The British headline writers are calling it "Chelsky" after the sale of London soccer club FC Chelsea to a Russian oil billionaire. In the biggest team acquisition in U.K. history, Roman Abramovich is paying about $240 million to take control of the club and take it private.
Current owner Ken Bates bought Chelsea in 1982 for just £1. He is going to walk away with $28 million in cash from the new deal. When Bates took over, he assumed debts of $2.4 million. In the ensuing two decades, the debt has climbed to an estimated $144 million. In addition to taking on that load, Abramovich is buying just over half the shares (50.09 percent) of Chelsea Village, the club's parent company, for an initial $47.4 million and is offering about the same amount for the remaining shares.
Bates, who has agreed to stay on as chairman for two years, said the Russian also plans to invest an additional $80 million in the club. Adding that to the share acquisitions and the assumption of debt brings the total value of the deal to about $320 million.
Abramovich, 36, is a major shareholder in Sibneft, the world's fourth-largest oil producer. His experience in sports to date has been confined to the ownership of Omsk Avangard, a Siberian ice hockey team.
Bates disclosed that he had been searching for investors for 12 months and that three other potential buyers had expressed interest. Abramovich also had been sniffing around Manchester United and London clubs Arsenal and Tottenham, as well as CSKA Moscow closer to home.
Chelsea's Stamford Bridge Stadium sits on premium West London real estate. In the 1990s, Bates pushed through ambitious plans to renovate the facility and add a hotel and shopping complex. The plans were financed by floating Chelsea Village on the market and subsequently issuing $120 million in bonds that now cost the club more than $11 million a year in interest.
Chelsea Village's assets include prime property in the center of Fulham, two hotels, eight restaurants, a travel company, a nightclub and a TV and radio station.
In the latest full financial year, ended June 30, 2002, the company lost $26.6 million on revenue of $85.8 million.
Abramovich agreed to pay 35 pence a share, a 15 percent premium on Chelsea's closing price on the Alternative Investment Market of 30.5 pence the day before the July 1 agreement. Regulators were reportedly investigating a sharp rise in the share price in the days before the announcement of the deal.
Jay Stuart is editorial director of SporTVision magazine and Sports TV Report newsletter.
