June 28, 2022

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Inside Chelsea cuts: deep pockets, special promises, and side deals

Inside Chelsea cuts: deep pockets, special promises, and side deals

LONDON – The British government on Wednesday gave its blessing to the purchase of Chelsea FC, one of Europe’s soccer teams, by a US-led investment group after deciding it had enough assurance that none of the proceeds from the record selling price would. $3.1 billion – will flow to the Russian owner of the club.

The government’s approval heralded the end of not only the most expensive deal in sports history, but perhaps the most fraught, ambiguous and political deal as well.

In the three months since the Russian oligarch who owns Chelsea, Roman Abramovich, hastily brought his team to market, the club’s fate has been to play not only in the stadiums of some of the world’s richest football leagues but in the corridors of power at Westminster and the towering towers of Wall Street. All this comes against the backdrop of crippling financial sanctions imposed after the Russian invasion of Ukraine.

“We are now convinced that the full proceeds from the sale will not benefit Roman Abramovich or any other sanctioned individual,” the government said in a statement.

The Road to a Deal has stymied a group of rarely-possible characters – private equity funds and anonymous offshore trusts. Legislators in Britain and Portugal. a octogenarian swiss billionaire The American tennis star Serena Williams; A mysterious Russian oligarch and an unknown Portuguese rabbi – and they surface a disputed passport, wartime peace talks and even reports of Try poisoning.

Its end leaves as many questions as the answers. All that can be said for certain is that a group led by Los Angeles Dodgers co-owner Todd Boyle and funded largely by private equity firm Clearlake will now take control of Chelsea, six-times England champion and two-time European champion, and Abramovich. Will not.

Abramovich first indicated his intent To sell Chelsea – his most famous asset by some distance – once the Russian army crossed into Ukraine in late February, and just a week ago Britain And European Union They identified him as a key ally of Russian President Vladimir Putin and froze his assets.

However, completing the deal has proven to be extremely complicated. The final hurdle to the sale was resolved only this week, when Britain’s lawmakers were convinced enough that a $2 billion loan owed to an offshore fund believed to be controlled by Abramovich, had been cleared. Then British government officials tried to reassure their counterparts in Portugal, which sparked controversy granted Abramovich is a Portuguese passport with the help of a rabbi in 2018, and the European Union, which imposed its own sanctions on Abramovich in March. Both must also agree to the sale due to their Portuguese citizenship.

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But the loan wasn’t the only complication faced by Ren, the New York investment bank that Abramovich hired to handle the sale. The agreement with the Buhli Group came with a web of terms, some set by the British government, some by Rennes and others by Abramovich himself, all of which are striking in the context of the sale of a sports team.

all four potential suitors identified by Ryan as serious contenders – the Boyle Group; One headed by British businessman Martin Broughton Williams and Formula 1 driver Lewis Hamilton between its partners. Another funded by Steve Pagliuca, owner of the Boston Celtics in the NBA; And one from the Ricketts family, who control the Chicago Cubs baseball team – they were asked to not only pay an astonishing price to the team but also commit to a number of pledges, including up to another $2 billion in investments in Chelsea.

The club’s suitors were told, for example, that they could not sell their stake during the first decade of ownership and that they must allocate $125 million to the club’s women’s team; investing millions in the club’s academy and training facilities; It is committed to rebuilding Stamford Bridge, Chelsea’s old stadium in West London.

At the same time, Abramovich insisted that all proceeds from the sale will go to a new charity for the benefit of the victims of the war in Ukraine. To make sure he doesn’t control that money, the British government will first ask that it be put into a frozen bank account that it controls. Only then will it examine all fund plans drawn up by Mike Penrose, the former head of the United Nations children’s charity branch, UNICEF, and issue a special license allowing the charity to control the money.

“We will now begin the process of ensuring that proceeds from the sale are used for humanitarian reasons in Ukraine, and to support war victims,” ​​the government said in its statement.

The charity was a hallmark of the deal arranged by Joe Ravic, the Raine co-founder who ran the sale.

