On July 20, Sportico EIC Scott Soshnick broke the news that RedBird Capital Partners had acquired controlling interest (85%) in Toulouse Football Club. Just one week later (July 28), it was reported the Kingdom of Bahrain bought a 20% stake in Paris FC. The two deals are the latest in a series of transactions that have seen smart money buy up French soccer league teams over the last decade (see: Qatar Sports Investments and PSG; Kings Street Capital Management and Bordeaux; Ineos and Nice). Ligue de Football Professionnel Chief Executive Didier Quillot says it’s “easy to understand” why global investors have gravitated towards his league—one just needs to look at their existing media rights agreements, the country’s ability to develop talent, its existing stadium infrastructure and the cost of entry.
Our Take: RedBird and the Kingdom of Bahrain are entering French soccer at an ideal time. The league just began “a new cycle with increased [domestic] TV rights,” Quillot explained. Spanish broadcaster Mediapro is paying a record +/- $950 million to carry Ligue 1 and Ligue 2 championship games through the 2024 season—an annual increase of 60%.
“International rights remain the weak point of the French league,” Quillot said. BeIN is paying just $95 million per year through the 2024 season. But it is widely believed a material increase is on the horizon. As media rights consultant Dan Cohen explained, “[The] next comparison up—Serie A—is getting $330 million annually for their international rights, so there is a big disparity there and plenty of room for growth.” The Octagon executive said the French league will “undoubtedly” see a boost in the value of their next international media rights deal.
The global transfer market can be a “big piece of [the] revenue [pie]” for European soccer clubs, so France’s reputation for training, scouting and developing talent is also appealing to investors. Said Quillot: “Everybody knows it’s the number one country in the world—maybe with Brazil—in terms of detecting and developing talent. If [an investor] is able to own a club where there is a strong academy and strong talent detection, they can optimize player trading values [and profitability] for the [following] year.”
The existing stadium infrastructure in France is another reason investors are attracted to domestic soccer within the country. “Thanks to Euro 2016, [the league] has brand new stadiums in Nice, Bordeaux, Lyon and Lille and renovated stadiums in Paris and Toulouse,” Quillot noted. Obviously, eliminating the need for (and costs associated with) venue construction makes the prospects of team ownership more attractive.
The cost of French league teams, which “are much lower than their comparable set in other [European] countries,” are certainly playing into the investment interest as well. While an English club like Newcastle might sell for $380 million and Serie A’s A.S. Roma commanded $700 million, French clubs, in many cases, can go for “tens of millions.” Of course, Ligue 1 and Ligue 2 teams sell for less because they generate less revenue (and many—even within Ligue 1—are not profitable). “Historically, their domestic TV deal has lagged [in value] behind the EPL, La Liga, Bundesliga and Serie A,” Cohen explained.
PSG has long dominated the league. However, Cohen notes, “a new owner with deep pockets, proper roster management and good coaching can find the easiest path forward to clinching a highly profitable and coveted Champions League spot when compared to the Big 5—as Monaco and Marseille have proven.” He added that it would cost significantly more money to put a Champions League-caliber team together in one of the other big five leagues—and reap the riches that come along with that (see: $92 million windfall).
To be clear, Coronavirus has not been a factor in the recent French team sales. Both RedBird and Bahrain were in discussions to acquire stakes in their respective clubs prior to the March outbreak. But Cohen does believe that as the COVID-19 induced losses continue to pile up, we could see “more clubs [looking for money] and potentially investments at the governance level” (as Serie A has discussed).
Cohen attributes the rash of French league team sales to a “cultural shift in [ownership] ideology.” Historically, many of these organizations were run as “social clubs” (as opposed to for-profit businesses). But the new ownership groups coming into the league are realizing “if they can put a professional management team in place, capable of developing a commercial strategy and attracting the right fans, sponsors and media partners, [these teams] can deliver a pretty big return.” With the new crop of owners professionalizing organizations, some of the league’s older owners are realizing they’re not prepared to spend the capital needed to keep up and instead are taking lucrative exits.
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