Mikhail Prokhorov honed his intuition at the exit to the cache

Why did billionaire Mikhail Prokhorov sell his basketball business and what projects are he interested in now?
20.12.2019
Forbes
Origin source
On the threshold of his 30th birthday, financier, co-owner of Oneximbank Mikhail Prokhorov went to the United States. In Russia, in the mid-1990s, crises succeeded one another, corporate wars raged, and the future billionaire walked placidly along Brighton Beach in the south of Brooklyn, the most populous area of ​​New York. Most of all, “Russian America” impressed Prokhorov with restaurants - local dishes were cooked in the best traditions of Soviet cuisine and made him nostalgic for the 1970s.

The times when Mikhail Prokhorov could calmly walk around Brooklyn are long behind. The purchase of the basketball team and its move to Brooklyn made him an American superstar, and the deal to close it, closed in 2019, became the largest in the history of the NBA (more about the deal). On the streets of New York, Prokhorov is asked for autographs, he is the favorite of the American public and the media. At the same time, the billionaire has already left the Russian radar for several years. What did Prokhorov do?

Experiments and luck

In the lobby of the luxurious Four Seasons Moscow Hotel there was no crowding. In December 2016, the best Russian businessmen were awarded the RBC Prize here. The ceremony was traditionally opened by the then owner of the media holding Mikhail Prokhorov, after which he personally handed a cake in the form of a boat to the Director General of RBC Nikolai Molibog. On one of its sides cream was displayed "In the same boat."

The media holding, which Prokhorov bought in 2010, became for him a black swan, says a billionaire friend. Prokhorov showed interest in the media when he became interested in politics. Prokhorov delved into strategy, content, from time to time offered to buy other media, he phoned guests of the RBC award himself, his acquaintance lists.

The arrival at the beginning of 2014 of the new chief editor of RBC, Elizabeth Osetinskaya, was marked by a series of high-profile investigations, including about the environment of Vladimir Putin. This was alarming for Prokhorov, several media managers familiar with him admit, but he did not intervene in the editorial policy of RBC, he only recommended: “You can burn not so brightly and not so quickly.”

In 2016, right during the Direct Line with the president, the FSB conducted searches in all major companies of Prokhorov, with the exception of RBC. “Here are these - RBC - calm down,” one of the former media managers Prokhorov interprets the signal. Two weeks later, Rosneft sued RBC to protect its goodwill. The amount of claims exceeded 3 billion rubles. After that, the media reported that Prokhorov put up for sale his main assets in Russia. “One thing came together,” says a friend of his. According to the Forbes interlocutor, Prokhorov has long been looking for buyers for Russian business: “There was fatigue.” Fatigue was preceded by the accession of Crimea in 2014, adds another billionaire friend.

A week after the presentation of the RBC Prize for 2016, the court reduced the amount of Rosneft's claims by 8,000 times to 390,000 rubles. At the same time, there were rumors that Prokhorov was negotiating the sale of RBC. By that time, the Ossetian and the bulk of her team had left the media holding. Six months later, Prokhorov broke up with RBC, after which Rosneft signed a world media holding.
Prokhorov was pushed to the wall, but not without the help of influential intercessors (one of them is the head of the Rostec state corporation, Sergei Chemezov), he got out, summarizes one of RBC's former media managers. At the same time, the Forbes interlocutor does not hold a grudge against the billionaire: “He could remain the owner of RBC and succumb to external influence, he could turn the head off for journalists. But he behaved very well. ”

Prokhorov coped well with the exit from Russian assets, said an investor familiar with him. In his opinion, the main success was the sale of the UC Rusal F 11 package before the founder of the company Oleg Deripaska F 30 came under US sanctions in April 2018. The news at the moment collapsed the price of UC Rusal's shares almost threefold. And two months earlier, Prokhorov sold 6% of UC Rusal to billionaires Viktor Vekselberg F 11 and Leonard Blavatnik, estimated at about $ 600 million. It took at least six months to prepare the deal, says Dmitry Razumov, CEO of Onexim, Prokhorov holding: “On in fact, it’s just luck, it [the deal] could well last another couple of months. ” At the same time, he emphasizes that the sale of assets was not forced: "We parted with some assets that the buyer was on and in which we did not see a particular growth prospect."

