Boehly is leading the talks and has Clearlake Capital
co-founder Behdad Eghbali, Swiss billionaire Hansjorg Wyss, Dodgers part-chair
Mark Walter and property developer Jonathan Goldstein (CEO of Cain
International, which Boehly part owns) among those in his consortium.
The group is confident of completing a sale and has felt it
would be named as the preferred bidder for weeks. But there was a late twist on
Friday after Nice owner Sir Jim Ratcliffe entered the race. The British
billionaire, who now lives in Monaco, bypassed the process with an unexpected
eleventh-hour $5.32 billion bid.
Ratcliffe’s offer is genuine — and he also explored buying
Chelsea in 2019 — but he can’t formally progress his bid until the period of
exclusivity expires for Boehly group’s.
So what happens next?
Boehly will lead talks with Chelsea to try and finalize a
purchase agreement. If successful, the American will only hold a minority stake
with private investment firm Clearlake Capital the majority owner. At Chelsea’s
request, they have guaranteed they will remain at the club until at least 2032.
Boehly will assume operational control on a day-to-day basis
but Clearlake co-founder Behdad Eghbali will be an active director. He has
already been a prominent voice on both the football strategy and Stamford Bridge
redevelopment plans.
A period of exclusivity doesn’t guarantee a sale. Neither
party is obligated to follow through. But it does provide the Boehly group with
an opportunity to undertake any further due diligence and, most importantly,
get clarity on how almost $2 billion ($1.93 billion, to be exact) in loans owed
to Abramovich will be dealt with.
That’s the biggest sticking point at the moment. Abramovich
originally promised to write off the debt, but due to the sanctions against him
he can’t legally do so right now. He must thus agree a deal with the U.K.
government to convert it into equity. This is the most logical solution, and
one the government seems open to, even if it weakens the share value of the
club. Otherwise, the Boehly group must take on the debt at book value.
In the past few days, Chelsea have warmed to this approach.
The club would ideally like to restructure the deal to pay off the debt from
its parent company Fordstam Limited to Jersey-based Camberley International
Investments — believed to be linked to if not controlled by Abramovich. (And
should there be no link, and if Chelsea successfully prove this, the government
would still rightly ask why the debt is being repaid there).
The key point is Fordstam can’t pay anything to Arbramovich
(or any affiliated company) under the sanctions, which makes the idea hugely
problematic. If they attempt this, the government could just block the sale.
The plan is essentially reliant on Camberley either being untouchable by the
government, Chelsea arguing a legal loophole or the debt just remaining in
limbo until a payment can be made.
If this approach is taken, the Boehly group would pay
exactly same amount and then see $2 billion taken from it to “settle” the loan
in full, or they would withhold that amount until a point they could legally
repay Abramovich. In essence, it’s the equivalent of buying a house worth $5
billion where the previous owner has an outstanding $2 billion mortgage which
you take over.
The most likely scenario is the Boehly group will be saddled
with a pending debt with it unclear whether Arbramovich can or can’t one day
write it off. With that looming, they may have to borrow more money to fund
club spending. And, according to finance expert Kieran Maguire, if Abramovich’s
debt takes priority then interest rates charged by lenders could also be
impacted.
The Boehly group is also keen to clarify precisely where the
rest of the sale proceeds will go. Abramovich has asked for at least $3.15
billion from the sale funds to be donated to “victims of the war in Ukraine,”
but no further specifics have been provided. It is likely Chelsea will have to
start a new charity or foundation. This could add time and risk a period where
the funds in question are frozen.
Former Arsenal vice-chairman David Dein has written to
politicians asking for $940 million from the sale to be invested back into
grassroots football in the United Kingdom. But government sources told CBS
Sports they are “cautious of taking this route” since they don’t want to be
seen to directly benefit from the sale. While these issues get resolved, it is
possible the period of exclusivity could be extended.
The bottom line is Chelsea desperately need a sale by May
31, before their government-issued special license expires. Otherwise, the club
risks not being able to meet essential outgoings and could incur a disrupted
offseason or far worse. The absolute latest deadline is surely June 8, when
Premier League meet ahead of the 2022-23 season. If Chelsea are license-less by
then, they won’t be able to compete.
The summer transfer window then opens on June 10 and the
Boehly group will clearly want to be in control by then. The ongoing sale saga
has already prompted Antonio Rudiger to join Real Madrid while Andreas
Christensen has reportedly agreed a five-year deal with Barcelona.
