November 28, 2019

Breakingviews: Man City adds scrappy player to financial roster

by Breakingviews.

Manchester City has beefed up its roster – off the pitch. Silver Lake is buying a $500 million stake in the club’s owner, valuing the international soccer conglomerate at a record $4.8 billion. Victory in the Premier League won’t be enough to satisfy the buyout shop’s goals. That may take winning in new top-level tournaments, e-sports and even Asia.

Silver Lake is a late-stage investor here. Sheikh Mansour bin Zayed al Nahyan bought Man City for some 200 million pounds ($260 million) in 2008, when it hadn’t won a significant accolade in three decades. Last season, the club added all four domestic trophies to its cabinet. City Football Group as a whole, meanwhile, has expanded to include teams in New York, Melbourne and Chengdu.

It’s the second time the Abu Dhabi royal has brought in fresh cash. In 2015, he sold a stake to a group led by China’s China Media Capital at a $3 billion valuation. He also has ploughed $1.7 billion into the main club over a decade. Lucrative sponsorship deals with Gulf firms have helped fund players and growth, too, but also attracted a European investigation that could prove costly.

Even so, Silver Lake, better known for tech investments such as Dell Technologies, expects big things to come. City Football Group is being valued at 7 times revenue reported by Man City for the year to June. Add a $45 million top-line estimate by Forbes for the smaller teams and the multiple drops closer to 6 times. New York-listed rival Manchester United trades at 3 times revenue, while World Wrestling Entertainment fetches 5 times.

Most professional soccer outfits have long burnt more cash than they generate. Broadcast rights are unlikely to keep growing at their recent breakneck pace. Instead, fresh sources of revenue may be necessary. Digital streaming could one day be fruitful, as might competitive video gaming. City Football Group is an anchor investor in a $115 million sport venture-capital fund.

Its multi-team structure also means that Silver Lake gets a foot into nascent football markets, including in China. The private equity firm already backs the Ultimate Fighting Championship and, according to media reports, has been sniffing around the New York Knicks and Rangers. Soccer could be an equally long financial game.

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