Power, private equity and European football
The last time DD checked in on CVC Capital Partners’ attempt to buy a stake in Spain’s top football competition La Liga, things weren’t looking easy for the private equity firm.
CVC had knowingly placed itself at the centre of a long-running power struggle between the league and two of its top clubs, Real Madrid and Barcelona, not long after they tried to break away into a European Super League.
Unsurprisingly, the two clubs were unhappy about what they saw as a backroom deal between the league and a group of financiers. Since then, Real Madrid has threatened legal action to block any deal.
Barcelona, which has just lost its star player Lionel Messi, centre, accuses CVC of underpaying © Reuters
The row is due to come to a head on Thursday, as La Liga’s 42 clubs vote on the proposal. CVC needs 32 votes and knows that this part is tricky: a lack of support from clubs is what caused private equity deals with Italy’s Serie A and Germany’s Bundesliga to fall through this year.
But La Liga is sounding confident. “We are going to have a big majority,” José Guerra Álvarez, corporate managing director at La Liga, told the FT’s Sam Agini in this story alongside DD’s Kaye Wiggins.
Even CVC, which hardly ever makes public comments on its deals, especially when they’re at a sensitive point, is being punchy: it said this week that Real Madrid’s planned legal action was “totally disproportionate and unfounded”.
La Liga has brought in Rothschild & Co, which has produced a report that favours its case, saying the offer is “fair from a financial point of view”. Barcelona had previously said CVC was underpaying.
The Rothschild report contains some new insights on how the deal will work.
CVC (which is using a €1bn loan from Goldman Sachs, per Reuters) would pay about €100m for a minority stake in a company holding La Liga’s broadcasting and sponsorship rights.
It would also contribute €2.5bn to La Liga, to be shared between its clubs.
In return CVC would be entitled to an 11 per cent share of revenues for the next 50 years. The clubs would get the €2.5bn in the form of “shareholder loan notes”, essentially interest-free loans that would mature in 40 to 50 years.
Will the clubs think it’s a fair price? It’s “not straightforward” to find a comparable group of companies from which to assess CVC’s valuation of La Liga at 15.1 times 2021 earnings, the Rothschild bankers note.
A group of premium content companies including Netflix and Disney was valued at almost 22 times earnings, they said. And a group of sports companies including Formula One and the Madison Square Garden Company was valued at 33.4 times.
But because Europe’s other football leagues have rejected CVC’s approaches, it’s hard to know for sure.