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Complex, whirlwind Chelsea sale ‘had it all’

By Chris Smith

When a consortium led by investor Todd Boehly and Clearlake Capital Group finalized a $5.2 billion deal to acquire Chelsea FC at the end of May, it capped what is likely the most complex team control transaction in history. Boehly, chairman and CEO of Eldridge, and Clearlake were joined by Guggenheim cofounder and CEO Mark Walter, Cain International CEO Jonathan Goldstein and Swiss billionaire Hansjörg Wyss in buying the team for a then-record $3.1 billion and committing to spend billions more across the next decade.

Sources with inside knowledge of the deal say the whirlwind process, which lasted just 89 days from sale announcement to closing, included unprecedented covenants that limit the incoming owners’ ability to sell their stakes, raise debt or take money out of the club, all negotiated in the shadow of a war and under the close-watching eye of the British government.

The Chelsea sale was run by The Raine Group, an American merchant bank that got the call three or four days before the March 2 announcement that longtime owner and Russian oligarch Roman Abramovich, who came under intense scrutiny following Russia’s invasion of Ukraine, would sell the team. Raine had an existing relationship with the club going back to 2018, when the bank helped Abramovich quietly test the market for the club. He ultimately passed on offers for the team believed to be in the $2.5 billion to $3 billion range.

Chelsea owner Todd Boehly after the Premier League match between Chelsea and Watford at Stamford Bridge on May 22.getty images

The official announcement that Abramovich would sell set off a feeding frenzy. Chelsea later revealed that it received “more than 250 enquiries from proposed purchasers, held detailed discussions with more than 100 individuals and entities, and entered into 32 confidentiality agreements, which allowed for due diligence with respect to confidential club information.”

First-round bids were requested within two weeks of the sale announcement, ultimately resulting in 15 formal offers, a dozen of which were considered credible. A source familiar with the process suggested there were likely just as many interested parties who would have submitted bids if not for the significant uncertainty, governmental involvement and the many requests being made of the buyers.

In fact, multiple sources said the laundry list of contractual obligations are unprecedented for a team transaction. “Is this Brexit? No. But in the sports world, I’ve certainly not worked on anything more complex,” said a source who advised one of the bid groups. “There have been some very complex financings, but this had it all.” Those covenants include measures stipulating that:

1. Control owners can’t sell their stakes in the team for at least 10 years. “They can’t sell secondary or sell down their stakes,” said one source. “They can bring additional investment to the balance sheet, but they’re limited in that as well.”

2. Those owners also can’t charge management fees, pursue a debt recapitalization, pay dividends out of debt or leverage club assets in any other way for personal gain.

3. Owners are restricted in both the amount and the nature of debt that can be put on the team, which has historically not carried debt under Abramovich’s ownership. Exact limits remain unclear, but a source said that debt has to be market terms and that the largest debt allowance is for stadium renovations.

4. The team must commit to investing some $2.2 billion over the next 10 years to support the team’s foundation, academy program, women’s team and stadium, Stamford Bridge. Chelsea’s new owners have some flexibility in how to deploy that capital, but a source said a minimum of some $60 million is earmarked for the women’s team—not $125 million as previously reported—and that stadium investments will likely total at least $1 billion.

It's thus far been unclear how those stipulations are enforceable, but a source with direct knowledge of the deal said that the team’ foundation has essentially been positioned as a counterparty to the new owners. There are also contractual terms stipulating that the amount due from Chelsea’s owners to the team’s foundation will increase should the above obligations not be met.

