By David G. Barry
Clearlake Capital’s seventh
flagship private equity fund scored with institutional investors, closing
earlier this month at $14.1 billion – $4 billion above its target.
What many of those institutional investors probably did not expect is that the
fund became a majority investor in one of the world’s premier soccer clubs: Chelsea
FC. The Santa Monica, California, private equity firm now owns 60% of the
British team after joining a consortium led by Todd Boehly and Hansjorg Wyss to
complete the $5.3 billion purchase. The group is paying $3.1 billion for the
team and putting up $2.2 billion in commitments to the team and renovations of
its stadium, Stamford Bridge.
The team became available after the United Kingdom sanctioned former owner and
Russian oligarch Roman Abramovich following Russia’s invasion of Ukraine.
Clearlake is not the first private investment firm to become an owner of a
European soccer team.
Silver Lake Partners, for example, paid $500 million in 2019 for a stake
in another English team, Manchester City. And last year, Oaktree Capital
purchased a 31% stake in Inter Milan, Area Management acquired a 34%
stake in La Liga’s Atletico, and 777 Partners bought Genoa.
However, what makes Clearlake’s deal noteworthy is both the price – the highest
ever paid for a sports franchise – and the fact it will be the majority owner. The
move could open the door for other private equity firms to acquire sports
franchises. And, in fact, RedBird Capital Partners is reportedly close
to acquiring AC Milan. RedBird, it should be noted, was where Nicole Musicco
was situated prior to becoming chief investment officer of the California
Public Employees’ Retirement System.
Andrew Palmer, who is CIO of the Maryland State Investment Board, a
Clearlake fund investor, did not have any specific comments on the purchase. He
did, however, say that “we do see sports and entertainment as having growing
interest from institutional investors. I would not be surprised to see others
make similar investments in the future. They can be reasonable investments
from a portfolio context.”
For the time being, such deals are likely to take place in Europe as they do
not have the restrictions that U.S. sports leagues have on private equity firms
owning teams. Several PE firms in the United States, most notably Arctos
Partners, have been acquiring stakes in U.S. sports franchises and leagues.
Clearlake’s involvement in the Chelsea deal emerged from Clearlake’s
unsuccessful effort earlier this year to buy debt manager CBAM, according to The
Wall Street Journal. While negotiating, Clearlake’s co-founders – Jose E.
Feliciano and Behdad Eghbali – came to know Boehly, who founded
Eldridge Industries, which owned CBAM.
And while Chelsea marks Clearlake’s first sports deal, Feliciano and Eghbali have
shown individual interest in becoming owners. The two previously tried to
acquire a 40% stake in the Washington Commanders – formerly known as the
Redskins.
Founded in 2006, Clearlake now has more than $72 billion under management.
Including its new fund, the firm has raised more than $25 billion over the past
18 months. Its new fund is double the size of its prior $7.1 billion fund,
which closed in early 2020.
Clearlake focuses on the technology, industrial and consumer sectors.
Investments made by the new fund include Cornerstone OnDemand, Concert Golf,
Discovery Education, Intertape Polymer Group, Kofax, Mold-Rite Packaging, Quest
Software, Spring Window Fashions and, just recently, BBB Industries LLC.