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Valencia attracts a big valuation

Valencia won both the Spanish league and the Uefa Cup in 2004, an achievement that propelled the team’s then head coach Rafa Benítez all the way to Liverpool.  But glory has eluded the club ever since, with form dropping off sharply in the past decade under the ownership of Singaporean palm-oil billionaire Peter Lim.

Now, perhaps, a new chapter is opening. On Friday, the club announced that a consortium of US investors, including the family offices of KKR co-founders George Roberts and Henry Kravis, had agreed to buy a 42 per cent stake valuing Valencia at €1.25bn. The group, which also includes the owners of the Denver Broncos NFL franchise, will inject €100mn of working capital too, helping the team buy players and improve the training ground.

Despite previous success, Valencia are well past being at European football’s top table. The team sits 19th in La Liga at the moment, while the club generated annual revenue of just €103.7mn in its most recent accounts. Brentford, 30th in Deloitte’s rankings of clubs by revenue, brought in twice that amount, yet sold a minority stake last year that valued the Premier League team at £400mn.

Meanwhile Bayern Munich, ranked third in Deloitte’s list, sold a sliver of equity this week at a valuation of close to €4bn, despite revenue around nine times higher than Valencia’s.

So what explains that lofty valuation for the Spanish club? The most likely answer is real estate. The team is finally expected to move to a new stadium next summer, almost 20 years after work began on the 70,000-seater Nou Mestalla. The incoming consortium is gaining exposure to one of the newest and biggest football stadiums in Europe.

What’s more, the club’s current ground, the Mestalla, sits in the centre of Valencia. Once the team makes the switch, the old stadium will be knocked down for redevelopment. This is also a bet on prime downtown land in a city that hosts some of Spain’s biggest companies, including Mercadona supermarkets and CaixaBank.

This is the second big takeover deal in Spain this year, following Apollo’s €2.5bn purchase of Atlético Madrid. That too had a major real estate project attached, albeit one tied to a team that is almost guaranteed Champions League money each year. Valencia are currently flirting with relegation, not European qualification.

Instead the two deals reinforce the view that the most attractive investment opportunities in European football aren’t necessarily about football at all.

BTW, I am always interested in Valencia as it is the nearest La Liga club to the town where my granddaughter and great-granddaughter live.  My great granddaughter is educated in Valencios.

 

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