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

LONDON – The British government on Wednesday gave its blessing to the purchase of Chelsea FC, one of Europe’s top football teams, by a US-led investment group after deciding it had sufficient insurance that none of the proceeds from the record sale price – $3.1 billion – would go to the club’s Russian owner.

The government’s approval marked the end not only of the most expensive deal in sporting history, but also perhaps the most cumbersome, cryptic and political.

In the three months since Russian oligarch Chelsea owner Roman Abramovich rushed his team to market, the club’s fate has been played out not only on the grounds of some of the most richest in world football, but in the corridors of power in Westminster and the high towers of Wall Street. And all this against the backdrop of crippling financial sanctions imposed after Russia invaded 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 path to a deal has tangled up an unlikely cast of characters – private equity funds and anonymous offshore trusts; legislators in Britain and Portugal; an octogenarian Swiss billionaire and American tennis star Serena Williams; an enigmatic Russian oligarch and a little-known Portuguese rabbi – and featured a disputed passport, wartime peace talks and even reports of attempted poisoning.

His ending leaves as many questions as answers. All that can be said for certain is that a group led by Los Angeles Dodgers co-owner Todd Boehly and heavily funded by private equity firm Clearlake will now control Chelsea, six-time England champions and twice European champion, and Abramovich will not.

Abramovich first signaled his intention to sell Chelsea – his largest asset by far – almost as soon as the Russian military entered Ukraine in late February, and only a week before Britain and the European Union don’t identify it as a key element. ally of Russian President Vladimir V. Putin and froze its assets.

Making a deal, however, proved fiendishly convoluted. The final hurdle to a sale was only resolved this week when UK lawmakers were sufficiently confident that a $2 billion loan owed to an offshore trust, believed to be controlled by Abramovich, had been cleared. British government officials then tried to reassure their Portuguese counterparts, who had controversially granted Abramovich a Portuguese passport with the help of a rabbi in 2018, and the European Union, which had imposed its own sanctions on Abramovich. in March. Both must also approve the sale due to his Portuguese nationality.

But the loan wasn’t the only complication faced by Raine, the New York-based investment bank Abramovich recruited to handle the sale. The deal with Boehly’s group came with a set of conditions, some set by the British government, some by Raine and some by Abramovich himself, all striking in the context of the sale of a sports team.

The four potential suitors identified by Raine as serious suitors – Boehly’s group; one run by British businessman Martin Broughton who counted Williams and Formula 1 driver Lewis Hamilton among his partners; another funded by Steve Pagliuca, the owner of the NBA’s Boston Celtics; and one from the Ricketts family, which controls baseball’s Chicago Cubs – have been asked not only to pay a jaw-dropping price for the team, but also to commit to a number of pledges, including up to to an additional $2 billion in investments in Chelsea.

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

At the same time, Abramovich insisted that all proceeds from the sale would go to a new charity to benefit victims of war in Ukraine. To ensure that it does not take control of this money, the UK government will require that it first be placed in a frozen bank account that it controls. Only then will he review all the plans for the fund drawn up by Mike Penrose, a former head of a branch of UNICEF, a United Nations children’s charity, and issue a special license that will allow the charity to take control of the funds.

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

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

The new owners also won’t be allowed to collect dividends or management fees or burden the team with debt – terms bankers linked to the sale have described as “anti-Glazer clauses”, a reference to the unpopular Manchester United owners who took control of the club in a leveraged buyout in 2005.

Several people familiar with the process said Boehly’s bid was ultimately selected from the group of wealthy suitors because of his willingness to meet the terms. (At least one of those people, who worked on the Pagliuca-backed bid, said his group pulled out of the race due to the nature of the conditions.)

The Premier League has already signed the sale of Chelseaannouncing on Tuesday that it had reviewed and approved the new owners “subject to the government issuing the required sales license and satisfactory completion of the final stages of the transaction.”

However, it’s unclear exactly what will happen if Boehly and his partners choose to waive any of the conditions once they gain control of the club. Any oversight role will fall to the charity, the only outside entity still inextricably linked to both Chelsea and Abramovich, or the continued influence of two key Abramovich lieutenants who hope to remain in their posts under the new owners.

These two leaders – club chairman Bruce Buck and Marina Granovskaia, a Russian-born businesswoman who rose from Abramovich’s personal assistant to the top official answer for the football trades at Chelsea – will win. at least $12.5 million for their work on the sale. Management fees, totaling up to $50 million, and fees to Ravitch, estimated at between 0.5 and 1% of the deal value, will be paid from the club’s balance sheet and not from funds of sale, according to someone familiar with the structure of the transaction.

British government officials had clashed with Chelsea executives and financiers over the creation of a legally binding resolution to block Abramovich from accessing the money he had so publicly declared he was willing to give up.

At issue was 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 $2 billion to Fordstam, the company through which Abramovich controlled Chelsea, to fund its expenses and operations. Camberley’s claim against Fordstam has now been resolved and its administrator recently resigned.

It was only then, with the May 31 deadline for closing the sale looming, that the UK government decided to approve the deal.

For Chelsea fans, the sale ends a season that has sometimes turned into absurdity. The sanctions imposed on Abramovich – and by extension Chelsea – have affected everything from team travel to printing and selling game programmes. Thousands of empty seats dotted Stamford Bridge during matches in the final months of the season after new ticket sales were banned, and roster turmoil loomed due to a moratorium on signing and selling tickets. players.

That will now be lifted, with Chelsea players and manager Thomas Tuchel urgently demanding clarification from Boehly and his group on their plans. At least two key defenders are expected to leave Chelsea this summer, with at least two other players – including club captain Cesar Azpilicueta – expected to follow.

Boehly, a regular fixture at Chelsea games since his takeover was announced on May 6, has widely said he would like to maintain Chelsea as a major force in football. It’s unlikely, however, that a group largely backed by a private equity firm will be as lenient as Abramovich was as an owner.

In nearly two decades at Chelsea, Abramovich was a familiar but almost silent presence at Stamford Bridge, 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 by employing a succession of top managers and investing billions of dollars in players.

His largesse changed not only Chelsea but also football as a whole, ushering in an era of unfettered spending that saw transfer fees and player salaries rise to levels unthinkable just a few years earlier. It also came at a price that Chelsea’s revenues, no matter how much they grew in those years of plenty, couldn’t match. Throughout his tenure, Abramovich used his vast personal fortune to subsidize losses of up to $1 million a week.

Yet just as Abramovich’s arrival in 2003 ushered in a new era for English football, his departure also serves as a marker.

While scarcity may partly explain the rush to pay a premium for Chelsea – football’s biggest teams are rarely for sale, after all – it’s unclear when or how a group of private equity investors who sailed in such dangerous and confusing waters to gain control the club can begin to see a return on their investment.

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