Real Madrid Furious After Spain’s Top Soccer League Agrees to Sell a Stake To Private Equity

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La Liga, Spain’s biggest soccer league and the home to global superstars like Lionel Messi, agreed Wednesday to sell a 10% stake for €2.7 billion to CVC Capital Partners, one of the world’s top private equity firms.

On paper, the deal seems to benefit both the finance and footie crowds, constituting private equity’s first entry into major European soccer league ownership and netting a lifeline for La Liga’s cash-strapped clubs. But Real Madrid, the second most valuable soccer franchise in the world, has thrown up a red card, saying it wants the deal tossed off the pitch.

One Big Messi

Revenues for La Liga clubs were in poor form in 2020, dipping 8% to €3.1 billion amid pandemic disruptions. But its two premier franchises, Barcelona and Real Madrid were in overleveraged disarray long before that. Barcelona is mired in €1.4 billion in debt (with just €368 million to show in terms of assets), while Real owes €901 million. Both clubs have been ordered to slash their player payrolls that make the New York Yankees look stingy.

Barca and Real also played a part in the recent disastrous failed attempt to form a breakaway European Super League, which would have netted those squads a €200 million welcome bonus each. The CVC deal is in part an attempt by La Liga to mend fences with its leading franchises, even if Real isn’t entirely on board:

  • The two top clubs will each receive over €250 million from CVC funds, helping them cope with the financial toll of the past year (and their fruitless Super League coup attempt).
  • Real and Barca will be allowed to spend 70% of that money investing in long-term growth, 15% on refinancing debt, and 15% to go beyond league-imposed spending limits.

Over Their Headers: Despite the cash windfall in store for Real, the franchise remains indignant over being left out of the negotiating room with CVC. But La Liga needs only a simple majority of support among its teams to forge ahead with the deal.

No Grazie: Earlier this year, CVC took a shot at similar negotiations with Italy’s Serie A, but the league’s clubs balked at the $2 billion price tag offered for 10% of their media rights. Spanish clubs are reportedly much keener to negotiate.