Timeline

Feb 24 – Russia begins its invasion of Ukraine
Feb 26 – Russian oligarch and Chelsea FC owner Roman Abramovich puts the “stewardship and care” of the British soccer club into the hands of trustees of the team’s charitable foundation.
March 2 – Abramovich announces that he will sell the team, stating that he will not seek the repayment of loans or fast-track the sale process. Proceeds will go toward a foundation supporting victims of the war in Ukraine.
March 10 – Abramovich is formally sanctioned by the U.K. government, which freezes his assets and enforces a travel ban. Chelsea is given a special operating license, allowing it to pay some staffing and operational expenses, among other limited operations. The license is later amended to allow greater freedom.
Mid-March – Sell-side bank The Raine Group eventually receives a dozen credible bids and spends the ensuing weeks whittling them down to four groups led by Todd Boehly and Clearlake Capital Group, Steve Pagliuca and Larry Tanenbaum, Harris Blitzer Sports & Entertainment and the Ricketts family.
April 29 – The Boehly/Clearlake group is selected as the preferred bidder.
May 6 – The Boehly group agrees to terms to buy Chelsea FC for $3.1 billion and commit to spend another $2 billion stadium to support stadium renovations and support of the club’s academy program, women’s team and charitable foundation.
May 28 – The two sides reach a final and definitive agreement. The deal is closed two days later.
June 22 – Boehly is named chairman of the board. Walter, Wyss, Goldstein and three representatives from Clearlake—cofounders Behdad Eghbali and José Feliciano, and partner and managing director James Pade—take board seats alongside MBC PR director Barbara Charone and politician Lord Daniel Finkelstein.

The dozen first-round bids were quickly whittled down with a focus on who would be a good steward for the team, commit to long-term investments and complete a deal quickly and with minimal debt financing. The Boehly/Clearlake group emerged as a finalist alongside three other bidders:

Boston Celtics co-owner Steve Pagliuca, who was joined by Maple Leaf Sports & Entertainment chairman Larry Tanenbaum, Facebook cofounder Eduardo Saverin and Passport Capital founder John Burbank, among others.

Harris Blitzer Sports & Entertainment, which provided the financial might for a bid publicly led by former Liverpool chair Martin Broughton along with investments from Canada’s Rogers family, British politician and former track star Sebastian Coe, Serena Williams and Lewis Hamilton.

The Ricketts family, which owns the Chicago Cubs, along with Citadel founder and CEO Ken Griffin and Cleveland Cavaliers owner Dan Gilbert.

The Ricketts group would later drop out, leaving three bids of similar strength. A late entry from INEOS chairman Jim Ratcliffe was considered but ultimately dismissed; a source said Ratcliffe had done minimal due diligence and confirmed earlier reports that he’d gone directly to the team chairman with a lowball offer before later publicly announcing a bid in line with the other contenders.

By the end of April, Boehly’s group had emerged as the frontrunner. A source with knowledge of the selection process said the Boehly group had ultimately offered the most money, but that the financial differences were negligible and, ultimately, unimportant. Rather, Boehly’s group had an edge thanks, in part, to its long-term vision for the club, its extensive track record of owning sports teams and navigating complex transactions, and being in a position to complete a deal quickly and without any debt financing. A representative for Raine declined to comment on the transaction.

Media reports that the Pagliuca and HBSE bids were hampered by a reliance on sizable bank loans were not accurate, according to a source who said those groups had secured debt financing in order to demonstrate access to capital, but that borrowing was not critical to their bids for the team.

Within the winning bid, Clearlake contributed roughly two-thirds of the capital, and it shares equal governance rights with the Boehly group, which includes Walter, Wyss and Goldstein. It’s the first sports transaction for Clearlake, which is led by Behdad Eghbali and José Feliciano, who were also recently among the bidders for the Denver Broncos. Representatives for Eldridge and Clearlake did not respond to requests for comment.

The deal closed on May 30, just shy of three months to the day from the team being put up for sale. Chelsea’s board of directors later said the sale process would ordinarily have taken nine months to a year to complete.

Members of the new ownership group were represented by a wide array of financial and legal advisors, including Deutsche Bank, Goldman Sachs, Moelis & Company, Robey Warshaw, Latham & Watkins, Sidley Austin and Paul, Weiss, Rifkind, Wharton & Garrison LLP. Chelsea and parent company Fordstam were advised by Northridge Law, Simmons & Simmons and Pillsbury, Winthrop, Shaw, Pittman LP.

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