Ares $500mn capital injection to Chelsea F.C.

Article posted by Coliseum, October 3^rd, 2023

Image: Coliseum GSVA

The Premier League team Chelsea F.C. (UK) has raised about $500mn in fresh investment from the global alternative investment manager Ares Management as the Premier League side’s US owners look for ways to fund expensive stadium improvements and build stakes in more football clubs.

‘FINANCIAL TIMES’ stated that Ares, the US alternative asset manager, has provided the capital injection. Sources revealed that it is a preferred equity deal.

The Chelsea Football Club is an English professional football club based in Fulham, West London (UK). Founded in 1905, they play their home games at the Stamford Bridge. The club competes in the Premier League, the top division of English football. They won their first major honor, the league championship, in 1955.

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The Stamford Bridge is a football stadium in Fulham, adjacent to the borough of Chelsea in West London (UK). It is the home of the Premier League club Chelsea F.C. With a capacity of 40,343, it is the ninth largest venue of the 2023-2024 Premier League seasons and the 11th largest football stadium in England.

Los Angeles (US)-based the Ares Management Corporation is a global alternative investment Manager operating in the credit, private equity and real estate markets. The company was founded in 1997 with additional offices across North America, Europe and Asia.

‘FINANCIAL TIMES’ further stated that Chelsea, which is controlled by a consortium including the private equity group Clearlake Capital and US financier Todd Boehly, is looking for ways to boost revenue after an expensive transfer window.

Ares, Clearlake and Boehly declined to comment. Chelsea did not immediately respond to a request for comment.

The Clearlake Capital Group, L.P. is a private equity firm founded in 2006 that focuses on the technology, industrial and consumer sectors. The firm is headquartered in Santa Monica (US) with affiliates in Dallas (US), London (UK) and Dublin (Ireland). In 2022, the firm was a part of an investor consortium named BlueCo that purchased Chelsea F.C.

Under Clearlake and Boehly, which acquired the club for £2.5bn from the sanctioned Russian billionaire Roman Abramovich in May 2022, Chelsea has spent hundreds of millions of pounds on refreshing its squad of players.

Commented José Feliciano, Clearlake’s Co-Founder, speaking at the International Private Equity Market (IPEM) private equity conference in Paris (France) recently, “We have bought an asset that is very coveted by many other potential buyers. Ultimately, we are extremely aligned with that supporter and fan base because the best way to make our club more valuable is to win.”

However, the new owners have yet to see their investment pay off on the pitch, at a club where fans are accustomed to winning trophies.

Chelsea finished 12^th in the league last season, missing out on what would have been a lucrative qualification for the Union of European Football Associations (UEFA) Champions League. The new owners have already parted ways with the two Managers and have appointed former Tottenham Hotspur F.C. Coach Mauricio Pochettino to lead the side.

However, the ‘Blues’ have won just one of five league matches this season, leaving them 14^th in the table. Commercially, the club has failed to conclude a deal for a front-of-shirt sponsor, a slot that would usually command tens of millions of pounds a year.

“The team had a tough first season, our first season,” Feliciano said, but added, “We have a tremendous amount of talent.”

Nyon (Switzerland)-based the Union of European Football Associations (UEFA) is one of six continental bodies of governance in association football. It governs football, futsal and beach football in Europe and the transcontinental countries of Turkey, Azerbaijan, Georgia and Kazakhstan, as well as some Asian countries such as Israel, Cyprus and Armenia. The UEFA consists of 55 national association members. Because of the 2022 Russian invasion of Ukraine, the FIFA and UEFA suspended all Russian national teams and clubs from any FIFA and UEFA competitions.

The UEFA Champions League is an annual club association football competition organized by the Union of European Football Associations (UEFA) and contested by the top-division European clubs, deciding the competition winners through a round robin group stage to qualify for a double-legged knockout format and a single leg final.

The West London club is deciding whether to redevelop its Stamford Bridge home ground or to build a new stadium at Earl’s Court. The 40,000-capacity Stamford Bridge stadium limits Chelsea’s ability to generate revenues and compete against rivals with larger and more modern facilities.

But Feliciano said the company could be better run from a financial perspective – “I think what we are trying to do is reduce the salary and essentially the [operating expenses] of the business by over $100mn per year.”

Separately, Boehly and Clearlake agreed to acquire the Ligue 1 club RC Strasbourg Alsace (France) in June.

Ares has accumulated interests across the sport, including in the LaLiga club Atlético de Madrid (Spain) and Eagle Football (family of global football organizations), the group that acquired the Ligue 1 team Olympique Lyonnais (France) last year. Last September, Ares said it had raised $3.7bn to invest in sports leagues, teams, as well as media and entertainment companies.

The alternative asset manager typically invests across the capital structure, striking hybrid deals that can include upside from equity, but also protection through financing mechanisms that draw on Ares’s expertise in credit markets.

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