🏟 Russian Oligarchs and the Sale of Chelsea Football Club
🏟 Russian Oligarchs and the Sale of Chelsea Football Club
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Executive Brief: Russian oligarch Roman Abramovich announced he is selling the historic Chelsea Football Club amidst Russia’s invasion of Ukraine due to the likely impending sanctions on his UK-based assets. Today’s newsletter explains what’s going on, how it impacts the club, and how the sale will likely happen. Enjoy!
Russian Oligarchs and the Sale of Chelsea Football Club
Russia officially invaded Ukraine on February 24, 2022.
Days later, rumours began to swirl online about a potential Chelsea Football Club (Club) sale due to their owner’s ties to Russia and the Kremlin.
The Club’s owner Roman Abramovich officially announced on March 2, 2022, that he was selling the team for the good of the Club.
The Russian oligarch decided to sell the Club due to impending sanctions and other complications expected to arise due to his ties to Putin and Russia amid Russia’s invasion of Ukraine. The oligarch faces significant pressure from possible sanctions to his assets and finances in the United Kingdom (UK).
In his statement, Abramovich stated that he is selling Chelsea FC in the best interest of the Club, the fans, the employees, sponsors, and partners. The sale is expected to be fast-tracked but will follow “due process”.
What does all this mean?
Essentially, because of his ties to Russia, his assets and finances in the UK will be sanctioned (hit with fines to decrease the value of the asset). This hasn’t happened in the UK yet despite other Western nations announcing so last week. So, oligarchs like Abramovich are urgently trying to sell most of their UK-based assets to transfer their wealth to a more Russia-friendly country. Or, at least to a country that is not so friendly with the West and will likely not sanction them.
Abramovich is already selling his villas, properties and other assets in England. Reports suggest he already listed his portfolio of London properties and his Kensington property worth upwards of $165 million. Reports also indicate that Abramovich is attempting to move his wealth from the UK to the United Arab Emirates (UAE) as soon as possible. He has spent time there over recent weeks, and he is expected to transfer a portion of his wealth there.
Why Chelsea FC?
Chelsea FC is technically an asset held by the Russian oligarch in Fulham, West London, England. Theoretically, if the UK imposes sanctions on his assets, they could penalize Chelsea FC. Therefore, selling is in the best interest of the Club and all its stakeholders and fans.
Please think what you will about how Abramovich obtained his wealth originally. My position on that aside, he has led Chelsea to every major trophy possible in professional soccer since purchasing the team for £140 million back in 2003. So, I do partially believe he wants what’s in the best interest of the Club.
Should he not sell, other clubs would likely be very reluctant to deal with Chelsea for transfers or transactions along with simply playing games against them. Many prospective signings and future players would probably feel uneasy about joining the team given the owner’s ties to Putin. Not to mention, navigating partnerships and sponsors for the team would be a disaster. Abramovich staying would be cancer to the team business-wise.
So, there’s all the incentive in the world for him to sell. And I believe he cares about the team genuinely.
I also believe he wants to cash out on the asset at its highest value before sanctions are imposed so that he can move his wealth as soon as possible.
For what it’s worth, Abramovich set up a charitable foundation where all net proceeds from the sale of the Club will be donated. The foundation will be for the benefit of all victims of the war in Ukraine. This includes providing critical funds towards the urgent and immediate needs of victims and supporting the long-term work of recovery.
To help facilitate the sale, Abramovich confirmed that he would not ask for any loans owed to him by the Club to be repaid. The Club owes Abramovich around $2 billion. Had he requested repayment of those loans, the deal would have become significantly more complicated.
The Sale
Selling the team is a very time-sensitive issue for Abramovich.
Should the UK Government sanction his assets and finances beforehand, the sale of the Club could become more complicated. He’s trying to sell all his holdings in the UK as quickly as possible, including Chelsea, to avoid sanctions depreciating the assets. If he doesn’t move soon, his asset (Chelsea FC) could be in serious trouble.
The Club itself could also be in trouble should sanctions land before a sale. Abramovich has vast, vast wealth. But sanctions are very real, and the Club owes him almost $2 billion in loans. Compounding these two factors and the likely sponsorship and partnership losses, Chelsea FC could be in trouble if a sale does not happen soon.