Earlier, Prokhorov at least twice successfully sold assets: a package of Norilsk Nickel F 9 on the eve of the 2008 crisis and Polyus Gold F 47 before a series of collapses in the gold market in 2013. Prokhorov has “incredible intuition” and “investor instinct,” two of his friends say. “By old age, I noticed one pattern: the more I work, the more I get lucky,” his neighbor on the Forbes list laughs at Prokhorov’s “luckiness”. However, the interlocutor admits that Prokhorov "is not without talent" and "he has a creative look": "He can go against trends, and this often turns out to be right." According to this principle, in 2010 Prokhorov bought a basketball team. “He does not like a collective farm. Everyone has football clubs, but Misha wanted something else, ”his acquaintance says. The basketball experiment brought Prokhorov an excellent result.

Basketball and Stadium

In July 2010, in the very center of New York - literally across the street from the legendary Madison Square Garden arena - a gigantic black and white billboard appeared: rapper Jay-Z and Russian billionaire Mikhail Prokhorov, both with ties, and above them the slogan “The blueprint for greatness ”(The Way to Greatness). A month earlier, Prokhorov bought an 80% stake in the NBA New Jersey Nets team, of which Jay-Z was a minority co-owner. By 2012, Nets were planning to move to Brooklyn, and daring advertising near the home site of another New York Knicks team indicated Prokhorov’s level of ambition. It was not Prokhorov who invented Nets in Brooklyn, but Bruce Ratner, a New York developer. The center of his large Brooklyn project Atlantic Yards for almost $ 5 billion was supposed to be the multifunctional Barclays Center arena, which required an anchor tenant - a sports club. And in 2004, Ratner bought New Jersey Nets for $ 300 million. With him, the team, who had recently played in the NBA finals, slipped into outsiders, bringing $ 30 million in losses a year. And the financial crisis of 2008 exacerbated Ratner's position. He desperately needed money for a club and a construction site.

It was possible to find an investor in 2009. Then the NBA commissioner David Stern recommended Ratner Prokhorov, whom he was personally acquainted with. The tall Prokhorov from his youth was not indifferent to basketball: he played and financed the Moscow CSKA for many years, but after breaking up with business partner Vladimir Potanin he was left without a team. In 2007, Prokhorov began to look closely at the NBA clubs, including the Knicks. In the context of the development project, although at that time it was only a foundation pit in the center of Brooklyn, Nets' prospects looked more attractive.
 
Prokhorov paid $ 223 million for 80% of the club and 45% of operating rights to the future Barclays Center arena, and also received an option for 20% Atlantic Yards. The new owner took over the club’s debts ($ 160 million), guaranteed coverage of $ 60 million of expenses until the team moved to Brooklyn, and a loan ($ 75.8 million) to build the arena. The American media greeted Prokhorov with ironic headlines in the spirit of “The Newest Toy of the Richest Russian: The NBA Team” (New York Times). The billionaire took the project seriously.

A new arena for Nets opened in 2012, and the club conducted a complete rebranding: changed its name to Brooklyn Nets, changed its logo and shape. Fans appreciated this: by sales of the form in 2013, the club climbed from 31st place to fourth. Prokhorov himself often appears in the form of Nets. Moreover, he often gives her friends a birthday. The club did not shine with sports successes, Nets showed their best result in the 2013/2014 season, reaching the second round of the playoffs.

Meanwhile, in 2015, the club’s value was already estimated at $ 1.5 billion. NBA team prices soared after in 2014, former Microsoft CEO Steve Ballmer bought Los Angeles Clippers for a record $ 2 billion. In 2016, Prokhorov became the sole owner of Nets and arenas, having bought Ratner's shares for about $ 300 million. Prokhorov did not begin to exercise the option for 20% of the stalled development megaproject. Shortly after the deal, rumors began to circulate that Prokhorov had put up a basketball project for sale.

“We realized that there was a reassessment of the NBA teams,” says Razumov. The second factor, he said, was the general uncertainty in world markets: “We actively did not offer a team to anyone, but in 2015–2016 we thought that if there would be an interested buyer, we would consider selling part of our package to fix profit and stay in the risk-free zone. " In 2017, investment bankers hired by Prokhorov told Razumov that billionaire Joseph Tsai was interested in buying the NBA club.

Fifty-five-year-old co-founder of Alibaba, whose fortune in 2019 Forbes valued at $ 9.5 billion, is from Taiwan, graduated from Yale, lives between California and Hong Kong, has a Canadian passport and loves basketball. First, the negotiations were conducted by Razumov, then in New York he met with Prokhorov. “Since the partnership was originally intended to be at least 3-4 years old, this required a personal acquaintance and understanding of whether we were suitable for each other,” Dmitry explains. According to him, Tsai shared Prokhorov’s views on the development of the team and the billionaires had “mutual sympathy”.