Marcos Alonso and Cesar Azpilicueta could yet join Rudiger
at Camp Nou, although Alonso is prepared to wait for the new owner to come in
before determining his future.
Chelsea manager Thomas Tuchel is clearly concerned about a
player exodus and desperate to hang on to Real Madrid target Reece James as
well as offer Mason Mount improved terms.
As a result, the Boehly group is well aware its first task
will be to renegotiate with key players in order to limit damage from
takeover-related uncertainty. If successful, they will work with Tuchel, and
Chelsea women’s manager Emma Hayes, to determine the most urgent priorities as
their first and most pressing task.
Does a purchase agreement guarantee a sale?
A purchase agreement doesn’t quite guarantee a sale but it
comes pretty close. It binds both parties into an agreement, at which point the
Boehly group would most likely transfer a non-refundable deposit. They have
already demonstrated proof of funds.
From there, there are still some further steps. Chelsea need
to get the deal signed off by the government, who must ensure no funds go to
Abramovich. That means the sale would be blocked if Fordstam attempted to pay
Camberley back the $2 billion in loans, even if it’s not entirely clear who
controls the latter.
The government will also want reassurances Clearlake Capital
have no Russian investors involved although that particular check is a mere
formality. And the Boehly bid must pass the Premier League’s Owners’ and
Directors’ Test — something that delayed Newcastle United’s Saudi-led takeover
by 18 months. The test not only scrutinizes all listed directors but assesses
three-year business plans.
Once a prospective new owner passes it, they can transfer
the balance of funds at which point the takeover is complete.
So could the British government or Premier League delay
things?
Culture Secretary Nadine Dorries has already said Chelsea
are on “borrowed time.” And sources at the Department for Digital, Culture,
Media and Sport (DCMS) told CBS Sports there are no plans to extend Chelsea’s
special license beyond May 31, albeit they do have the power to do so. In fact,
the government can tighten, relax or even revoke the special license at any
point. That adds pressure to complete a quick sale and means acquisition isn’t
entirely on Chelsea’s terms.
But the government has no say (at least not officially) over
who actually owns Chelsea, providing no one involved is under sanctions. The
DCMS have constantly reiterated this throughout the process.
“The government has no role in establishing a preferred
bidder for Chelsea Football Club,” a DCMS statement read. “Assessments of
owners and due diligence are a matter for the club and the Premier League, not
the government. Our role is to consider an application for an amended license
that authorizes a sale of the club when it comes forward with a preferred
bidder.”
Ultimately, the government is happy with the Boehly group.
Plus the involvement of Tory peer Danny Finkelstein and former chancellor of
the exchequer George Osbourne means the bid has strong government ties.
Finkelstein, who is also a columnist for The Times newspaper, will become a
non-executive board member if the Boehly group is successful.
All this means the only government-initiated delay (assuming
they don’t block the sale over the handling of the debt owed to Abramovich) is
a logistical one. This is because they may have to create two licenses – one to
sign off the sale and a second one to actually release the funds. Creating two
licenses won’t take any extra time unless, at the time of sale, it remains
unclear where the funds are going, DCMS sources told CBS Sports.
As for the Premier League, they have “soft vetted” the
Boehly group’s listed directors and now assessed their business plan. In doing
so, they also sought reassurances as to the share split and identity of
Clearlake’s investors. This was not an atypical request. That means the Boehly
group has effectively if not formally already passed.
But after Newcastle’s lengthy and controversial takeover
saga, the EPL must be seen to carry things out by the book. A source told CBS
Sports, they expect to clear the Boehly bid within seven days of the Test
officially starting.
The failed Sir Martin Broughton and Steve Pagliuca bids (to
date) would have probably taken a bit more time. Broughton’s bid had
Philadelphia 76ers owners Josh Harris and David Blitzer involved, and the pair
also have shares in Crystal Palace. Meanwhile, Boston Celtics co-owner Pagliuca
owns 55% of Serie A side Atalanta. Palace wouldn’t have stood in the way of
Harris and Blitzer buying Chelsea, but they would still have had to offload
their shares first, according to CBS Sports soccer reporter James Benge.
And Pagliuca was asked to provide written confirmation of
his Atalanta plans prior to being cleared but hadn’t done so at the point of
being ruled out. A source told CBS Sports that Pagliuca is still in dialogue
with Raine Group but was not only ranked behind Boehly, but Broughton, too.
Broughton’s bid impressed Chelsea and he, much like Ratcliffe, is on “standby”
in case the Boehly group don’t succeed.
