The much-awaited, nearly three-month sale of Chelsea Football Club has finally reached its culmination, with the Todd Boehly-led consortium completing the most valuable takeover in sporting history.
Five of the so-called ‘big six’ in England are now majority-owned by Americans, with US-based private equity firm Clearlake Capital expected to have a 60% stake in the West-London side.
Both the UK government and Premier League have approved the £4.25bn takeover, which incorporates the £2.5bn price to purchase the two-time European champions and £1.75bn committed to funding investments in Stamford Bridge, the academy and the women's team.
Several reports suggest the consideration for Chelsea will be frozen in a bank account as part of the British government’s sanctions on Russian oligarchs thought to be close to Vladimir Putin amid Russia’s invasion of Ukraine.
Proceeds from the sale will eventually solely go to support humanitarian causes in Ukraine.
The final piece to the takeover puzzle was the government ascertaining that former owner Roman Abramovich would not receive any benefits from the sale after it received legal guarantees.
"The ownership of this Club comes with great responsibility.
"Since I came to Chelsea nearly twenty years ago, I have witnessed first-hand what this Club can achieve.
"My goal has been to ensure that the next owner has a mindset that will enable success for the Men's and Women's teams, as well as the will and drive to continue developing other key aspects of the Club, such as the Academy and the vital work of Chelsea Foundation,” Roman Abramovich said in his farewell message.
This process has been a rollercoaster of events, to say the very least, and you’d have done exceptionally well to remember every winding turn along the path.
But fear not, Proactive has the ins and outs of every stage from which assets the Russian had sanctioned to who were the leading bidders and who actually are the names and companies behind the world’s largest-ever sports takeover.
Why did Abramovich list Chelsea for sale?
On 2 March 2022, Chelsea’s billionaire owner Roman Abramovich said he intended to sell the football club following increased pressure from the UK government to sanction oligarchs following Russia’s invasion of Ukraine.
His affiliation with the country’s state was raised by Labour leader Keir Starmer, as he pressed for tighter regulations.
Abramovich appointed American bank The Raine Group to oversee the sale, with the lender issuing letters to potential bidders on 2 March, with bids greater than £3bn initially thought to be considered and a deadline of mid-March for bids stated.
The week prior to this, the oligarch announced he would be “giving trustees of Chelsea’s charitable foundation the stewardship and care” of the club, to try and avoid being seized.
Increasingly strengthened sanctions meant this was not possible.
What did Abramovich have sanctioned?
Just eight days after the multi-billionaire confirmed his intention to offload Chelsea, his fears came true as the UK government sanctioned the Russian individual.
"There can be no safe havens for those who have supported Putin’s vicious assault on Ukraine," Boris Johnson said.
As well as Abramovich’s assets being frozen, he was not able to complete any transactions with UK businesses and individuals, while he was also subject to a travel ban.
The government claimed he “has had a close relationship [with Putin] for decades” and obtained “financial benefit or other material benefit” from the Russian state, which Abramovich denied.
The oligarch “is or has been involved in destabilising Ukraine and undermining [the country’s] territorial integrity, sovereignty and independence,” the UK government added.
The Russian had a minimum of £3.2bn of UK assets frozen, according to the Independent.
Property
Abramovich listed his £150mln London home for sale at the start of March, which is a 15-bedroom mansion at Kensington Place Gardens, but now it cannot be sold.
Meanwhile, the billionaire’s £22mln West London penthouse and £8.75mln flat in Cheyne Terrace, Chelsea, were also subject to the sanctions.
Vehicles
As well as his UK-based properties, Abramovich also had a fleet of supercars that were believed to be in the UK, valued at approximately £16mln.
Some of the most notable high-end vehicles include a Porsche 911 GT1 Evo, a Ferrari FXX, an Aston Martin Vulcan and a Maserati MC12 Corsa.
He also owns a Pagani Zonda R, of which only 15 have ever been produced.
The oligarch bought a £264mln Boeing 787-8 Dreamliner jet, the most expensive private jet in the world, in December 2021.
The 50-seater aircraft has a base cost of £188mln with £76mln of additional equipment, Forbes commented citing industry experts. Although at the time of sanctions, it was not thought the jet was in the UK.
Other assets
Russian steel producer Evraz PLC had its shares temporarily suspended by Britain’s Financial Conduct Authority on 10 March.
The London-listed steel giant, which boasts Abramovich as its largest shareholder with a 28.6% holding, could still be sold as its Russia-based.
Founder Alexander Abramov, Abramovich and three other oligarchs hold two-thirds of the company.
