hiring a failed retread like Bryan Colangelo or David Kahn to run the basketball operations.

Weaknesses

Their wealth: While their support for Democratic politicians and causes will earn them some level of partnership with one side of the political aisle here, their sheer wealth and how they earn their money may not play well in Milwaukee, especially as it relates to a new arena.  We’ve heard critics of a new arena decry any subsidies for “millionaire Herb Kohl”. Those cries will only become louder if two out of town billionaires are brought into the mix.

Stability: The hedge fund world is filled with cut-throat corporate actions, which make the Howard Schultz/Clay Bennett sale and subsequent move of the Seattle Sonics look like child’s play.  Will Lasry and Edens be committed to Milwaukee?  Will they take on any local civic roles as Brewers owner Mark Attanasio has done so well?  Will they purchase the team and then later move it for a profit, even if there is a long-term lease in place in a new arena?

No one can answer these questions at the moment. It is possible that Lasry and Edens simply want “in” to the exclusive club of 30 NBA owners and won’t mind at all the fact their team is located in Milwaukee.  We’ve got a convenient airport and practice facility that they can jet in and out of with ease, and they might appreciate owning a team in a lower profile city, where if they runs things well, they will be considered civic heroes and not subject to the press they’d receive in New York or Los Angeles.  That said, these are not local buyers, and their likely associations with Milwaukee in the past probably only related to corporations here that they might have looked at investing in.

Who Wins the Bidding War?

The other key piece from Simmons was the fact that Lasry and Edens thought they had their purchase locked up, until three days ago, when other parties reportedly upped their bids, causing Kohl to take a pause to reassess the other offers.

Based on the fact that sale of the Bucks would be conditioned on their remaining in Milwaukee, we thought the sale price would be much lower, more likely in the $400 to $450 million dollar range, with Senator Kohl leaving substantial dollars on the table as a result. That potential sale price appeared to be what we thought the market would bear as it relates to local investors, and it still may be.

Nonetheless, as Fonzie would say, we were wroooo…wrrooooo…wrong on the sale price Kohl might have to settle for, while still being able to keep the team in Milwaukee. The market for an NBA team evidently is extremely robust, and not just from one bidder (Chris Hansen in Seattle). It also seems apparent that NBA commissioner Adam Silver is working behind the scenes to make sure the Bucks sell for a price at least equivalent to what the Kings sold for, to make sure that he does his job of increasing asset value for all NBA owners.

If the team sells in the $550 to $600 million dollar range, it will provide a significant windfall for Senator Kohl.  The question then becomes, how much might he might invest in a new arena and what would be his net gain to do so after capital gains taxes are accounted for in a sale. We still would appreciate thoughts from any attorneys out there who specialize in tax law, that could offer some commentary as to ways a franchise sale and subsequent donation or investment in a new arena complex could be structured so as to minimize taxes for Senator Kohl.

Where do we go from here?

No one knows. The last time Kohl had the team up for sale in 2003, he came within inches of selling to a group lead by Michael Jordan, before backing out at the last minute, reportedly over concerns about whether or not the Jordan group would keep the team in Milwaukee. The scuttlebutt is that the Lasry/Edens bid was going to be reviewed by NBA Board of Governors meeting on April 17-18th of next week.

The great news is that Kohl appears committed to making sure the team remains in Milwaukee. As Simmons reported, he rejected outright offers from the Seattle group. The other good news is that Lasry and Edens appear to have the smarts and the means to take over the Bucks and build them into one of the best run organizations in the NBA. The question is how Kohl can navigate that process, while ensuring the team remains here and a new arena is built. When you add in the upcoming NBA Draft Lottery on May 20th, the next 40-days are going to be the most important in franchise history. Buckle up, we are in for an amazing ride and hopefully for Bucks fans, the outcome will turn out beautifully, but we still aren’t there yet. Godspeed to Senator Kohl in his negotiations in the coming days.

ADDENDUM: After this piece was published, we followed up with a companion piece that talks in more detail about how the Bucks themselves make an attractive hedge fund target in a sense, and some of the potential risks of selling to Lasry and Edens.