The pending sale of AC Milan is a better bargain than the recent purchase of Chelsea FC.
Last month, sanctioned Russian oligarch Roman Abramovich sold Chelsea to a group led by American Todd Boehly and Clearlake Capital for $3.1 billion, the second-highest price ever paid for a sports team. (The $3.2 billion that Joseph Tsai plunked down for the NBA’s Brooklyn Nets in 2019 remains No. 1.) Chelsea’s 2021-22 revenue before player trading probably comes in at about $550 million, which means an acquisition revenue multiple of 5.6.
Private equity firm RedBird Capital has just snapped up AC Milan for $1.28 billion. A person familiar with AC Milan’s books pegs the team’s revenue before player trading for the 2021-22 season at about $280 million, meaning RedBird would be paying 4.6 times revenue.
Who got the better deal—RedBird or Boehly and Clearlake? Both AC Milan, which won its domestic title this season, and Chelsea, which finished third in the Premier League, will participate in the lucrative 2022-23 Champions League. Both AC Milan and Chelsea play in antique stadiums. The former is looking to build a new one, and the latter plans to invest perhaps as much as $1.5 billion to renovate Stamford Bridge.
Chelsea is more profitable than AC Milan, which likely posted slightly positive operating income (earnings before interest, taxes, depreciation and amortization) in 2021 versus perhaps more than $40 million in operating income for Chelsea. But the English team for years was being financed by its Russian owner, while the Italian side, after Elliott Management pushed its balance sheet into the black, is self-financed. Thus the new owners of Chelsea are going to have to rein in expenses while trying to keep the team at the caliber demanded by the Champions League.
RedBird knows one thing or two about buying soccer teams on the cheap. It acquired the Toulouse FC two years ago for about $20 million, and sports bankers peg the team’s value at about $80 million as it has climbed from France’s third division to winning the second division in just two years. That works out to a fourfold increase in value in just two years.
Weep not for Elliott Management. For starters, the firm only took over AC Milan because the previous owner defaulted on a loan payment. Moreover, the investment firm is getting a fair price for AC Milan and, thanks to the miraculous job it did turning the team around—from negative equity of $37 million to positive equity of $70 million at the end of the 2020-21 season, and qualifying for the Champions League for the first time in seven years last May—Elliott will make a nifty profit on the roughly $740 million (purchase price and cash infusions) it has made.
In contrast to RedBird, Boehly has a history of paying up. He was part of the group that bought the Los Angeles Dodgers for a then-record amount of $2 billion in 2012. Forbes most recently valued the Dodgers at $4.08 billion—a doubling in return over a decade.
In the long term, AC Milan and Chelsea will both appreciate in value. But the Italian club will likely do so much more quickly than the English one.