Inside the Chelsea Sale: Deep pockets, private promises and side deals


Inside the Chelsea Sale: Deep pockets, private promises and side deals

LONDON – The UK government on Wednesday cleared the purchase of Chelsea FC, one of European football’s blue ribbon teams, by an American-led investment group after deciding it had sufficient assurances that none of the proceeds from the record sale price – $3.1 billion – would go to the Russian owner of the club.

The government’s approval signaled the end of not only the most expensive deal in sports history, but also possibly the most tense, cryptic and political.

In the three months since Russian oligarch who owns Chelsea, Roman Abramovich, hastily launched his team, the fate of the club has played out not only on the fields of some of the world’s richest football competitions, but in the corridors as well of power in Westminster and the towering spiers of Wall Street. And all against the backdrop of crippling financial sanctions imposed after Russia’s invasion of Ukraine.

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

The road to a deal has involved an unlikely group of characters – private equity funds and anonymous offshore trusts; legislators in Great Britain and Portugal; an octogenarian Swiss billionaire and American tennis star Serena Williams; an enigmatic Russian oligarch and a little-known Portuguese rabbi – and included a disputed passport, wartime peace talks and even reports of a poisoning attempt.

His end leaves as many questions as answers. All that is certain is that a group led by Los Angeles Dodgers co-owner Todd Boehly and funded largely by private equity firm Clearlake will now control six-time English and two-time European champions Chelsea and Abramovich will not.

Abramovich first indicated his intention to sell Chelsea – by far the most well-known of his assets – almost as soon as the Russian army invaded Ukraine in late February, and just a week before Britain and the European Union identified him as a key ally of President Vladimir V. Putin of Russia and froze his assets.

Closing a deal, however, has proven fiendishly muddled. The final obstacle to a sale was only resolved this week when lawmakers in the UK were sufficiently satisfied that a $2 billion loan owed to an offshore trust believed to be controlled by Abramovich had been cleared . British government officials then sought to reassure their counterparts in Portugal, who had controversially granted Abramovich 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 have to agree to the sale also because of his Portuguese citizenship.

But the loan wasn’t the only complication for Raine, the New York investment bank hired by Abramovich to handle the sale. The settlement with Boehly’s group came with a web of conditions, some from the British government, others from Raine and others from Abramovich himself, all blatantly related to the sale of a sports team.

All four potential suitors identified by Raine as serious competitors – Boehly’s group; one led by British businessman Martin Broughton, whose partners included Williams and Formula One driver Lewis Hamilton; another funded by Steve Pagliuca, owner of the NBA’s Boston Celtics; and one of the Ricketts family, who control baseball’s Chicago Cubs — were asked not only to pay a staggering price for the team, but also to commit to a series of pledges, including up to $2 billion more to Investments in Chelsea.

For example, the club’s suitors were told that they could not sell their stake within the first decade of ownership and that they had to earmark $125 million for the club’s women’s team; invest millions more in the club’s academy and training facilities; and commit to rebuilding Stamford Bridge, Chelsea’s aging west London stadium.

At the same time, Abramovich insisted that all proceeds from the sale would go to a new charity in aid of the victims of the war in Ukraine. To ensure he doesn’t gain control of that money, the UK government will require that it first be deposited in a frozen bank account under its control. Only then will she review all of the plans for the fund drawn up by Mike Penrose, a former department head at the United Nations Children’s Fund, UNICEF, and issue a special license allowing the organization to take control of the funds .

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

The charity was just one of the special features of the deal, which was arranged by Raine co-founder Joe Ravitch, who led the sale.

The new owners are also not allowed to take dividends or management fees or burden the team with debt – terms that bankers have called “anti-glazer clauses” in connection with the sale, a reference to Manchester United’s unpopular owners who are in control took over the club in a leveraged buyout in 2005.

Several people close to the process said Boehly’s bid was eventually selected from the pool of wealthy applicants because it was willing to abide by the clauses. (At least one of those people who worked on the Pagliuca-backed bid said their group withdrew from the race due to the nature of the conditions.)

The Premier League has already done it signed the Chelsea saleand announced on Tuesday that it had reviewed and approved the new owners, “subject to the issuance of the necessary sales license by the government and the satisfactory completion of the final stages of the transaction.”

However, it’s not clear what will happen if Boehly and his partners decide to waive any of the terms once they take control of the club. Any oversight role will fall to the charity, the only outside entity still intrinsically linked to Chelsea and Abramovich, or the continued influence of two key Abramovich lieutenants who hope to remain in their posts under the new owners.

Both executives – the club’s chairman Bruce Buck and Marina Granovskaia, a Russian-born businesswoman who rose from Abramovich’s personal assistant to Chelsea’s top official football business answer – will receive about US$12.5 million for their work on the sale. earn dollars. Commissions to management totaling up to $50 million and the fee to Ravitch, which is believed to be between 0.5 and 1 percent of business value, will be taken from the club’s balance sheet and not paid from the sale proceeds familiar with the structure of the deal.

British government officials had been at odds with Chelsea executives and financiers over the creation of a legally binding resolution to prevent Abramovich from accessing the money he so publicly said he was willing to forego.

It was about a company called Camberley International Investments, run by a Cypriot trustee on behalf of what British officials believe to be Abramovich and his children. Camberley loaned Fordstam, the company Abramovich Chelsea controlled, $2 billion to fund its spending and operations. Camberley’s claim against Fordstam has now been settled and his trustee recently resigned.

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

For Chelsea fans, the sale ends a season that has at times turned absurd. The sanctions imposed on Abramovich – and by extension Chelsea – covered everything from the team’s travel to the printing and sale of game programmes. Thousands of empty seats lined Stamford Bridge during games in the final months of the season after the sale of new tickets was banned and a moratorium on player signings and sales threatened squad riots.

That is now being overturned as Chelsea player and manager Thomas Tuchel is said to be urgently seeking clarification from Boehly and his group about their plans. At least two key defenders are set to leave Chelsea this summer and at least two other players – including the club’s captain Cesar Azpilicueta – are expected to follow.

Boehly, who has been a regular present at Chelsea games since announcing his acquisition on May 6, has broadly said he would like to keep Chelsea as a force in football. However, it is unlikely that a group largely backed by a private equity firm will prove as lenient as an owner as Abramovich was.

In almost two decades at Chelsea, Abramovich was a familiar but almost silent presence at Stamford Bridge who was happy to let his money do the talking. Under his leadership, Chelsea transformed into a true European superpower, winning five Premier League titles and two Champions League crowns while employing a string of A-list managers and investing billions of dollars in players.

His generosity transformed Chelsea, but also football in general, ushering in an era of unrestrained spending that saw transfer fees and player salaries soar to levels unthinkable just a few years earlier. It also came at a price that Chelsea’s income, no matter how much it had grown during those years of plenty, could not match. Throughout his tenure, Abramovich used his vast personal fortune to subsidize losses that amounted to as much as $1 million a week.

But just as Abramovich’s arrival in 2003 opened the door to a new era for English football, his departure also serves as a bookmark.

While scarcity might explain some of the rush to pay a premium for Chelsea — after all, football’s biggest teams are rarely for sale — it’s not clear when or how a group of private equity investors navigated such treacherous, confusing waters of control through the club can begin to earn a return on their investment.

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