MURKY GOOAAALL!

Value of Boehly and co.’s soccer buy questioned

A coterie of US investors took control of the English soccer team Chelsea FC last month — and some Wall Street insiders are still struggling to understand why.

Todd Boehly — a coowner of the Los Angeles Dodgers whose free-spending strategy over the past decade has been credited with reviving the MLB team — promised a similar tack for Chelsea when he announced May 30 that he and a consortium of investors had purchased the team for 2.5 billion pounds, or more than $3.1 billion.

Boehly, however, also has sought to draw a line between his cash-intensive approach and that of Russian oligarch Roman Abramovich, who reportedly lost 900,000 pounds a day during his 19-year ownership stint, shelling out more than 2 billion pounds on team payroll and redefining a new era of lavish spending in soccer.

Specifically, sources close to the situation say Boehly and his main co-investing partner, Clearlake Capital, a buyout fund based in Santa Monica, Calif., are looking to Liverpool — owned by another US-based investor, billionaire John Henry’s Fenway Sports Group — as an example they’d like to follow.

By the numbers

Liverpool generates 200 million pounds in EBITDA — or earnings before interest, taxes, depreciation and amortization — compared with Chelsea’s 50 million pounds, according to a source briefed on the teams’ finances. If Chelsea can match Liverpool’s EBITDA, the acquisition will look like a relative bargain, according to sources familiar with Boehly and Clear117-year-old lake’s thinking.

In the 2021-2022 season, Chelsea had the Premier League’s second-highest payroll at 355 million pounds. Liverpool came in fourth at 314 million pounds, according to soccer site Marca. Meanwhile, sources close to Chelsea’s new owners note that Boehly’s Dodgers have 30 people hired to study “data analytics”— a practice commonly used to seek strong players at good prices — while Chelsea has four.

Abramovich’s profligate spending produced results, with Chelsea winning five Premier League titles and two Champions League trophies as the best club team in Europe.

Evidence of a more flintyeyed, numbers-driven approach emerged last week, when it was leaked to the press that Boehly was happy to let Romelu Lukaku, a Belgian soccer star Chelsea had signed last summer for 97.5 million pounds, return to the Italian soccer club Inter Milan.

A ‘bridge’ to sell

Nevertheless, insiders say it isn’t clear that such tweaking will be enough to achieve the outsize returns to which Clearlake and its investors have grown accustomed. The firm’s 2012 and 2015 buyout funds produced net internal rates of return of 41% and 33% per year, respectively as of June 30, 2021.

That made the funds among the best performers for those raised in that time, even when compared with veteran buyout heavyweights like the Blackstone Group or Carlyle Group, according to public records.

Clearlake and Boehly, who each put down more than $1 billion in equity in the deal, share governance control over budgets, including payroll. Sources close to Clearlake insist the firm is less focused on slashing costs than on growing revenue, which they said was recently less than 500 million pounds, versus Manchester United’s estimated 700 million pounds. The plan is to seize opportunities for naming rights and sponsorships, the sources said.

Nevertheless, bankers close to the deal note that profits face at least one massive obstacle — a pledge to rebuild Chelsea’s Stamford Bridge stadium in London at an estimated cost of more than 1 billion pounds to increase its seating capacity. Fans worry that the upshot will be more luxury suites and higher ticket prices for fans — with Boehly scrambling to tamp down concerns about the latter in recent weeks.

“You need to put 1 billion pounds into a new building and they lose money,” a sports banker said. “I’m not a big fan of this deal.”

Passion vs. profit

Chelsea lost 146 million pounds ($178 million) for the year ending June 30, 2021, when stadiums were emptied out amid the pandemic. It made a 39.5 million pound ($48 million) profit the prior year, according to Football.London.

Whatever happens, the co-founders of Clearlake, Behdad Eghbali and José Feliciano, will make money from the Chelsea deal. That’s because Clearlake charges its investors a 1.7% annual management fee on investments, and the Clearlake partners put down money at most equal to 2% of its fund, according to a November presentation by Clearlake to the Connecticut treasury.

Chelsea fans are concerned the new owners will put profits over success.

“Generally, Americans don’t get ‘soccer’ and my fear is that if there is no passion or desire for the club within the ownership then we are no longer a football club and we become purely a business,” said Martin Pearce, a Chelsea season ticket holder for more than 30 years.

“Roman Abramovich was very popular, all politics aside, and was clearly passionate about the team and the success he brought us,” Pearce added.