The best-case scenario for the Club and the oligarch would be a buyer meeting the asking price in the coming day or two before the UK Government imposes sanctions while he writes off the $2 billion owed to him by Chelsea.
Why haven’t sanctions already been imposed on his UK-based assets?
UK Labour leader Sir Keir Starmer challenged UK Prime Minister Boris Johnson in Parliament last week about why Abramovich hasn’t been sanctioned yet.
Johnson replied, “it is not appropriate to comment on individual cases.”
As of March 5, the UK has not sanctioned Abramovich.
When asked by la Repubblica this weekend, Prime Minister Johnson had the following to say about why the UK hasn’t sanctioned Abramovich:
"None of us want to live in a country where the state can take your house off you without a very high burden of proof and due process", Johnson explained, "there's no point say, yeah, we're going to go after him, and then you come up against the brick wall of lawyers. So we have to get it right.”
And,
"We're also trying not to just make this about one individual. Top line of what our package on Monday will do is that the measures that you have against individual oligarchs in Europe will essentially allow us to catch them too. Plus the extra things that we are doing that Europe hasn't caught up with or is not prepared to do, like Swift.”
Whether you believe Johnson’s due diligence explanation or not — whether you think the sanctions are being held up a few days for the good of one of English soccer’s most historic clubs — the UK intends to start its sanction roll out today based on the Prime Minister’s comments.
I’d expect a sale of Chelsea FC will likely be coming very soon. Or things could get very complicated for Abramovich and the Club.
This is a very tough negotiation situation for Abramovich with the bit of leverage he has. Meanwhile, he and the team stakeholders are doing everything they can in the media to uphold some leverage to obtain a reasonable purchase amount.
However, buyers know the Russian and the team are up against the clock with UK sanctions impending, and buyers are likely comfortable waiting it out a few days until the asking price decreases.
Whether a sale happens in the coming days will likely depend on the magnitude of the impending sanctions and how close Abramovich can get buyers to come to meet his asking price. If I take Prime Minister Johnson for his word, sanctions for Russian oligarchs could come as soon as this morning so that a sale could happen sooner than later.
If not, get your popcorn ready.
Who is buying?
American bank, the Raine Group, is set to handle the sale.
The Raine Group first acted for Chelsea in 2018 after talks with US private equity firm Silverlake and British billionaire Sir Jim Ratcliffe broke up without an agreement. The Club has effectively been for sale ever since due to the UK’s Home Office declining to issue Abramovich a visa.
Reports suggest that Abramovich listed the Club on the market on March 2 with an asking price of at least $4 billion.
Abramovich also reportedly tried to hand over the “stewardship and care” of Chelsea to the trustees of the charitable foundation to distance himself from the club and to protect the Blues from any speculation and uncertainty. But no deal was agreed to as the talks continued.
While individuals like Conor McGregor have lodged informal offers for the club, reports indicate that Swiss billionaire Hansjorg Wyss claims he has been approached and is considering an offer as a part of a consortium including Los Angeles Dodgers co-owner Todd Boehly.
Wyss confirmed to the media that he and three others were approached to buy Chelsea on March 1, the day before Abramovich released his official statement about the team’s sale.
Abramovich is reportedly targeting American buyers, but there are doubts that any potential buyer meets his $4 billion valuation. Reports suggest that bids for the Club will be closer to $2.6B.
Why Americans?
Well, investment from China, Eastern Europe, the Middle East, and other geopolitically complicated countries (we’ll say) has currently dried up due to the political landscape.
Turkish businessman Muhsin Bayrak claims to be in negotiations with the Russian’s lawyers to purchase the Club. However, reports suggest other groups are pursuing the deal.
How will it play out? No one knows at this point.
But with UK sanctions likely coming later today or tomorrow, we will probably find out very soon.
Thank you for reading. Have a great day, and we’ll talk next week!
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Kendal
Question of the Day
How much do you think Chelsea Football Club sells for?
Games of the Week
NBA
Monday, March 7: Chicago Bulls @ Philadelphia 76ers at 7:00 p.m. (ET.)
Thurs, March 10: Brooklyn Nets @ Philadelphia 76ers at 7:30 p.m. (ET.)
NHL
Mon, March 7: Edmonton Oilers @ Calgary Flames at 9:30 p.m. (ET.)
Tues, March 8: Florida Panthers @ Pittsburgh Penguins at 7:00 p.m. (ET.)