The new owners would also not be allowed to charge dividends, management fees or put the team in debt – terms that bankers involved in the sale described as “anti-glaze clauses”, referring to the unpopular Manchester United owners who took control of the club in a leveraged buyout in 2005.

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Several people close to the process said that Buhli’s show was ultimately chosen from the pool of wealthy suitors because of his willingness to abide by the terms. (At least one of these people, who worked on the Pagliuca-backed show, said their group withdrew from the race due to the nature of the conditions.)

Premier League already Sign for sale to ChelseaOn Tuesday, it announced that it had examined and approved the new owners, “subject to the government’s issuance of the required sales license and the satisfactory completion of the final stages of the deal.”

However, it is not clear what will happen if Buhli and his partners choose to back out of any of the terms once they take control of the club. Any supervisory role falls to the charity, the only outside entity still closely associated with both Chelsea and Abramovich, or the continuing influence of two of Abramovich’s key lieutenants who hope to remain in their positions under the new owners’ supervision.

These two CEOs – club president Bruce Buck and Marina Granovskaya, the Russian-born businesswoman who rose from being Abramovich’s personal assistant to the highest-ranking official response to Chelsea’s football deals – will earn about $12.5 million for their work in the sale. Management commissions, totaling $50 million, and Ravitch’s fee, believed to be between 0.5 and 1 percent of the value of the deal, will be paid from the club’s balance sheet rather than from sale funds, according to one of the people. Familiar with the structure of the deal.

British government officials have clashed with Chelsea executives and financiers over a legally binding decision to block Abramovich’s access to money he has publicly said he is willing to give up.

The subject of the dispute was a company called Camberley International Investments, run by a Cypriot trustee on behalf of what British officials think It was Abramovich and his sons. Camberley loaned $2 billion to Fordstam, the company through which Abramovich took control of Chelsea, to fund its spending and operations. Camberley’s claim against Fordstam has now been resolved, and the trustee recently resigned.

It was only at that point, with the May 31 deadline for completing the sale approaching, that the British government moved to approve the deal.

For Chelsea fans, the sale puts an end to a season that at times turned out to be absurd. The sanctions against Abramovich – and thus Chelsea – affected everything from team travel to printing and selling game software. Thousands of empty seats sprang up at Stamford Bridge during matches during the final months of the season after new ticket sales were banned, and roaring turmoil loomed over the roster due to the moratorium on signing and selling players.

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That will now be lifted, with Chelsea’s players and manager Thomas Tuchel saying they are urgently seeking clarity on their plans from Boehly and his group. At least two key defenders are set to leave Chelsea this summer, and at least two others – including the club’s captain, Cesar Azpilicueta – He is expected to follow.

Buhli, who has been a regular at Chelsea’s matches since his takeover was announced on May 6, has said widely that he would like to keep Chelsea as a major force in football. However, a group largely backed by a private equity firm is unlikely to prove quite as forgiving as Abramovich was its owner.

During his nearly two decades at Chelsea, Abramovich was a familiar but silent presence at Stamford Bridge, happy to let his money speak. Under his leadership, Chelsea have transformed into a true European superpower, winning five Premier League titles and two Champions League titles by hiring a succession of first-list coaches and investing billions of dollars in players.

His generosity has transformed Chelsea but also football as a whole, leading to an era of unrestrained spending that has seen transfer fees and player salaries rise to levels unimaginable just a few years ago. It also came at a price that Chelsea’s income could not match, no matter how much they had grown in those years of plenty. Throughout his tenure, Abramovich has used his vast personal fortune to support losses of up to $1 million a week.

However, just as the arrival of Abramovich in 2003 opened the door to a new era of English football, his passing is also a bookmark.

While the scarcity may explain part of the rush to pay a premium to Chelsea – the biggest football teams are rarely offered for sale, after all – it’s not clear when or how, a group of private equity investors traversed such treacherous and confusing waters for control. The club can begin to make a return on their investment.