In the spring of 2018, the NBA approved the sale of Nets. Tsai paid $ 1 billion for a 49% stake in the team and got the right to buy the remainder until 2021 for $ 1.35 billion. But on August 16, 2019, the second part of the deal was announced, and by the fall it had taken place: Tsai not only became the sole owner of the team, but also bought the rights to the arena, estimated at $ 1.15 billion. Why did it all happen so soon?

“We built what we wanted,” Razumov explains. - The team moved to Brooklyn, gained its identity, the best infrastructure in the league. We have increased the fan base, increased revenue by 4-5 times. The arena has become one of the phenomena of New York. In general, we leave the superfood. And it was important for us to exit the project on this high note. ” In addition, the price proposed by Tsai was “exorbitant,” the Oneksima CEO acknowledges: “This is a deal that is not abandoned.”
Investments in the project were estimated at $ 1.5 billion. Razumov said that the amount of investments was less, but did not disclose it, as well as the exact amount of the transaction. But based on estimates of $ 3.5 billion, Prokhorov could earn at least $ 2 billion. “Of course, this is our merit, but to no lesser extent is what happened with the development of the NBA over the past 10 years,” Razumov notes . League business is really booming. In 2014, the NBA concluded a stunning ($ 24 billion) telecontract with Time Warner’s TNT and Walt Disney’s ESPN for nine years (from the 2016/2017 season). In 2015, a five-year agreement with Tencent Chinese media company for $ 800 million was launched: in China about 300 million people play basketball, they are even more ready to watch the NBA. At the same time, the economy of American basketball is designed so that all revenues are divided evenly between clubs. If league revenue grows, so does team revenue.

And in the case of basketball, it seems, not without luck. Two months after the announcement of the deal, an NBA scandal erupted. Huston Rockets club general manager Daryl Mori, who supported the Hong Kong protests, tweeted the league with Chinese sponsors. And the Chinese state-owned channel CCTV canceled the broadcast of the Brooklyn Nets match. How seriously the conflict will affect the Asian prospects of the NBA is not yet clear. But, it seems, luck smiled on Prokhorov again.

Other clubs

“Girl, girl, dark nights,” the crowded restaurant buzzes. Mikhail Prokhorov is dancing at the stage, surrounded by a dozen girls. In June 2019, on the second day of the St. Petersburg International Economic Forum, he threw a traditional party on the Moika embankment. Before dancing, Prokhorov, dressed in a black Brooklyn Nets T-shirt and sweatpants, personally conducted face control of the guests.

Prokhorov “peculiarly” rests in clubs, a friend of his notes: “He does not drink alcohol. For him, the dance floor is a source of emotion. ” Prokhorov was known as a regular party in the late 1990s. Then he launched his legendary Christmas parties in Courchevel, where he also stood at the entrance. After a scandal with the French police in 2007, the disco was closed. But the billionaire has his own nightclub in Manhattan. In addition, he still controls the NYCB Live Arena on Long Island. The purchase became part of the Brooklyn Nets project, with their “junior” basketball team Long Island Nets and the New York Islanders hockey team training at NYCB Live. As in the case of Barclay’s, the arena was previously owned by Ratner and was the entrance ticket to the development project for the development of 30 hectares of housing and commercial real estate. The volume of investments is estimated at $ 1.5 billion; Onexim attracted one of the largest development groups RXR in New York’s partners.

However, sources in the New York Post reported that after the sale of Barclay’s, Prokhorov was also looking for a buyer on NYCB Live. “The arena is a nice, good asset that we continue to develop,” says Razumov, adding that there are no offers to sell “on the table.” In the development project around the stadium, which is currently being agreed by local authorities, Onexim has “just a small economic interest,” says Razumov: share in profit and option. He estimates all of Prokhorov’s New York assets to be approximately $ 200 million. However, Prokhorov’s interest is not limited to the American entertainment industry.

For almost 10 years, Prokhorov has been building the Sensorium Hall multifunctional concert complex at Moscow City. The launch is scheduled for 2021, said Forbes Vladimir Kedrinsky, a native of Norilsk Nickel and CEO of Fan Generation, which implements the project.

