What Does Todd Boehly’s Consortium Bid Mean for Chelsea?
Introduction
On March 2nd 2022, Chelsea Football Club was put up for sale by long-time owner Roman Abramovich. 10 days later, Abramovich was sanctioned by the British Government for his alleged involvement with the Russian Government. After over 19 years of ownership of the London club, 21 trophies and a global impact on the finances of football, his assets, including the shares in Chelsea were frozen.
Ticket sales, transfers, contracts and merchandise revenue were all prohibited. However, the Government granted a special license to allow for the sale of the club to take place. There were time restrictions and pressures also placed onto the club. The special license allowed up until May 31st to present a preferred bidder to finalise the sale of the club with. If this license had expired and a suitable bidder had not been found, the club would have been left in daunting circumstances and the possibility of remaining under sanctions at the time of the Premier League’s meeting to formulate the 2022/23 league campaign. This meeting takes place on the 8th June.
The Interest
Predictably for one of Europe’s major clubs, there was significant interest in the purchase of Chelsea. This was despite Abramovich suggesting an enormous price tag of over £3billion for the club and investments into a new stadium alongside other considerable areas of expenditure. Abramovich had also clearly stated that he did not expect the club to remunerate him for the ‘loans’ that he had given the club which were in excess of £1billion. He was determined that the sale of the club would be of benefit to its future and not put it in a difficult financial predicament.
Several consortiums and wealthy businesspeople were speculated within the media as having made notable approaches or expressed a reasonable interest in buying shares in the central London club. Names such as Serena Williams and Lewis Hamilton were seen in the media as agreeing to contribute millions to a consortium led by Sir Martin Broughton, the chairman of British Airways. Despite several false rumours of billionaires from around Europe and the US, another significant British interest emerged in the form of a consortium led by Sir Jim Ratcliffe, Britain’s wealthiest man. Ratcliffe came forward at the last minute and proposed a bid that contained appealing clauses to Chelsea fans, emphasising his interest in prioritising acting in ways that benefits the club rather than his own financial profitability. In doing so, he also expressed concerns over the American interest and their intentions and motivation for purchasing the club.
Todd Boehly’s Consortium
On May 7th 2022, Chelsea announced that they have agreed terms with their preferred bidder. Their official social media pages as well as renowned trustworthy sources and sport news platforms reported the developments. The sale of Chelsea Football Club is now at the stage of being finalised with a consortium led by Todd Boehly.
Forbes has reported Boehly’s net worth at £3.6billion. He already has significant shares in three American, Californian based sports clubs and franchises. He is the co-owner of the Los Angeles Dodgers Major League Baseball franchise, the Los Angeles Sparks Women’s Basketball team and the iconic Los Angeles Lakers National Basketball Association franchise.
The rest of the consortium consists of Clearlake Capital, Mark Walter, Hansjoerg Wyss and Jonathan Goldstein. Voting rights will be equally shared but Clearlake Capital, a Californian private equity and investment firm, will own the majority of shares in the club. Mark Walter, another American billionaire, already co-owns the Dodgers with Boehly and will be accompanied and assisted by Swiss billionaire Wyss. Goldstein is an important inclusion as he offers a vital British perspective and knowledge of Chelsea Football Club and its history.
The Deal and The Formalities
Whilst the official announcement has been made and it is clear that Boehly and his consortium will likely be the next owners of Chelsea Football club, there may still be a few weeks left in the process before the deal is finalised. The numbers that have been reported so far have been broken down as follows:
- A total input of £4.25billion ($5.2billion) into the club as part of the full overtake.
- £1.75billion of the investment will be focussed on benefitting the club itself. This includes improvements to the Chelsea academy, the women’s team and system as well as their Kingsmeadow Stadium and financial support for the Chelsea Foundation charitable cause.
- £2.5billion for specifically purchasing the shares in the club from Abramovich.
The proceeds from the sale are strictly prohibited from reaching Abramovich’s accounts. The British Government will not approve of the sale of Chelsea without complete assurance and certainty that an ownership transfer agreement is in place that prevents any proceeds going to Abramovich. The club has sought financial advice from investment banks such as Goldman Sachs to help guide them through the process and ensure all details and criteria are adequately satisfied. Boehly and the rest of his consortium must also, as with any prospective owner, shareholder or director of a British football club, pass the fit and proper persons test conducted by the English Football Association. The deal must then also pass through the approval of the government once they are content that the process has not breached the sanctions that have been placed on Abramovich.
One of the ways of ensuring this that has been detailed so far is that the proceeds from the sale will be directly deposited into a frozen UK bank account. The intention is then to donate 100% of this amount to charitable causes. The media has reported that Abramovic is fully supportive of this policy and has encouraged the money to go towards victims in Ukraine.
Another important aspect of the deal and its intricate clauses, especially for Chelsea fans, is the manner in which Boehly and his consortium will be financially remunerated by the club following their purchase. In other words, there have been concerns over their attitudes towards profiting from the club and erasing or overwriting debts. So far, the consortium has successfully overcome this worry by agreeing that they will not pay themselves any dividends from the club, nor will they take management fees. There has also been calculations made to limit the debt that the club can take on which hopefully will provide more financial direction, stability and protection for Chelsea.
Summary
The basic and most important principles and factors of the Boehly purchase of Chelsea are now well documented. However, it is more than likely that over the rest of the month of May, the deal will meet obstacles and hurdles that may delay the completion of the sale. There is plenty of small print to address and determine and details to be refined. Nevertheless, the overtake will have an immediately positive impact on Chelsea Football Club, allowing them to capitalise on the summer transfer window, offer contracts to their current players, sell season tickets for the next campaign and return to a high revenue from team merchandise. It remains to be seen whether the sale will continue to have a positive effect in the long term or whether the new American owners, with financial rather than sentimental motivations for buying a major football club, have an adverse, detrimental impact on its future.