Skip to main content

Can hedge fund revive AC Milan?

In April 2017 an unknown Chinese businessman, Li Yonghong, acquired AC Milan for €740m from Silvio Berlusconi, the three times Italian prime minister, who had owned the club for two decades. He hoped to exploit the club's large Chinese fan base. The takeover was funded by €300m of high interest loans from Elliott Asset Management, a $38.2bn hedge fund described by the Financial Times as 'the world's most feared hedge fund.'

In July 2018 Mr Li defaulted on the loans, losing €500m in equity overnight. Elliott effectively acquired AC Milan for €400m, just half of what the club had been valued at months earlier.

Admittedly, AC Milan had faded from earlier glories. It last won Serie A in 2011 and has failed to qualify for the Champions League for five seasons. Over the past decade its revenues have stagnated at around €200m. Those at Real Madrid have doubled to almost €750m over the same period.

Elliott's plan is clear: win matches on the pitch and raise revenues off it, all to enhance the club's value and sell for a healthy return. The scarcity value of such a renowned club means there will always be buyers in the market.

Quite extraordinarily, the club previously had no dedicated sponsorship sales people. This provides a key revenue stream for all top clubs, in particular it is something at which Manchester United has excelled. The club has approached hundreds of brands in a search for new sponsors. In 2017-18 the club made €70.2m in sponsorship agreements, half the €143m earned by Juventus and well behind the €356.2m at Real Madrid.

The club is awaiting a decision on permission to replace the San Siro stadium on an adjacent site. The €1.2bn cost would be shared with Inter Milan. The clubs estimate the income from a new stadium would more than double from €40m today to over €100m, closer to the €145m earned by Barcelona.

Elliott seems to have acquired a taste for football, negotiating a complex debt deal with the owner of French club Lille.

Labels:

Comments

Post a Comment

Popular posts from this blog

Threat of financial calamity removed from Baggies

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club. This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner. Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player s...
1 comment
Read more

Gold standard ground boosts Tottenham's income

The gold standard in European football grounds is the Tottenham Hotspur stadium in north London, a £1bn construction project completed in 2019. Its impact on the club’s finances has become increasingly clear as the effects of the pandemic have faded. Previously, the average fan would spend less than £2 inside the ground on a typical match day, but now that figure is about £16, thanks to new facilities including the longest bar in Europe and an on-site microbrewery. Capacity has gone up from 36,000 at the club’s previous home of White Hart Lane to 62,000.  The new stadium — built on land adjacent to White Hart Lane — has opened the door to a broad range of other events that have helped to push commercial income up from €117mn in 2018 to €215mn in 2022. Last year, Tottenham hosted US singer Beyoncé for five nights on her global Renaissance tour, two NFL matches, as well as rugby games and heavyweight boxing bouts.  Money brought in from football has gone up too. Match day ...
Post a Comment
Read more

Spurs to sell minority stake

Tottenham Hotspur is in talks to sell a minority stake in a deal that could value it at up to £3.75 billion and pave the way for Joe Lewis and his family to sever ties with the Premier League football club. Tottenham chairman Daniel Levy is seeking an investment that values the club at between £3.5 billion and £3.75 billion, including debt. While the terms of any deal have not been finalised, City sources expect Spurs to sell about 10 per cent. The club is being advised by bankers from Rothschild on the sale. Tottenham wants to raise fresh capital for new player signings and to help fund the development of an academy for its women’s team, as well as a 30-storey hotel next to its north London stadium. The financier Amanda Staveley, who brokered the deal for Saudi Arabia’s Public Investment Fund to take over Newcastle United, is understood to be among the parties to have expressed an interest in Tottenham. Staveley’s fund, PCP Capital Partners, has raised about £500 million to ...
Post a Comment
Read more