American Pie: Why US powerbrokers are so hungry for the Premier League
Chelsea chairman Bruce Buck (left) and prospective owner Todd Boehly in the stands during the Premier League match at Stamford Bridge.
The announcement that the contest to buy Chelsea Football Club has been won by a bidding group led by a US financier, Todd Boehly, offers an incredible insight into the commercial power of modern sport.
The money at issue is a staggering £4.25bn; this figure includes purchase of the club and commitment to invest in the ground at Stamford Bridge in West London.
Chelsea was up for sale, of course, because Putin’s friend Roman Abramovich, having long been indulged by elite English society and celebrated by every Chelsea fan, was sanctioned by the British government after the invasion of Ukraine.
Abramovich’s money had transformed Chelsea from a historically mid-table club in England’s Premier League to champions of England, then Europe and then the World.
It is not often than a sports club of such stature can be bought.
The sale of Chelsea was managed by Raine Group, the US merchant bank. The competing parties for the sale demonstrated the global nature of modern sport and the manner in which the reality of ownership of elite sports clubs is now a matter of financial and political power. Buying English football clubs at the high end is now the preserve of oil-rich Gulf States or private equity billionaires.
The winning bid for Chelsea centred on Todd Boehly, the co-founder and chief executive of Eldridge Industries, who invest in insurance, asset management, technology, media and real estate.
The roll-call of those involved with Boehly includes a Swiss billionaire Hansjörg Wyss, and Daniel Finkelstein, a Tory party peer and newspaper columnist on the ‘Times’. George Osborne, another Tory and former chancellor of the exchequer is an adviser, as are the advisory firm Robey Warshaw and the investment bank Goldman Sachs.
What also is of interest is that it is reported that more than half of the purchase price – and the right to joint governance of Chelsea – has come from the US private equity group Clearlake Capital, run by José Feliciano and Behdad Eghbali, both of whom are now billionaires.
Neither men are using their personal wealth to fund the purchase, but are instead using private equity funds.
Clearlake Capital manage some $75bn in assets and are hugely successful at driving returns on their investments. For almost two decades they have been involved in buying mid-sized successful companies in America and increasing their profits by using advisory experts to devise strategies to increase profitability.
They are most celebrated for their capacity to “unlock hidden value quickly” and quickly monetising it.
As well as being involved in the sale of Chelsea, Feliciano and Eghbali are also reported to be trying to buy the Denver Broncos, although in this occasion are said to be using their own money. It may be noted in passing that their personal wealth has been put at around $3bn apiece.
The larger frame here is one in which Chelsea are about to be one of eight teams in the Premier League which are either wholly or partly owned by Americans.
This is not an interest that can be attributed to a simple love of the game. It is, of course, rooted in hard calculations about the amount of money that is there to be made from a global product. Or at least the amount of money that they hope to make – there are plenty of investors who see no return.
The money that flows into the top clubs in England clubs is driven by revenue from local and international television rights. Almost 50% of the income of the top clubs in England comes from their share of broadcasting rights fees. More than 35% comes from sponsorship and merchandising. The balance comes from ticket sales and other matchday income at their grounds.
In the case of Chelsea, success was bankrolled by Abramovich’s Russian money. The belief must be that by modernising Stamford Bridge and increasing its capacity from around 40,000 to around 60,000 they can hugely increase matchday income.
There is also the view that Chelsea’s wider commercial revenue can be enhanced. This will have to be the case, given that the “loans” to the club from Abramovich to subvent the construction of a champion team will no longer be an option.
More to the point, the institutions who are investing now in Chelsea are not engaged in some sort of charitable or voluntary exercise in public good. How are they now to get a return on their money?
For sure, Chelsea will seek a great range of commercial partners and sponsors. Manchester United’s sponsor on their Adidas jerseys is Team Viewer, a form of computer software. But their other commercial partners include Kohler, Apollo Tyres, Gulf Oil International, Cadbury, Canon, Chevrolet, DHL, HCL, HTD, Konami, Marriott, VisitMalta, Ecolab, Remington Steel, Tag Heuer, Renewable Energy Group, and on and on and on across the modern economy. Aeroflot used to be on the list, but they’re gone now, not to be spoken about.
But there are also brands such as Chivas (“Official Spirits Partner of Manchester United”), Casillero Del Diablo (“Official Wine Partner of Manchester United”) and Hua Ti Hui (“Official Global Betting Partner of Manchester United”).
But of course the great success of the Americans who bought Manchester United – the Glazer family – was that it was a leveraged buyout. That is to say that much of the money the Glazers used to buy the club was borrowed money and these loans were, in turn, secured on Manchester United’s assets and Manchester United then had to pay the interest on them.
In the case of Manchester United, ‘The Athletic’ reports that when the Glazers bought Manchester United it was debt-free and had money in the bank. Within two years the club was £660 million in debt.
As well as the biannual dividends they pay themselves, the Glazers are estimated by experts to be in a position to realise a 2,000 per cent return on their original investment.
For their part, Liverpool name fully 25 commercial partners and sponsors on their website. They are, of course, also largely owned by American investors who make their money in the global sports market.
But Chelsea’s investors will not make their money just from commercial deals with disparate companies. They will also need Chelsea’s fans to pay much more for their engagement with the club. And pay they will. There is nothing surer but that blind love of a club is one of the greatest ways to get people to hand over large sums of money for all manner of products and services. There is ready evidence for all of this. Between 1990 and 2010, the price of the average ticket to a top-flight match in England increased by 1,100%.
Increased price of tickets was only part of the story, for sure, and when you look at the wider increase in expenditure on everything from merchandising to television subscriptions, there is a relentless drive to profit.
For example, between 2014 and 2019, the overall spend of Premier League soccer fans in England increased by 31% to reach a staggering £1.3bn.
The thing is, this is a trend that is heading off in pursuit of the spending of American sports fans. From merchandising to the commercialisation of clubs and the introduction of subscription television in sport, American sports set the trend that has been followed by the Premier League.
Again, the Americans are ahead of the curve – this is business. And it is a business that may be located in England, but it is no longer owned by the English.
