The current owner of the Brooklyn Nets, Russian billionaire Mikhail Prokhorov, is seeking to divest the majority of his Russian portfolio.
After Kremlin insiders recently took a hard line with the former oligarch due to his media company’s investigative reports on the business interests of intimates of Russian President Vladimir Putin, Prokhorov announced his desire to sell most of his properties. Only hours later, he heard from staff in Moscow that masked agents of the Federal Security Service had raided his headquarters and other companies — a clear sign of government disapproval.
In a subsequent responsive action, Prokhorov sold his primary Russian holding, a $2 billion stake in a fertilizer company. His largest remaining Russian asset, a $900 million holding in aluminum giant Rusal, is now officially for sale. If that sale transpires, his most valuable investments would essentially be Brooklyn-based.
Besides the Nets and the Barclays Center arena, Prokhorov holds leases on several other entertainment venues in Brooklyn, estimated to be worth anywhere from $2.2 billion to approximately $3 billion. The billionaire’s remaining Russian assets are estimated to be worth $2.3 billion, with a separate estimated $5.7 billion in cash.
Prokhorov’s sudden abandonment of his Russian fortune shows how difficult it is for even powerful businessmen to maintain satisfactory loyalty to the Kremlin. Some billionaires, like Roman Abramovich and Mikhail Fridman, avoided this issue years ago by shifting substantial holdings to Europe or the United States, where there are less governmental complications. Others, like oil tycoon Mikhail Khodorkovsky, have been hit with criminal charges in Russia and were forced to hand over their assets to the state.
“Prokhorov has always stayed within the boundaries” and has benefited from his close connections to the authorities, noted Gleb Pavlovsky, a former Kremlin adviser who now runs a political consultancy in Moscow. “But uncertainty is rising and that’s not Prokhorov’s element.”
Dmitry Razumov, the CEO of Prokhorov’s Onexim holding company, said that these newest sales have long been planned, and that some proceeds will be invested in its Russian finance and energy businesses. “We have no plans to sell off all our Russian assets,” Razumov insisted. “Quite the opposite is true.”
“Onexim’s current investment strategy is not about geography, but rather liquidity and maintaining a smart portfolio,” Razumov added. The company’s focus is on assets where it has controlling stakes and a major management role, he elaborated.
The 51-year-old Prokhorov started out in business selling jeans in the waning days of communism and built up his fortune in the 1990s with Vladimir Potanin, an acquaintance who worked in foreign trade. The partners founded a bank and later bought control of Arctic metals giant GMK Norilsk Nickel in a controversial privatization auction.