The company, which produced the steel for Russian tanks to aid its invasion of Ukraine, saw its shares sink prior to the temporary freeze.
Who were the four shortlisted bidders?
At the end of March, several bidders for Chelsea Football Club were removed from the auction by the Raine Group, with the shortlist significantly whittled down.
Todd Boehly’s winning consortium, which was always one of the two frontrunners, was also backed by Hansjorg Wyss, Jonathan Goldstein, Daniel Finkelstein and Barbara Charone.
Boehly owns a 20% stake in iconic basketball team LA Dodgers, while he is also part-owner of the basketball team, LA Sparks.
Boehly’s closest rival to a consortium led by Sir Martin Broughton, the former Liverpool and British Airways chairperson, which was backed by Lord Sebastian Coe, Joshua Harris, David Blitzer, Wall Street investment banker Michael Klein and Sacramento Kings owner Vivek Ranadive.
A joint bid by the Ricketts family and Ken Griffin, the hedge fund tycoon, received a setback last week when it emerged Joe Ricketts, the family’s patriarch, was accused of Islamophobia three years ago.
This caused much uproar from Chelsea fans, with 77% of them voting against their bid to buy the club.
Boston Celtics co-owner Steve Pagliuca was the final name on the list, but his consortium was always an outside bet.
What is the investment case for Chelsea?
Presumably, the 25+ bidders that reportedly came forward must see the potential for significant growth, that is if they intend to make profits on the initially asked for £3bn, rather than simply score public relations points through so-called 'sports-washing.'
Streaming is one of the main reasons for optimistic financial projections, according to experts, as many predict future broadcast rights deals via streaming may provide clubs with a bigger slice of direct revenue and more centralised control into global markets.
With five American owners amongst the ‘big six,’ it opens the question of whether the changing ownership at Chelsea shifts renewed momentum back towards the previously bungled plans to break away into a lucrative new 'European Super League.'
Effectively the establishment of a franchise-style competition without relegation or promotion, like in America's elite sports leagues such as the NFL or NBA, would see the financial performance of participating club’s skyrocket.
“I think lots of American owners feel that football clubs, in particular, are not that good at selling their commercial rights,” Kieran Maguire, football accountancy lecturer at Liverpool University, author and broadcaster, said.
“They are mainly from the US and although £3bn seems a lot… it’s still relatively cheap compared to the cost of buying a US sports franchise,” he added.
Digital assets perhaps open another potential area of growth, if Chelsea is to follow John Terry, the club's former "leader and legend," into non-fungible token (NFTs) dealing.
In the metaverse, another emerging digital economic space, Chelsea's new owners may potentially create a virtual world that includes Stamford Bridge, which would provide the option for fans to buy match tickets and attend games virtually – making it feel like they’re at the game, Maguire explained.
It is not entirely clear. Nevertheless, many investors evidently put serious cash on the negotiating table.
How are Chelsea’s financials looking?
Abramovich was owed £1.5bn by Chelsea but the frozen-out oligarch has agreed to quash the club’s debt.
In the year ended 30 June 2021, Chelsea recorded a loss of £153.4mln, citing pandemic-related issues that impacted revenues. Commercial revenue and matchday revenue unsurprisingly also plummeted compared with the year before.
“The pandemic has had a severe impact on the club’s income for a second year in a row," chairman Bruce Buck said in a statement.
“Significant revenue was lost due to the majority of matches being played behind closed doors, however, with our success in the Champions League, we have been able to offset the huge impact of the pandemic on our revenues.”
Who are the tycoons and companies behind the Chelsea takeover?
Clearlake Capital
Founded in 2006, it’s one of the largest buyers of mid-sized companies and targets highly profitable businesses in the consumer goods, industrial and technology sectors, which it grows via leveraged or debt-financed acquisitions.
See the company’s whole portfolio here.
Its flagship funds, including a new US$14bn buyout fund, earned net returns of between 34% and 56% between 2013 and 2018, according to public pension fund disclosures.
“Clearlake has continued to be one of the best performers in our private markets’ portfolios,” said Shawn Wooden, treasurer of the State of Connecticut, which invested over US$500mln with the group.
Its most successful deal was the sale of healthcare software company Provation, which it acquired for US$180mln in 2018.
It made four acquisitions before offloading to Fortive for US$1.43bn in December. The group made 20-times its money as it financed the purchase using debt.
Clearlake has become Wall Street’s largest user of ‘GP-led secondaries.’ It involves locating a private equity company that’ll buy a substantial portion of an existing investment.
