Chelsea's owners are rational actors so what is their strategy?
Under the ownership of free-spending oligarch Roman
Abramovich Chelsea Football Club lost about £1mn a week for almost two decades.
The losses racked up by the club’s current owners have made the Abramovich era
appear restrained by comparison.
Chelsea this month reported a £262 mn pre-tax loss in
2024-25, a record for a Premier League club, as owners Clearlake Capital and
financier Todd Boehly try to wean the club off Abramovich’s millions.
When US investment firm Clearlake and financier Boehly
bought Chelsea for £2.5 bn almost three years ago, the football industry
expected a new era of financial rigour at the west London club. But they have
since spent about €1.7bn (£1.5bn) on players, parted ways with four head
coaches and have yet to agree on a critical revenue driver: whether to
modernise Chelsea’s existing stadium or move elsewhere. With the club at risk
of missing out on a place in next season’s lucrative Champions League, football
executives are questioning how Chelsea’s owners will make a return on their
substantial investment.
Chelsea is the first team ever bought by Clearlake, which
was better known for investing in the technology and consumer sectors. The
Santa Monica-based firm owns more than 60 per cent of the club and its
co-founder and managing partner, Behdad Eghbali, has emerged as a key decision
maker.
Boehly, whose mentors include Guggenheim Partners chief Mark
Walter and junk bond pioneer Michael Milken, has tasted success in sports.
After backing Walter’s takeover of the Los Angeles Dodgers in 2012, the
baseball team went on to win its first World Series title in 32 years. Their
bet on Chelsea was predicated on the belief that elite European football clubs,
which trade at a discount to US sports teams despite the sport’s greater global
popularity, were undervalued.
Shortly after the deal, Clearlake co-founder José E
Feliciano talked up the opportunity to grow Chelsea’s revenue to £1bn.
Chelsea’s owners, who withheld £150mn of the purchase price to cover costs
related to questionable actions taken under Abramovich, have put in place new
private equity-style financing. At the centre of this is a $500mn
payment-in-kind note provided by Ares Management to Chelsea’s holding company,
22 Holdco.
The club’s owners have spent €1.75 bn signing talented young
players in the hope that they have greater resale value, which should enable
them to eventually reduce their reliance on external financing. Chelsea have
partly offset the spending splurge with €921mn of player sales.
While Abramovich’s reign was often chaotic, Chelsea won 17
major trophies, including five Premier League titles and two Champions League
trophies, in that time. The only silverware of the Clearlake era so far is the
Club World Cup and the European third-tier Uefa Conference League.
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