Real lose out on CVC deal

Real Madrid may be at the top of the Spanish league. But off the pitch, the country’s richest and most successful club has suffered a grievous loss.  Last weekend, La Liga signed a €2bn financing deal with private equity group CVC Capital Partners.

The fiercest opposition came from Florentino Pérez, the billionaire president of Real Madrid, who offered up an alternative debt deal. But 37 of 42 Spanish clubs voted in favour of the CVC transaction instead.

Real’s defeat is hard to overstate. CVC will invest €2bn to partner with La Liga and be entitled to 8.2 per cent of the Spanish league’s “commercial profits” — meaning its revenues, minus costs from setting up a new commercial entity — for the next 50 years.

Opponents, who also include FC Barcelona and Athletic Bilbao, are still seeking to block the deal by filing lawsuits. In the meantime, they have received a carve out. By refusing to take CVC’s cash, they won’t have to give up any of their share of future La Liga revenues.

CVC still gets what they want most: a stake in the broadcasting rights around Spanish league matches, including those involving Real Madrid.

On Monday, La Liga sold its domestic broadcasting rights to Spanish TV operator Movistar and streaming service DAZN in a deal worth €4.95bn over five years.  That’s an increase on the value of the rights per season it earns from the existing three-year deal with telecoms group Telefónica worth €2.94bn. The continued attractiveness of La Liga’s screening rights is down to, in large part, fans wanting to watch top sides like Real Madrid.

The new TV deal provides CVC with early returns, but the true goal is for a bumper payout in future. The private equity group also typically views its investments over a 10-year period, seeking to grow the companies they acquire or partner in, then sell out at a higher price than they bought in.

Real Madrid is staying away from the CVC deal, partly because it still wants to launch a European Super League. But with most other top clubs backing off from that radical project, and legal disputes around the Super League likely to rage on for months if not years, it doesn’t look likely to come to fruition any time soon.  Until then, Real Madrid will continue to play in — and seek to win — La Liga.  Much to CVC’s benefit.