LaLiga signs one of the largest corporate operations in the sports industry. The Spanish professional football manager has reached an agreement with CVC, whereby the investment firm will inject approximately 2,700 million euros to the clubs. In return, it will receive a 10.95% stake in a new holding to which the entire commercial business will be transferred. Control over audiovisual rights will remain in the hands of the entity chaired by Javier Tebas.
The agreement has been ratified by the clubs in delegated commission and by the investment committee of the US firm; next week it will be the club assembly that will have to vote. Among the keys to the agreement, that LaLiga maintains intact its sports and organization and management competitions for the commercialization of audiovisual rights.
With this alliance, the competition takes a much more ambitious step than was anticipated a few months ago, when it negotiated with different funds the sale of a significant stake in LaLiga Tech, the digital business unit. Finally, if the agreement materializes, the magnitude of the alliance would be much greater, since the valuation of that subsidiary was more than 450 million euros.
In fact, the valuation that has been made of the new holding is 24,250 million euros, much higher than that obtained by other properties immersed in similar operations. There, the entire international business of the professional football manager will be transferred, including the joint ventures with Relevent to develop the North American market and with Ddmc for the exploitation of activities in China. The new company will also manage the marketing of sponsorships and entertainment projects, such as the theme park with Port Aventura or the line of soccer restaurants.
90% of these funds will go to clubs, including women’s, semi-professional and amateur soccer, which will receive 100 million
In exchange, CVC will contribute those 2,700 million euros under the formula of the participating account. That is, that eThe fund will recover the money contributed as LaLiga’s turnover grows and there are benefits to be distributed throughout the alliance period; if not, you would lose part of the investment. It is the formula that, for example, Real Madrid used with Providence to get 250 million euros.
90% of these funds (2,430 million) will go to clubs, while the remaining 10% will go in equal parts for the expansion of LaLiga and for women’s, semi-professional and amateur football, which will receive 100 million through the Royal Spanish Football Federation (Rfef) and the Higher Sports Council (CSD).
The funds will be transferred to the clubs in a 40-year soft credit format with an interest rate of 0%, so that the fiscal blow will be less than if it were noted as an extraordinary income. In addition, as they are participating loans, they will be considered equity, so they will not be counted as debt on the balance sheet.
Regarding the distribution, everything indicates that a criterion similar to that used for the distribution of television rights will be used. Furthermore, the sources consulted by 2Playbook indicate that the average of the last seven seasons will be used.
As for the purpose of the money, LaLiga wants to prevent it from being used for transfers, so they will be a finalist. In fact, 70% of the money should be allocated to investments in infrastructure, 15% to refinance debt and compensate losses due to Covid-19 and another 15% to increase the workforce limit. At this last point, they will be able to divide it into three years, so FC Barcelona and Madrid would have an extra 40 million to define their first team this year, for example.
Regarding investments, they should serve to improve sports strategy, infrastructure, international development, brand and product development, communication strategy, innovation plan, technology and data, and content development plan on digital platforms and social networks. All this incorporating sustainability, good governance and diversity as fundamental values of the model.
“It is, therefore, an inclusive, equitable and democratic strategic agreement, which not only shields the economic viability of all Spanish football clubs, but also opens a new present and future for them by allowing them to advance in their development and transformation one decade ”, says LaLiga, which trusts that the agreement will have“ a multiplier effect not only in the world of football, but also in the ability to create a Spain brand, as well as in the creation of employment for the sector and in attracting talent ”.
Clubs must allocate 70% of loans to infrastructure, 15% to refinance debt and 15% to salary limit
The entity chaired by Tebas highlights in a statement that this contract “recognizes LaLiga’s leadership as one of the most outstanding sports competitions worldwide, as well as its growth potential through a greater digital presence focused on direct interaction with the fans, investment in a sports brand and project and internationalization, in a coordinated effort between LaLiga and the clubs ”.
The entry of liquidity would occur at a vital moment for the vast majority of teams, especially those of LaLiga Santander, where transfers and the box office have a higher weight in the business. This is where the main problems have occurred, with obvious cases such as that of FC Barcelona, which could close the two years of the pandemic with accumulated losses of more than 300 million euros.
LaLiga managed to save with note the economic earthquake that caused Covid-19 in the accounts of 2019-2020, but the duration of the pandemic will make it impossible to save 2020-2021 and the competition has planned to close with losses of 733 million euros .
In terms of revenue, the problem for 2020-2021 is the extension of the stadium closings will cause a 66% collapse in the business per matchday, to 271 million. Television revenues will have remained stable, with 1,762 million, while the commercial area will suffer an adjustment of 7.6%, to 912 million. In total, the turnover will have fallen by 29.7%, to 3,545 million euros.
Despite this, CVC has decided to bet long-term on the competition, the one that has grown the fastest in terms of revenue in the last five years and the only one that has managed to start competing with the Premier League in international markets. Proof of this has been the last year, in which LaLiga has achieved revaluation of contracts where the English league has stagnated or even regressed. Clear examples are those of China, but also the new alliances with ESPN in the United States or MTV in India.
As for the investment firm, this agreement comes after its initial agreement with Serie A was stalled by opposition from some clubs. In this case, the plan was similar in that it also involved acquiring a 10% stake, but in its case in the management of the entire audiovisual and commercial business. The valuation was lower, as it meant contributing 1.7 billion euros to the clubs.
For CVC, this would be its third consecutive investment in less than a year within the sports industry. In March, the former owner of MotoGP and Formula 1 closed the purchase of 14.3% of the Six Nations rugby for 365 million pounds (426 million euros). A month before, he signed an agreement with the International Volleyball Federation (Fivb) to promote the growth of this discipline with an investment of 300 million dollars (248 million euros) to contribute to the growth of volleyball.
In recent months he has also considered buying a minority stake in the NBA’s San Antonio Spurs and has led talks with ATP and WTA to create a global tennis giant. His proposal involves injecting 600 million dollars (493 million euros) into a manager that brings together the two professional circuits, the male and female. In return, he would receive a 15% package, valuing 100% of the group at 4,000 million dollars (3,287 million euros).
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