Earlier in the week, the cruise announced the creation of its SAF (Sociedade Anônima do Soccer). As a result, the club sent the CBF notice to transfer its vacancies in competitions to its company, including the position in Série B. Now, the association is preparing its sale to investors if approved by advisers.
The process is explained by the CEO of Cruzeiro, Paulo Assis, in an interview on the blog. It is the first large club to start the process of transforming into SAF under the new law.
A key step is the approval by the Deliberative Council of the sale of more than 49% of the club to investors — currently only this percentage is allowed to be negotiated. The board decided on the measure because, in conversations with the market, it realized that it would not attract partners without ceding management power.
In the interview below, Paulo Assis details the process of transforming Cruzeiro into SAF. The transfer of rights will take place in this window without competition, but the transition to sale is still expected to extend to 2022.
Blog: After the constitution of SAF do Cruzeiro, what are the next steps? Should the transfer from the club to the company still take place in this window?
Paulo Assis: The constitution of the CNPJ was important. Setting up an SAF was not that simple. As this is a new situation, the board of trade could have doubts about the law. The creation of the CNPJ represents the emergence of a company capable of operating. In the next steps, there are actions that depend on others and the operation itself. Cruzeiro sent a letter to CBF to request the transfer of Cruzeiro’s assets. I will receive a login and password from CBF. I need you to transfer the vacancies first. This is new for CBF, in the format of the law, we were the first. It was shipped today. Now it’s time to wait for CBF to transfer: vacancy in Serie B do Brasileiro, vacancy in Serie A in Mineiro. Will do in this window now. It’s time to do this. (Then player contracts will be transferred)
Blog: And the operation of the company itself?
Paulo Assis: There are transactions to be made, we will have some legal requirements: build a website, bring information. The search for investors continues. We called a meeting of Cruzeiro for the possibility of negotiating more than 49% of the SAF. Intends to have that after the 17th. We realized that raising funds without ceding control would be difficult. We knew, but we tried to stress it out, to try (without selling control). I hope it allows for greater speed in the business.
Blog: From whom did Cruzeiro hear that it would be necessary to cede control?
Paulo Assis: Groups of investors interested in the purchase.
Blog: Between selling 49% of the shares or ceding control, there is a way in the middle, with power sharing. There are models to be discussed. Has Cruzeiro defined its model?
Paulo Assis: We will always work on what offers the best value for money for the club. It can’t just be whoever pays the most. The investor with greater expertise (in football) counts with the speed of money supply. On the association side, we are going to preserve at least 10%, thereby safeguarding the right to affirmative matters such as coat of arms, headquarters, color, to maintain identity. The formatting of the Board of Directors will be negotiated with what the investor will want. Will the investor want to take advantage of the existing structure or will he want to start from scratch? Give the investor the possibility to buy control and will not be subject to this change of electoral cycles every three years. This piece of Cruzeiro that became SAF will have more autonomy.
Blog: Will Cruzeiro transfer all assets (television contracts, sponsorships) to SAF? Will this be provisional or definitive?
Paulo Assis: At first, we are going to make an assignment of use of the brand. It is necessary for this. Assets that make sense will be in this contract. It will be an assignment with or without liens. It will be a matter of negotiation, what percentage. The term is indefinite, as long as the SAF lasts. Or doesn’t make sense.
Blog: Has Cruzeiro already made an assessment of how much it is worth? How much will the club be charged?
Paulo Assis: It’s a question fans and advisors always ask. We are aware of this valuation (the process of valuing an asset). But setting a value can limit the sale value or alienate investors. We will not disclose. We have a business plan. It has a number (sale value) that works. Above, we may have a better investment value. Below, we will have difficulties. We have a North. It’s obviously going to happen out of the limelight.
Blog: Companies’ sales processes are usually time-consuming. What is Cruzeiro’s estimate for the conclusion of the SAF negotiation?
Paulo Assis: Our expectation is that when we have the proposal on the table, we will do a “due dillegence” (sort of auditing your parties to a transaction) of at least six months. The market average is higher. We’re going to need some time to get this on our feet. It is not a product that is priced in an ordinary way. We see it as a rebirth, but it is a means and it depends on how we are going to carry out the project. We are creating a feasibility for Cruzeiro to have investment potential again tomorrow.
Blog: But how will this transition take place? Will Cruzeiro have initial participation in the management of the new controller?
Paulo Assis: We have a structured project which is already being built, I believe the controller will not want to start from scratch. I’m talking to Belletti, who is working as a coach, and he said that at Chelsea it took six to seven years of transition. An investor can come with everything ready. I think it’s unlikely.
Blog: When talking about selling a club, the fan imagines the acquisition by someone with a lot of money to spend. But, under capitalism, those who buy want profit and this may not mean a competitive team model. For being a team just to make a profit as we see Arsenal. Is there this awareness?
Paulo Assis: In the investment logic, you have a company to generate profit or make a secondary (sell the club later). Winning club is a valued club. Our difference to the European market is that we are exporters. We will continue to be an exporter. It’s an economic issue. Maybe in 30 to 40 years, with Brazil becoming developed, we will match each other and this order will change. A trainer club that offers athletes to the world to sell bigger (in values) when it’s better.
Blog: What about recurring revenues (television, marketing)? What is the perspective of Cruzeiro in this field if we think that it is in a secondary market, which is Minas Gerais, despite having great fans?
Paulo Assis: In addition to TV revenues, there is a diversification of revenues, there are NFTs, Fan Tokens. In the medium term, there will be an increase, we see that live entertainment is the one with the most value. Football has this characteristic. We are being very conservative in our recurring revenue estimates. It’s very interesting, Cruzeiro fans, without doing anything exceptional, she justifies the investment in the club.
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