Football investors unfazed by market turbulence for now

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It will be a busy weekend for sport as European club football returns from the international break, formula 1 go online in Singapore, and the Minnesota Vikings stand in line against them Saints of New Orleans in London to start the NFL‘s international series.

Off the pitch, things are looking just as busy, with a raft of new football investments in Italy, England, Germany and beyond.

In this week’s Scoreboard we have a double dose of European football, with a look at how the recent turmoil in currencies and interest rates could change the outlook for US investors looking to park their dollars this side of the Atlantic. We also examine the recent round of talks between private equity investors and the Bundesligafighting for fans outside of Germany and for help on the market.

Continue reading – Josh Noble, Sports Editor

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Everton: in game © Matthew Childs/Action Images via Reuters

Can anything slow the flood of investment in European football clubs?

Farhad Moshirithe British-Iranian owner of evertonis in advanced sales talks The English Premier League American real estate investor club Maciek Kaminski. Meanwhile, Bloomberg reported on it this week Watforda club a league below the top flight, is considering a capital increase while US investor Bill Foley is reportedly hoping to seal a deal for AFC Bournemouth in the coming days. And it seems every club that isn’t already part of a multi-club group is toying with becoming one.

What the latest talks show is that it’s not just the biggest global brands that investors are eyeing after the £2.5bn auction of Chelsea FC and €1.2bn sale of AC Milan this year.

The wave of investor interest in European clubs seems untarnished by general market and economic crises. In the UK, sterling’s fall against the dollar is adding to the firepower of US bidders.

“The weakness of the pound is not the decisive factor, but another snag in the short term [and] positive for US buyers in the UK,” said Gordon Saint-Denis, head of sports finance at private lending manager Monroe Capital. “Wealthy individuals see the long-term appreciation: these teams tend to appreciate in value, largely due to increases in media rights.”

But even when US investors benefit from a favorable exchange rate, interest rates – and with them the cost of borrowing – rise. This puts pressure on investors who rely on debt to fund their investments. And there are signs it could be getting harder to close deals.

People close to the Everton process said the talks have been complicated by recent financial market instability in the UK, amid the €800m acquisition of Olympique Lyon through crystal palace co-owner John Texter and Authentic Brands founder Jamie Salter was pushed back.

Lyon said it is awaiting confirmation that existing lenders will keep the financing arrangements after the change of control. The club expects “all lenders to agree before closing.” Also Textor and Salter’s Eagle Football Holdings is awaiting “final funding documents” for the debt it agreed to fund the acquisition. The deal should close on Friday.

Still, a money manager with interests in all sports remained bullish this week. “It’s an attractive asset class,” he said. “We like the direction it’s going, it’s less correlated [to other assets such as stocks] and it’s recession-resistant.”

As markets and economies become unsettled, investors will soon find out just how uncorrelated their sports holdings really are.

German Bundesliga puts private equity back on the agenda

Private equity gets a repeat with German football © Sascha Schuermann/AFP via Getty Images

That Bundesliga talks to investors again. A year after clubs voted against a private equity deal that would have netted them around €300m, a much bigger idea is being mooted. Now they are talking about creating a media company that will own TV rights domestically and internationally, with a target valuation of up to €18 billion – a figure similar to CVC Capital Partners‘ Agreement with Spain league.

Why now? Well, German football is losing the global battle for eyeballs. That First League and the Champions League are way ahead. And for those still not full of football, there’s still La Liga.

Can money solve the problem? At least that’s what those driving the plans in Germany think. They want more teams on the road in the summer, more representation in new markets, and a direct-to-consumer streaming platform to give people instant access to games.

But it looks like a tough fight. English football and Spanish football have one major advantage: the language. They have also been distributing their product overseas for years, which gives them a long lead.

They can also offer something that has been missing in German football – an exciting story to tell. Bayern Munich have won the last 10 Bundesliga titles. Despite a bumpy start to the season (they are currently fifth in the table), Bayern remain the big favorites for eleventh place. Spain may lack big clubs, but at least they have a few of them.

Fresh cash could help Germany address the lack of competition as the smaller clubs increase their purchasing power, but it’s an issue that could easily become a sticking point in the negotiations.

And if you’re a football fan, say in Cincinnati or Shanghai, how much time and appetite will you have after enjoying the excitement of the Premier League, Champions League and La Liga?

This creates another potential sticking point for the talks. Expanding abroad sounds great – but where to? Clubs like FC Bayern are eyeing the US with its huge media market, growing appetite for football and the upcoming 2026 World Cup. But English and Spanish football are already big there. Some investors believe there are better opportunities elsewhere — in Asia or Africa, where the language factor is less relevant. But that’s a much longer-term game and potentially a tougher sell to clubs.

The Bundesliga is a premium product that helps explain the breadth of interest. But it doesn’t look like an open target for investors.

An invitation:

It’s less than a month until ours Business of Sport Summit in New York on October 24. Milwaukee Bucks owner Marc Lasry and Philadelphia 76ers owner Josh Harris, among others, will share their insights. As a Scoreboard subscriber, you can claim your free digital pass with promo code Premium22 and purchase access to our personal VIP discussions and drinks reception. Register for your pass today.

highlights

Lars Windhorst: Miracle football © David Swanson/Reuters

  • German financier Lars Windhorst hired a private Israeli intelligence agency to organize a secret campaign to overthrow the then-president Hertha Berlin football club, according to a lawsuit reported by the FT this week.

  • Sports Streaming Service DAZN completed its acquisition of smaller rival Eleven Sports this week. We reported that it was in the works as early as July.

  • Allegations of cheating continue to send aftershocks through the world of chess after the champion Magnus Carlson ended a 53-game winning streak by losing to a US teenager in a tournament in St. Louis.

transfer market

Tim Williams, former chief financial officer of Inter Milan, is back in football. He was named chief executive of this week OxfordUnited after working for an investment company Tifosy. The English League One Page also announced this week that two Indonesian investors have taken control of the club. One of them – Erick Thohir – was the owner of Inter between 2013 and 2016.

final whistle

That National Football League is back, which means some fan bases are already wanting a repeat by the end of week 3. That was the case for buffalo bills fans in their Sunday night loss to the Miami Dolphins, in which wide receiver Isiah McKenzie made a strategic error by running the ball down the field instead of going wide to restart the clock. When time was up, Bill’s offensive coordinator Ken Dorsey was caught on the show by his own emotional fumble, which he later said he “would learn from.” Catch (or not) the fallout here.

Scoreboard is written by Josh Noble, Samuel Agini and Arash Massoudi in London, Sara Germano, James Fontanella-Khan and Anna Nicolaou in New York, with contributions from the team producing the Due Diligence Newsletter, the global network of correspondents and data FT visualization team

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https://www.ft.com/content/248a1e7d-b35d-4740-b5d2-31cdf9e0e5e6 Football investors unfazed by market turbulence for now

Adam Bradshaw

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