What are Ratcliffe’s chances?
Ratcliffe’s bid is certainly a “rogue” one and is not at
this stage being prioritized by Chelsea, even though the 69-year-old met with
Chelsea chairman Bruce Buck prior to tabling his offer.
A senior Chelsea source has also denied suggestions
Ratcliffe’s dramatic late offer stopped Raine Group publicly announcing Boehly
as the preferred bidder. Instead, they claim the plan was always to refrain
from any official comment until an agreement is further advanced.
Ratcliffe owns the petrochemicals giant INEOS, and certainly
has the financial means to buy Chelsea outright simply by extending corporate
credit lines to fund the purchase. That’s the fastest way to a sale for him
unless he seeks part-capital from failed suitors with capital in place.
Ratcliffe will pay $3.13 billion for Chelsea and has pledged
to invest $2.19 billion over a 10-year period. He also plans to extend Stamford
Bridge’s 41,837 capacity to 60,000. But Boehly bid sources confirmed that
Ratcliffe’s all-in $5.32 billion offer is actually slightly lower than their
own when one includes the sale price, charitable donation and investment into
the football club post-acquisition.
There is no doubt Ratcliffe’s offer took the Boehly group by
surprise but they remain unconcerned by it as this stage, other than knowing
Chelsea could use it as leverage.
Don’t be fooled by the delays (so often lamented on social
media) or frustrations from certain bidders. The sale process has actually been
surprisingly smooth for one so incredibly unorthodox. And yet the number of
interested parties has given Chelsea the chance to pit suitors against each
other, move the goal posts at times and maintain a “hard sell” demeanor, even
though Abramovich (let’s not forget) is being forced to sell.
With that said, it’s also important to stress, Ratcliffe
isn’t in the same “race” as Boehly because he didn’t formally enter the
official tender. In fact, he went straight to Chelsea with his offer, much to
the bemusement of Raine Group.
Ratcliffe did register interest in Chelsea in late March but
then chose not to proceed. He has since been watching the process from afar and
felt the niggling delays and debate over valuation presented a window of
opportunity. But Buck made it clear to him that Chelsea won’t abandon their
process, which means Ratcliffe can only really succeed if Boehly and Chelsea
fail to agree terms.
In the meantime, Ratcliffe plans to further engage with fan
groups this week having already met with the Chelsea Supporters’ Trust. He is
in London for a few days but won’t be at Stamford Bridge for Saturday’s Premier
League fixture with Wolves since it clashes with Nice’s French Cup final
against Nantes.
Ratcliffe’s main challenge for now is he can’t carry out due
diligence while the Boehly group is in exclusive talks. He may claim he can
complete a deal fast — and he’s right in the sense he has the capital available
— but he has no locked numbers yet behind the his redevelopment plan.
Meanwhile, the Boehly bid has an impressive roadmap and both Goldstein and
Abramovich’s own project manager for his abandoned redevelopment, David Hickey,
on board.
And Ratcliffe will also, like Pagliuca was asked to, have to
clarify his plans for Nice. He has already he said he won’t give up or reduce
his stake in the club, something you’d expect prior to even knowing whether
he’s a contender. But he’ll need to put this in writing to Chelsea and the
Premier League. And if he’s intent on remaining Nice owner, that means should
the sides meet in European competition one of them would have forfeit.
Ratcliffe is hoping his “British bid for a British club”
pitch will win over the government. And it’s not impossible with that in mind
he’ll bring on board Lewis Hamilton, especially since INEOS currently hold a
33% stake in his Mercedes team. The seven-time Formula One champion was part of
the failed Broughton bid and remains open to investing in Chelsea.
But Ratcliffe must be cautious, since Broughton was
criticized by one Raine source for the “celebritization of the sale process”
and trying to turn it into a popularity contest. It is currently unclear what
involvement Raine would have if Chelsea did proceed with Ratcliffe.
In short, the most likely Chelsea owner remains the
Boehly-led consortium. Plus, it isn’t a case of choosing directly between them
and Ratcliffe. Chelsea will see if they can finalize deal with the former
first. If they can’t, then Ratcliffe may be considered but still probably not
before Broughton or Pagliuca.
But there remains a commitment and confidence from Boehly
and Chelsea that the period of exclusivity will lead to a sale providing the
handling of Abramovich’s loans can be resolved. Although there are plenty of
other points to discuss, there is nothing else outstanding that should delay a
sale beyond May 31.
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