LONDON — The British government moved closer on Tuesday to giving its blessing to the purchase of Chelsea FC, one of European football’s blue ribbon teams, by an American-led investment group, after deciding it had sufficient guarantees that none of them the proceeds from the record sale price – $3.1 billion – would flow to the club’s Russian owner.
The pending government approval, expected on Wednesday, marked the end of not only the most expensive deal in sports history, but possibly the most fraught, cryptic and political deal.
In the three months since the Russian oligarch who owns Chelsea, Roman Abramovich, hastily marketed his team, the club’s fate has played out not only on the fields of some of the richest football leagues in the world, but also in the corridors of Westminster and the soaring towers of Wall Street. And all this against the backdrop of crippling financial sanctions imposed after the Russian invasion of Ukraine.
The path to a deal has entangled a hardly likely cast of characters – private equity funds and anonymous offshore trusts; legislators in Britain and Portugal; an octogenarian Swiss billionaire and American tennis star Serena Williams; an enigmatic Russian oligarch and a little-known Portuguese rabbi — and had a disputed passport, wartime peace talks, and even reports of attempted poisoning.
The ending leaves as many questions as answers. The only thing that can be said for sure is that a group led by Todd Boehly, co-owner of Los Angeles Dodgers and funded largely by private equity firm Clearlake, will now control Chelsea, a six-time English and two-time European champion, and Abramovich will not.
Abramovich first indicated his intention to sell Chelsea – by some distance the most prominent of his assets – almost as soon as the Russian army entered Ukraine at the end of February, and just a week before Britain and the European Union regarded him as a key figure identified. ally of President Vladimir V. Putin of Russia and froze his assets.
Closing a deal, however, has turned out to be devilishly complicated. The latest hurdle to a sale was resolved only this week, when lawmakers in Britain were satisfied enough that a $2 billion loan to an offshore trust believed to be owned by Abramovich had been approved. British government officials then tried to reassure their colleagues in Portugal, which had granted a Portuguese passport with the help of a Rabbi Abramovich in 2018, and the European Union, which had imposed its own sanctions on Abramovich in March. Both must also approve the sale due to his Portuguese citizenship.
But the loan wasn’t the only complication faced by Raine, the New York-based investment bank Abramovich recruited to handle the sale. The deal with Boehly’s group came with a web of terms, some drafted by the British government, some by Raine and some by Abramovich himself, all conspicuous in the context of the sale of a sports team.
All four potential suitors identified by Raine as serious contenders – Boehly’s group; one led by British businessman Martin Broughton that includes Williams and Formula 1 driver Lewis Hamilton; another funded by Steve Pagliuca, the owner of the NBA’s Boston Celtics; and one of the Ricketts family, which runs baseball’s Chicago Cubs – was asked not only to pay an astonishing price for the team, but also to commit to a number of pledges, including a whopping $2 billion more in investments in Chelsea.
For example, the club’s suitors were told that they cannot sell their share within the first decade of ownership and that they must set aside $125 million for the club’s women’s team; investing millions more in the club’s academy and training facilities; and committed to rebuilding Stamford Bridge, Chelsea’s aging west London stadium.
At the same time, Abramovich insisted that all proceeds from the sale go to a new charity to benefit the victims of the war in Ukraine. To ensure he doesn’t gain control of that money, the UK government will require it to be first placed in an escrow bank account it manages. Only then will it examine any plans for the fund being prepared by Mike Penrose, a former head of a division of the United Nations children’s charity UNICEF, and issue a special license that would allow the charity to take control of the funds.
The charity was just one of the quirks of the deal arranged by Joe Ravitch, Raine’s co-founder who led the sale.
The new owners will also not be allowed to receive dividends or management fees or burden the team with debt – terms bankers have described in relation to the sale as ‘anti-glazer clauses’, a reference to Manchester United’s unpopular owners who took control of the club in a leveraged buyout in 2005.
Several people close to the trial said Boehly’s bid was ultimately chosen from among the wealthy suitors due to his willingness to abide by the clauses. (At least one of those people, who worked on the Pagliuca-backed bid, said their group withdrew due to the nature of the circumstances.)
The Premier League already has signed for the Chelsea saleannounced Tuesday that it had vetted and approved the new owners “subject to the issuance of the required sales permit by the government and the satisfactory completion of the final stages of the transaction.”
However, it is not clear what exactly will happen if Boehly and his partners choose to waive any of the terms once they have the club under control. Any oversight role will fall to charity, the only outside entity still inextricably linked to both Chelsea and Abramovich, or the continued influence of two key Abramovich lieutenants who hope to remain in their posts under the new owners.
Both executives — club president Bruce Buck and Marina Granovskaia, a Russian-born businesswoman who grew up from Abramovich’s personal assistant to top official football business response at Chelsea — will earn about $12.5 million for their sales work. The management commissions, totaling as much as $50 million, and the fee to Ravitch, believed to be between 0.5 and 1 percent of the deal value, will be paid from the club’s balance sheet and not from the sales funds. according to a person familiar with the structure of the deal.
British government officials had clashed with Chelsea executives and financiers over creating a legally binding resolution to prevent Abramovich from accessing the money he so publicly said he was willing to waive.
It involved a company called Camberley International Investments, run by a Cypriot trustee on behalf of what British officials say were Abramovich and his children. Camberley lent $2 billion to Fordstam, the company through which Abramovich controlled Chelsea, to fund his expenses and operations. Camberley’s claim against Fordstam has now been resolved and the trustee has recently resigned.
It was only then, with a May 31 deadline for the closing of the sale, that the UK government approved the deal.
For Chelsea fans, the sale marks the end of a season that has at times faded into absurdity. The sanctions imposed on Abramovich – and by extension Chelsea – affected everything from the team’s travels to the printing and selling of game shows. Thousands of empty seats were scattered across Stamford Bridge during games in the final months of the season following a new ticket ban, and roster turmoil loomed over a moratorium on signing and selling players.
That is now being lifted as Chelsea players and manager Thomas Tuchel urgently seek clarity from Boehly and his group about their plans. At least two key defenders will leave Chelsea this summer, and at least two more are expected to follow, including club captain Cesar Azpilicueta.
Boehly, who has been a regular at Chelsea games since his takeover was announced on May 6, has broadly said he wants to keep Chelsea as a key player in football. However, it is unlikely that a group largely backed by a private equity firm will prove to be as lenient as Abramovich was as its owner.
For nearly two decades at Chelsea, Abramovich was a familiar but virtually silent presence at Stamford Bridge, happy to let his money do the talking. Under his leadership, Chelsea was transformed into a true European superpower, winning five Premier League titles and two Champions League crowns by hiring a succession of A-list managers and investing billions of dollars in players.
His generosity changed Chelsea, as well as football as a whole, ushering in an era of rampant spending in which transfer fees and player salaries rose to levels unimaginable just a few years earlier. It also came at a price that Chelsea’s income, however much it grew in those years of plenty, could not match. Throughout his tenure, Abramovich used his vast personal fortune to subsidize losses that amounted to $1 million a week.
But just as Abramovich’s arrival in 2003 opened the door to a new era for English football, his departure also serves as a bookmark.
While scarcity may explain some of the rush to pay a premium for Chelsea — after all, the biggest football teams are rarely for sale — it’s not clear when and how a group of private equity investors rushing through such treacherous, confusing waters to control Getting over the club can start realizing a return on their investment.