Buyout groups team up in €1.3bn battle for Italy’s Serie A

Private equity groups CVC Capital Partners and Advent International have teamed up for a €1.3 billion bid to acquire a minority stake in Italy's Serie A football competition as clubs near a decision on whether to bring outside investors into one of Europe's biggest leagues.

The two buyout groups, which previously made competing bids, are working with the Italian investment fund Fondo FSI on a fresh offer which would value the league at €13 billion – considerably higher than the €11 billion valuation of a previous offer by CVC earlier this year.

They are seeking a 10 per cent stake in a new company that would manage Serie A’s broadcasting rights, its international trademark and commercial development. Under the proposal CVC would own half of the stake, Advent would own 40 per cent and FSI the remainder, according to people with knowledge of the bid.

The decision to join forces – a departure for CVC, which has a history of investing alone in sports tournaments such as Formula One and England’s Premiership Rugby – is a sign of the difficulties facing private equity groups in the hotly contested process.

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To win bidders must first secure support from 14 of the league's 20 clubs to set up a new company with private equity involvement to oversee media rights. If successful 15 clubs must then vote in favour of their offer over that of rivals. Private equity firm Bain Capital is bidding against Advent and CVC.

However, several clubs are sceptical about handing over control to private equity groups, with some preferring instead to set up an alternative company funded through a debt deal that would allow them to remain in charge of commercial affairs.

That has left would-be investors scrambling to build a coalition that the remaining clubs can rally around. Several people involved in the process said it was far from clear that a deal could be agreed.

“The clubs will be nervous, very nervous [about selling a minority stake] because it means that whoever comes in will want to put proper governance structure around the league,” said a senior executive at a leading Italian side. “The ownership of Italian football clubs will not like that because they want to have the say and have their way.”

Negotiations

Lega Calcio Serie A, the body that runs Italy’s top division, is expected to make a decision on the bids within the next fortnight, people involved in the negotiations said. If it does a deal could be completed this autumn.

The offers reflect the rare opportunity to buy into one of football’s top leagues, under a belief that the value of international broadcasting rights for the world’s favourite sport can continue to rise.

Under CVC and Advent’s proposal the private equity groups would control 50 per cent of a board overseeing day-to-day decisions, with the clubs controlling the remaining 50 per cent and the casting vote being held by an independent chair, one person close to the process said.

Decisions on financing and strategy would, however, be subject to a shareholder ballot in which the clubs could outvote the buyout groups.

Paolo Dal Pino, Serie A’s president, told the Financial Times last month that the league was “looking at how to create value in the long term. Do we do it alone or do we do it with a partnership?”

The finances of Italian clubs are more precarious than continental rivals. Serie A's clubs made a collective loss of €318.3 million in the 2018-19 season, according to KPMG, compared with a collective profit of €230.8 million for Spain's La Liga.

The private equity groups declined to comment. – Copyright The Financial Times Limited 2020