“The object implements the concept of 'tropics in a megalopolis' and promises to bring the main deficit to Moscow - eternal summer,” says Kedrinsky. The core of the 11-story building in the form of a giant dial will be the “beach club” under a glass dome. There will be tropics. The space holds up to 8000 people and can be transformed into a concert hall, event hall or exhibition space - only 20 configurations. The project cost is more than $ 200 million.

In the summer, the hall dome will open for open-air parties. According to Kedrinsky, Ushuaia Club from Ibiza will conduct them. Sensorium Hall is developing a show based on virtual and augmented reality technologies. However, it may be possible to hang out at Prokhorov’s club without getting up off the couch. “I am currently working on several ideas related to social VR technologies,” Prokhorov told Forbes through his representative. - Follow the news!"

According to SPARK-Interfax, Fan Generation owned the Sensorium trademark until October 2019. It is now owned by Sensorium Corporation from the Cayman Islands. Kedrinsky also runs Sensorium Corporation Moscow, which on the job search site calls itself one of the Onexim companies and a startup “at the junction of VR, music and gaming industries.” The company also indicates that it is "the initiator of a new global project."

In the summer of 2019, Sensorium Corporation, along with startup Redpill, presented a prototype of a social VR platform at the largest gaming exhibition E3 in Los Angeles. Visitors, wearing VR glasses, were transported to a virtual dance club, where he played a real DJ. “SVR [social VR] overcomes the obstacles of modern virtual reality, in particular the emotional isolation of the user,” the press release explained. The project has already received funding of $ 70 million. According to the release, Sensorium will bring experience in organizing events at the Barclays Center, Webster Hall and Ushuaia Ibiza.

Mikhail Prokhorov decided to step out of American assets, including because of the “arrival of a new global VR technology in our life,” says Kedrinsky, it allows “to scale the audience’s access to artists to tens and hundreds of millions of people - inconceivable parameters for classical entertainment technologies ".

Tescao time and strategy

“So here is your billionaire trick!” Exclaims American comedian-comedian Stephen Colbert. In 2017, Prokhorov invited him to his place in Moscow and personally taught the guest the lessons of the Tibetan martial art of Teskao. Before this, Colbert vainly wondered if he, like any oligarch, had some unusual hobby that would seem strange to mere mortals: “So there it is! You have a house decorated in a country like a coloring book, a dungeon in it, where you throw axes at the wall. You are a real oligarch! ”

Prokhorov began to practice teskao in 2010, after which the rest of his hobbies, including windsurfing, jet skiing and kickboxing, receded into the background. In his column for Forbes, the billionaire compared teskao with meditation and said that he practiced two hours a day. Tesco develops psychological stability, explained Prokhorov: the basis is the ability to relax in stressful situations. The billionaire, who has been involved in martial arts for more than 30 years, has argued that "there is no equal". Prokhorov “always checks himself for limits of physical abilities”, his acquaintance says: “He does unreal things, tries to compete with himself.”

Prokhorov took lessons from grand master Teskao Yuri Monkhoyev, says athlete Sergei Badiuk, who also practices this martial art. The level of training Prokhorova Badiuk calls "very high." At home, he has a special room for teskao, a study room is equipped in his study, and on trips he always takes equipment with him. For group lessons, Prokhorov built an entire fortress not far from Krasnogorsk (Colbert visited there). The billionaire’s acquaintances call the place “a school,” noting that this is not a commercial project, but a “club of like-minded people of twenty.” Prokhorov himself in an interview with Kolber either jokingly or seriously says that teskao is practiced by 25 people all over the world.

Prokhorov is a rather private person and prefers to spend time in a narrow circle of close friends, although his public image is different. Forbes interlocutors say that the billionaire himself still dispenses with a mobile phone: "He avoids unauthorized intrusion into personal space." According to the testimonies of his friends, he has little interest in business and lives between the Seychelles, Ibiza and Moscow. About Courchevel Prokhorov also does not forget and sometimes goes skiing there. Owning a club and real estate in the United States did not bring Prokhorov closer to the American establishment, acquaintances of the billionaire say. However, according to Forbes interlocutors, he himself did not strive too much for this. In New York, Prokhorov allegedly never got his personal real estate and stops at Four Seasons.

Prokhorov claims that business takes up most of his time. And he says that he focused on strategic planning and analysis of information - “in order to anticipate what might happen in the future, and determine how this will affect my business.” In addition, he often reflects on the topic of life expectancy and thinks about "how to lead a healthy lifestyle and live a long life."