Lyon double whammy - off form-fiscal woes

Lyon double whammy – off form-fiscal woes

Article posted by Coliseum, October 10^th, 2023

Image: Olympique Lyonnaise

The Ligue 1 team Olympique Lyonnais is seeking to raise about €300mn from the bond market and is selling some of its assets including a new 16,000-seater arena as the French football club’s US owner looks to reorganize its finances following last year’s record-breaking takeover.

‘FINANCIAL TIMES’ stated that John Textor’s (American businessman) Eagle Football Holdings acquired Lyon in December last year at a valuation close to €900mn, by far the highest price ever paid for a French team and part of a wave of US investment into European football. Ares Management, the US private equity firm with numerous investments in sport, provided the bulk of financing for the acquisition.

Olympique Lyonnais, commonly referred to as simply Lyon or OL, is a French professional football club based in Lyon in Auvergne-Rhône-Alpes (France). The men play in France’s highest football division, Ligue 1.

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The Parc Olympique Lyonnais, known for sponsorship reasons as the Groupama Stadium, is a 59,186-seat stadium in Décines-Charpieu, in the Lyon Metropolis (France). The home of the French football club Olympique Lyonnais, it replaced their previous stadium, the 35,000-capacity Stade de Gerland, in January 2016.
The Eagle Football Holdings Limited is a family of global football organizations with top-tier clubs based in London (UK), Lyon (France), Brussels (Belgium), and Rio de Janeiro (Brazil). Eagle Football fosters a collaborative ecosystem of clubs with the main focus of maximizing competitive advantage through a global network of talent identification.

Los Angeles (US)-based the Ares Management Corporation is a leading global alternative investment manager offering clients complementary primary and secondary investment solutions across the credit, private equity, real estate, and infrastructure asset classes. It seeks to provide flexible capital to support businesses and create value for its stakeholders and within its communities.

‘FINANCIAL TIMES’ further stated that Textor, who previously said he wanted to pay off all Lyon’s debt not linked to its stadium within two years, informed that he was currently in the process of “paring off non-core assets to focus on football”, and that Lyon had been “way too heavy on physical assets”.

He added that the money generated from asset sales could be better used to invest in youth academies and player development, as well as reducing debt linked to the takeover.

The club has invited bids for either 40 percent or full control of the LDLC Arena, a new multipurpose venue due to be completed later this year. It is also exploring the sale of its US women’s team, OL Reign, which could fetch about $50mn based on the recent sale of a new team franchise in the same league.

The LDLC Arena is a new concert hall under construction in the heart of Lyon (France). This ERP building located to the East of the City can accommodate 16,000 people. Its roof is entirely covered with Phonotech DK140 acoustic panels. The LDLC Arena will be the largest indoor arena in France outside Paris and one of the most technologically and environmentally advanced in Europe.

‘basketnews.com’ stated that in a latest development, the ASVEL President Tony Parker has expressed interest in acquiring the LDLC Arena amidst Olympique Lyonnais’ financial crisis.

‘basketnews.com’ quoted Parker as stating, “I spoke about it with my shareholders. They want to go for it, and we want to position ourselves to buy the arena. I think we will be in a strong position. OL [Olympique Lyonnais] is still a shareholder in ASVEL, and for them, it would be beneficial if it returned to the group that I lead, remaining within the Lyon ecosystem.”

The ASVEL Basket, commonly known as ASVEL or sometimes as ASVEL Lyon-Villeurbanne, and also known as LDLC ASVEL for sponsorship reasons, is a French professional basketball team that is located in the City of Villeurbanne, which is a suburb of Lyon, France. They play at the 5,556-capacity Astroballe in Villeurbanne, France.

In May, Eagle sold a controlling stake in Lyon’s women’s team (Olympique Lyonnais Féminin) to the US businesswoman Michele Kang. That deal – for the most successful team in European women’s football – is still awaiting approval from the French authorities.

Textor has also hired Goldman Sachs (American multinational investment bank and financial services company) to raise about €300mn from the bond market as part of a broader effort to improve the club’s finances. The money raised would be secured against the club’s stadium and used in part to refinance the existing loans from about a dozen different banks, he said.

