Russia’s invasion of Ukraine has already spurred major changes for global sport, perhaps none bigger than Russian-born billionaire Roman Abramovich’s decision to sell Chelsea, one of the world’s most valuable soccer clubs.
Abramovich is working with Raine Group to solicit bids for the club, which Sportico recently valued at $3.35 billion, and interested parties are being told to ready initial offers by the middle of March, according to people familiar with the process.
There are now two sports franchises that Sportico values above $3 billion dollars on the market. And while the Chelsea process is happening under vastly different circumstances than the Denver Broncos auction, both are expected to test soaring franchise valuations and the appetite among the ultra-rich for owning costly sports assets.
The Chelsea sale comes amid a potential transition for European soccer ownership. There’s increased backlash toward sovereign wealth funds buying into sports; Russian oligarchs are now off the table, and money from Chinese billionaires, once rampant in soccer, has all but dried up. The cost to operate these teams is also soaring—while the Broncos will likely spend around $200 million on players next year and turn a nine-figure profit, Chelsea could spend $300 million next season and lose $150 million.
Abramovich, 55, is already sweetening the pot. On Wednesday he confirmed that he was selling the club, and mentioned that he would not seek repayment for the roughly $2 billion (£1.5 billion) he’s personally lent to the team. Additionally, he said all “net proceeds” from the sale would be given to a foundation benefitting victims of the invasion in Ukraine. It’s unclear how that would be calculated.
“This has been an incredibly difficult decision to make, and it pains me to part with the club in this manner,” Abramovich said in a statement. “However, I do believe this is in the best interest of the club.”
Despite reports that Abramovich values the club as high as $4 billion, there are headwinds that could lead to a much lower price. For starters there’s growing scrutiny toward investments from petrostates and billionaires with ties to countries with spotty human rights records—the very type of investors who have poured large chunks of money into the sport over the last decade.
“My question is: Does that now limit candidates?” said Walter Franco, a principal at Victus Advisors, a firm that works in global soccer. “Chelsea is potentially at the peak of its valuation. So what groups or individuals have that capital, can be properly vetted, and are willing to take on that kind of purchase?”
There’s also the economics of European football’s top tier. Teams like Chelsea that compete annually for domestic and continental titles spend an extraordinary amount of money for talent.
Chelsea reported $585 million in revenue for the 2020-21 season, but losses topped $200 million, despite winning its second Champions League title in club history. COVID-19 restrictions kept fans from Stamford Bridge, and revenue would have been closer to $675 million with a full stadium, but that still would have meant a $100 million loss in a season it was crowned the best club in Europe.
Only the Dallas Cowboys generate more than $675 million in annual revenue among NFL teams, but the league’s relatively hard salary cap and massive TV haul guarantee NFL owners annual profits that are expected to top $200 million annually for stronger franchises when the NFL’s new media contracts kick off in 2023.
The NFL recently inked $105 billion in new domestic TV deals, more than double the previous U.S. contracts. The Premier League, by contrast, recently chose not to put its domestic rights up for auction, instead extending its existing deals for another three years at similar terms.
Despite the poor economics for many Premier League clubs, investors are drawn to its global reach. Chelsea has 50 million fans on Facebook, and more than 100 million overall on social media, including Instagram and Twitter. The Cowboys are tops in the NFL at 8 million on Facebook, and 16 million across all social platforms.
The international media rights for Premier League games from 2022 through 2025 were recently sold for $6.73 billion (£5.05 billion)—up 30%, and a shade above the $6.66 billion (£5 billion) for U.K. broadcast rights. It is the first time the international rights sold for more than the domestic ones.
Like the NFL, where only two teams have been sold since 2013, there is a scarcity value when it comes to buying an elite global soccer team. Teams like Real Madrid and Bayern Munich are owned by club members and will not be hitting the market. Manchester City and Liverpool have sold limited partnership stakes in recent years, but the last control transfer of a Big Six team in England was Arsenal in 2011, when Stan Kroenke assumed majority control after years of battling for the club with Russian tycoon Alisher Usmanov. Kroenke bought Usamanov’s remaining stake in 2018 in a deal that valued the team at $2.3 billion.
Spotify co-founder Daniel Ek says he made a bid for Arsenal last year after the European Super League blew up, and Arsenal supporters pushed for Kroenke to sell. His bid, reportedly $2.5 billion, was rejected by Kroenke.
Bidders for the Broncos know they are likely on the hook for hundreds of millions of dollars in additional funding to upgrade its home stadium, Empower Field at Mile High. Figuring out what to do with Chelsea’s stadium, Stamford Bridge, is an entirely different animal.
It opened in 1877 and is by far the smallest venue of the Big Six clubs, with a capacity just over 40,000. A redevelopment or new stadium was on Abramovich’s to-do list for much of his ownership tenure, but Stamford Bridge is located in a heavily built-up part of London and new plans have faced legal and logistical hurdles. In 2019, Tottenham Hotspur opened its new venue in the north part of the city at a cost of $1.3 billion; a new home for Chelsea would cost as much as $2 billion. Another complication: Stamford Bridge is owned by the Chelsea Pitch Owners non-profit, which also controls the rights to the Chelsea Football Club name.
Abramovich, who purchased Chelsea in 2003 for $232 million (£140 million), is now facing an uncertain financial future. Sanctions against Russian businesses and businesspeople have been far-reaching, with authorities in Germany and France recently seizing yachts owned by oligarchs. It’s unclear if or when the U.K. could crack down on Abramovich. Prime Minister Boris Johnson declined to comment on Wednesday, while the billionaire, who has Israeli and Portuguese citizenship, is reportedly selling some of his British real estate in addition to Chelsea.
Investors interested in the Broncos have had many months to free up money for a potential bid, and that process isn’t expected to close until the second half of the year. The Chelsea process arose much faster and is expected to wrap much sooner.
That said, prospective buyers are kicking the tires, including notable American sports investor Todd Boehly, whose portfolio includes the Los Angeles Dodgers and Lakers, along with Swiss billionaire Hansjörg Wyss. Wyss told a Swiss newspaper this week that while he wants to be part of a consortium of “six to seven” investors, Abramovich “is currently asking far too much.”
(This story has been updated in the headline.)