A major reset at Chelsea

Chelsea FC’s US owners believe a major reset will prevent a repeat of a calamitous first year in charge during which the club spent record amounts on players but suffered its worst season in almost three decades.  Speaking to the Financial Times, Chelsea chair Todd Boehly said: “We feel really good about the sporting side of the house. Morale is high and the culture is good. On the commercial side, we’ve got a lot of new hires. We’re excited about the path ahead.”

A consortium led by Boehly, co-owner of the LA Dodgers baseball team, and Clearlake Capital acquired the club for a record sum of £2.5bn in a forced sale last year from sanctions-hit Russian oligarch Roman Abramovich. The combination of a private equity firm and a financier with a proven record in the sector was expected to bring financial rigour and sporting savvy following the excesses of the Abramovich era, in which Chelsea lost almost £1mn a week over close to 20 years.

The high price raised valuation expectations across football, prompting the US owners of rivals Manchester United and Liverpool to explore sales. But Chelsea’s first season under new ownership proved disastrous and raised questions about whether the flood of professional investors coming into football have a path to making money. The team finished the season in 12th place, its worst league position since 1994, while the result deprived the club of qualification for European football for the first time since 2016.

Participation in the Uefa Champions League generated an average of £87mn a year for the club during the past three seasons.  Todd Boehly: ‘The culture is good . . . we’re excited about the path ahead’.   “It was one of those seasons that was just chaotic on and off the pitch from start to finish”, said Dan Silver, a board member of the Chelsea Supporters Trust, who added that some of the problems had been building up long before the takeover. “We were poor. We were underprepared.” 

However, the US owners hope to get on the front foot with a number of key additions to both the sporting and commercial operations, while talks have begun with several outside investors, including Ares Management, over raising new funds. Fresh capital could be used to bolster the club’s finances ahead of a possible stadium redevelopment and a further push into multi-club ownership following the recent purchase of French team RC Strasbourg.

Chelsea made a pre-tax loss of £121mn on revenues of £481mn in the year ended June 2022. Among the arrivals is new chief executive Chris Jurasek, a veteran from other companies backed by Clearlake, Chelsea’s biggest shareholder. An experienced hand in the technology sector, Jurasek will take on some of the responsibilities that had fallen to Tom Glick, Chelsea’s president of business, who is currently serving his notice period after less than a year with the club. More executive hires are planned as the owners look to beef up what they see as underpowered commercial operations.

Jurasek’s priorities include sealing a deal for a new front-of-shirt sponsor to replace UK mobile phone operator Three, which chose not to renew its £40mn-a-year partnership when it ended this summer.  The club had a deal with US streaming service Paramount+ that was nixed by the Premier League owing to a perceived conflict with the competition’s broadcast partners, according to several people familiar with the matter.  A tentative agreement with a betting company was then ditched after pushback from fans. A number of potential partners remain in talks.

One cloud hanging over the club was lifted late last month when it reached a €10mn settlement with Uefa related to potential breaches of its financial reporting rules. The issues, which are also being examined by the Premier League, occurred during Abramovich’s tenure, and were quickly flagged to the authorities by the new owners.

The club has been a net seller overall this summer, with €254mn-worth of players heading for the exit — more than any other club. Sales include Kai Havertz to Arsenal for £65mn and Mason Mount to Manchester United for £55mn, while several players have been swept up in the spending spree by clubs in Saudi Arabia.  Aside from the fees generated, the departures already agreed should net the club annual savings of about £50mn from reduced player amortisation and up to £80mn from lower wages, according to estimates from Football Benchmark, a consultancy. Most of the incoming players are much younger, on longer contracts and on lower salaries than those leaving.