Investors are then given the choice to sell at its new valuation or roll their stake into a new fund that will hold the investment for roughly four more years.
Despite having led or co-led over 300 investments, this was the group’s first venture into the sporting world.
The two co-founders José Feliciano and Behdad Eghbali, who own a combined 80% of Clearlake, bought the football club from the group’s private equity funds, The Financial Times reported.
Todd Boehly and Eldridge Industries
Boehly, who has been the main public figure in the Chelsea deal, became wealthy through real estate and is now the chief executive and chairman of Eldridge Industries – an American private investment firm.
Eldridge owns or invests in approximately 100 companies, including Security Benefit Life Insurance, an insurer that it owns with US$40bn in assets.
The 46-year-old American tycoon, who has a net worth of US$4.5bn, was reportedly keen on buying Chelsea in 2019 but his then £3bn offer was not sufficient for Abramovich.
Boehly spearheaded the purchase of Major League Basketball franchise Los Angeles (LA) Dodgers in 2012 for US$2.1bn. He owns 20% of the club and is part of the ownership consortium Guggenheim Baseball Management.
In the last decade, the Dodgers have been one of the highest-spending baseball teams and had the highest payroll of all teams in 2022 at US$289mln, Sporting News commented.
He also has a minority stake in the NBA basketball team LA Lakers, with his ownership group alongside Mark Walters, who has a combined 27% stake.
Mark Walter and Guggenheim Partners
Walter is the chief executive of Guggenheim Partners, a private global financial services firm that has more than £250bn in assets under management.
His net worth was US$3.9bn in May 2022, according to Forbes.
Walter, too, is a co-owner of the LA Dodgers and has a minority stake in LA Lakers. A decade ago, he was the eighth most influential person in sports business, according to the Sports Business Journal.
He is personally invested in plant-based food producer Beyond Meat and online car vendor Carvana.
Hansjörg Wyss
The 86-year-old Swiss billionaire, with a US$5bn net worth in May according to Forbes, made his fortune through Synthes, a manufacturer of medical devices, which he sold to Johnson & Johnson for US$20.2bn.
He also worked in government infrastructure services, the steel industry, and sold aircraft, while Wyss holds stakes in biotech companies Novocure and Molecular Partners.
Forbes claimed he is "among the most philanthropic people in the world," signing The Giving Pledge in 2013 and agreeing to give away most of his fortune.
He has made major donations to environmental and scientific causes, with the assets of his charitable foundations reaching almost £1.6bn.
Jonathan Goldstein and Daniel Finkelstein
The consortium also includes British businessman Jonathan Goldstein and British journalist Daniel Finkelstein.
Goldstein is the co-founder and chief executive of the multinational investment firm Cain International.
Finkelstein was made a member of the House of Lords in August 2013 for the Conservative Party, as well as being a former chairman of Policy Exchange.
He was also the old executive editor of The Times and remains a weekly political columnist.
How did Boehly and Clearlake become friendly?
Clearlake, which took in US$25bn in new assets over the last year, was working to purchase debt manager CBAM in early-2022 but thought the US$787mln asking price was too high.
Its two co-founders Feliciano and Eghbali grew close with Boehly, the Eldridge Industries founder, which owns CBAM. This is where the foundations for the Chelsea takeover formed.
How will Chelsea’s spending habits change under Boehly?
Under Abramovich, Chelsea was renowned for sacking and hiring managers in an instance – in fact, just two managers in the Russian’s tenure survived for over two years.
But Boehly is thought to want to end the firing and hiring policy, according to Si.com, especially given current manager Thomas Tuchel’s calmness and stability offered during the rocky past months.
The new consortium is expected to hand Tuchel some £200mln this summer to try and bridge the gap between themselves and the top two English sides, according to Football London and several industry experts.
That figure, however, was thought to be the targeted number once a handful of players were sold.
When it comes to player recruitment, Chelsea now wants to model themselves on Liverpool, who compete with Manchester City by making signings specifically suited to their manager's footballing philosophy, Goal.com said.
Wrap-up
The biggest sporting takeover in history made a mockery of those initially claiming the Russian oligarch would be lucky to get half the final £4.25bn figure.
If Boehly’s spending habits at the Dodgers and the £200mln transfer budget rumoured to be handed to Tuchel this summer are anything to go by, then Chelsea fans have much to be optimistic about.
However, with a new owner at the helm, there is more uncertainty than questions answered for the west London side.
And as the old cliché goes, only time will tell before conclusions can be drawn as to whether the Clearlake-Boehly consortium will bring success to the club that won 21 trophies in 19 years under Roman Abramovich.