The Olympique Lyonnais Groupe had €321mn net debt at the end of 2022, according to its most recent financial statements, which showed a first half net loss of €60.7mn.

Lyon was once the dominant force in French football, winning seven consecutive titles between 2002 and 2008, but its form has slipped in recent years. The team finished seventh in the league table last year, while it no longer ranks in Deloitte’s (British multinational professional services network) top 30 richest clubs in European football.

A day after completing the takeover, Textor agreed to a provisional deal to combine Eagle Football with the Iconic Sports Acquisition Corporation, a blank check vehicle backed by the hedge fund billionaire Jamie Dinan and the former banker Alexander Knaster, according to SEC (U.S. Securities and Exchange Commission) filings. The agreement valued Eagle Football at $1.2bn, and would have been the first attempt to list a multiclub football vehicle.

London (UK)-based the Iconic Sports Acquisition Corporation is a newly incorporated special purpose acquisition company formed to establish a business combination with an iconic Global Sports Franchise or Sports Data, Media or Technology Company.

However, that plan has now been called off, Iconic announced recently. Iconic’s backers took a $75mn stake in Eagle Football as part of the original agreement, and now have the option of recalling their investment, as per reliable sources.

Instead, Textor hopes to list Lyon – which still has shares trading on Euronext (a pan-European bourse) – and his other football holdings in the United States early next year in what would effectively be an initial public offering (IPO). The Eagle Football also owns the Brazilian sports club Botafogo (Brazil), the Belgian professional football club RWD Molenbeek (Belgium) and a roughly 40 percent stake in the Premier League team Crystal Palace F.C. (UK).

A move to list Lyon in the United States would have echoes of Textor’s 2020 deal to merge Facebank, his facial recognition software business, with the sports streaming service FuboTV. Textor stepped down from the combined company six months later during a share price surge that gave Fubo a market capitalization of about $8bn at its peak. But the stock market value of the company has since fallen sharply to about $700mn.

Textor’s brief tenure as the Lyon owner has been turbulent both on and off the pitch. Under the original agreement, the former owner Jean-Michel Aulas was due to stay on and run the club for three years. However, Aulas, a towering figure in French football who had owned Lyon since 1987, was pushed out after just four months following a disagreement over strategy.

Since then, the relationship has become increasingly acrimonious. Aulas, who still holds an eight percent stake in Lyon through his company Holnest, began legal proceedings related to his departure that resulted in a court order freezing the club accounts containing €14.5mn in the month of August. In a statement, Lyon called the move an “attack” that was “as violent as it is illegitimate”.

Soon after Aulas’ departure, French football’s financial regulator rejected Lyon’s spending budget, a move that limited the club’s ability to sign new players this Summer.

Textor responded by selling some of Lyon’s most-sought-after players and used Eagle Football’s other clubs to help facilitate new arrivals. In a highly unusual move, Eagle-owned Molenbeek signed Ghanaian winger Ernest Nuamah for €25mn – a Belgian transfer record – and then agreed to loan him to Lyon the following day. The move is due to be made permanent next Summer.

Textor admitted that the first few months since he took charge had been “awkward” but that the club was on the right path – “You expect some turbulence. Nobody ever sold a club when everything was going well. But this is where you have the value opportunities.”

Yet, on the pitch Lyon’s fortunes have been floundering. The team has not won any of its opening six games of the season, making it the worst start in the club’s history. At the end of a recent home match, players were forced to stand in silence as the head of Lyon’s “ultras” fan group berated them publicly for their poor performances. Former French international Laurent Blanc was fired as the Head Coach soon after.

Textor said it was far too soon to judge his time at Lyon, and pointed to his other clubs, which have fared well under his direct control. Molenbeek was promoted to the first tier of Belgian football this Summer, while Botafogo is currently on the top of the league table just two years after returning to the Brazilian top flight.

He remains confident that the Eagle Football model, which he describes as scouting unknown talents, avoiding star players and selling those in demand for profit, will ultimately pay off in France.

He concluded by stating, “Give me a year and a half. Our approach has worked in other markets, we’ll see if it works in Lyon.”

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