Why CVC is plotting a £9bn sports ‘mothership’
CVC’s £9bn sports ‘mothership’
The rumour mill has been in overdrive since news emerged that CVC Capital Partners was exploring a refinancing of its sports assets, which span cricket and rugby to volleyball, tennis and football.
Sports executives and bankers are asking deep questions about the motives behind an entity that’s being referred to as SportsCo.
CVC is known for making a killing through its past ownership of Formula 1, which it sold in an $8bn deal to Liberty Media in 2017.
But struggles in French football, where media rights values have dropped since CVC bought into a new commercial entity controlled by Ligue de Football Professionnel in 2022, show that sports investing isn’t a sure thing.
Premiership Rugby, in which CVC holds a 27 per cent stake, says it has turned a corner since three clubs collapsed in the wake of the coronavirus pandemic. The league recently struck an improved media rights deal, but clubs still play second fiddle to the internationals. To be sure, CVC also has a stake in Six Nations, the annual contest featuring England, France, Ireland, Italy, Scotland and Wales.
To some cynics in sport, CVC’s latest idea, first reported by Sky News, looks like a firm struggling to find buyers for assets such as Premiership Rugby. Or even a tacit acknowledgment that investors would rather not be exposed solely to CVC’s investment in French football, where the league and clubs are experimenting with their own media platform because of weak demand from broadcasters.
But by putting CVC sporting assets into a £9bn group, the private equity firm’s interests can be leveraged to borrow cash. The idea is that a large, diversified group is less risky than any individual asset, enabling CVC to borrow at cheaper interest rates.
This is critical because of booming sports valuations and mounting interest from rivals in the sector. Just consider Apollo Global, whose in-house insurer provides cheap capital to invest in deals. For CVC to remain competitive for sports assets, it must think creatively about its funding sources.
A person close to CVC also dismissed the notion that SportsCo is simply a method by which to raise money to distribute to investors in CVC funds.
Scoreboard’s understanding is that the Amsterdam-listed group thinks SportsCo can be the CVC “mothership” for new deals in sport. Further ahead, the firm could sell a minority stake in the vehicle without changing the ownership of the underlying assets.
As one person with knowledge of CVC’s perspective said, why sell “forever assets” at a time when sports exposure is “red hot”?
Perhaps the truth is that CVC is in fact owning for longer, preparing to add to its collection of sports assets without giving up what it already owns.