Pricing Inter Milan

Good morning from New York, where the weather is sharply cool again and October means one thing: Yankee baseball. The Bronx Bombers are down two games in a best-of-seven series against bitter rivals the Houston Astros to decide who heads to the World Series. The city has not fielded a team to the Major League Baseball championship since the Mets’ appearance in 2015 – and the Yankee drought since 2009 is an especially dry spell for the winningest team in the history of the sport.

Meanwhile, here at Scoreboard US HQ, we are in the final stretch before our second annual FT Business of Sport US Summit on Monday. Our schedule is jam-packed with some of the industry’s top executives, bankers, owners, agents and disruptors, including Marc Lasry, Josh Harris, Ian Charles and many more. For Scoreboard subscribers, claim your free digital pass using the promo code Premium22 or register for VIP in-person access here. We hope to see you there.

In the meantime, in this week’s issue we delve into the next buzzy football sale for Inter Milan, and with the World Cup around the corner, sponsors are already having to navigate the complexity of its setting in Qatar. Do read on – Sara Germano, US sports business correspondent

Putting a price on Inter Milan

Received wisdom dictates that the opportunity to buy an elite football club is a rare and wondrous opportunity. That was part of the appeal when Roman Abramovich sold Chelsea FC this year. These assets just don’t change hands too often.

But since Todd Boehly and Clearlake Capital bought the west London football club for £2.5bn, Gerry Cardinale’s RedBird Capital has acquired Italian champions AC Milan for €1.2bn. And now, Raine Group, the merchant bank that handled the Chelsea auction, is looking for buyers of local rivals Internazionale, better known as Inter Milan.

Despite the apparent scarcity of top-end clubs, investors now have two reference points for deciding how much to bid on Inter. This is a club with plenty of pedigree – the first Italian side to win the treble of domestic league and cup plus Uefa Champions League, and a history of great players including Brazilian Ronaldo, Argentinian Javier Zanetti and German Jürgen Klinsmann.

But at present, Inter is struggling financially. The club recently reported that it made a loss of €140mn in the 2021/22 financial year on revenues of €440mn.

The owners are also under pressure. Nanjing-based electronics retailer Suning, which has owned the club since 2016, also suffered during the pandemic as consumers switched to online shopping from its brick-and-mortar foundations. Meanwhile, Chinese owners have flooded out of European football since Beijing tightened capital controls.

So what is Inter worth? Andrea Sartori, founder of data and analytics platform Football Benchmark, this year estimated that Inter’s enterprise value, including debt, was about €996mn. In a takeover, he says the club could command somewhere in the region of the €1.2bn valuation commanded by AC Milan. For what it’s worth, Football Benchmark had put an EV of €578mn on AC before the sale, partly because its revenues are lower than Inter’s.

There are some caveats, however, notably that interest rates have moved upwards since US hedge fund Elliott Management sold AC Milan to RedBird this year.

Inter is an early test of investor appetite for football clubs in the post-zero interest rate environment. In the words of one debt banker, “the cost of capital is really high and you can buy liquid assets at a discount and make a far better return, so why stick your money in a football club”.

Football clubs are pretty illiquid compared with blue-chip stocks that can be sold immediately for cash. But investors are also betting that long-term broadcast deals and loyal fans will help them weather recession more effectively than large swaths of the economy.

And, Sartori points out, Inter and AC Milan could both benefit as the timeline for their new shared stadium becomes clearer.

There would be added upside from potential structural changes to the landscape of European football that could result in steadier income streams and lower costs for elite clubs that have long paid enormous salaries to players in search of trophies.

That’s why much hinges on the planned relaunch of the European Super League, a breakaway competition that wants to put financial sustainability at the centre of the sport. If that goes the way of big clubs, there could be hidden value to a team of Inter’s pedigree.

So despite the cost of borrowing, there are reasons to be optimistic.

The Qatar World Cup is nearly upon us. Fifa and the tournament’s Qatari organisers held a joint press conference this week in Doha to mark the one-month countdown. During the lengthy session, the audience was regaled with all the snazzy facilities and exciting goings-on throughout the four-week festival of football – including live performances from top DJs at regular all-night raves in the desert. 

No matter how much those behind the tournament want to talk about the actual football and its adjacent (and extravagant) imported carnival, international media attention remains focused on two issues: worker rights and civil liberties.

For World Cup sponsors, you might think this presents a challenge. They too would surely much rather be in celebration mode. Instead they’ve had years of very public lobbying from NGOs asking them to put pressure on the organisers to make changes. 

But big brand sponsors know how to take the rough with the smooth – these are long-term commitments after all. Coca-Cola, for example, has been a World Cup sponsor since 1978. Adidas is locked in until at least 2030. 

Controversy around big sporting events is nothing new. The 1978 World Cup took place in Argentina, two years after a military coup. Russia hosted in 2018, four years after annexing Crimea. The Olympic Games has a similar list of complicated past events. 

Ricardo Fort, a consultant who previously ran global sponsorship at Coca-Cola and Visa, says sponsors know what they are signing up for. Some events are better than others, some easier than others. The 2026 World Cup in the US, Canada and Mexico is a prize worth sucking up a bit of bad PR for. Besides, broadcasters are the ones with the closest thing to real influence, he says. 

The bigger frustration for sponsors at the World Cup in Qatar is simply the size of the place. 

“The difference between Qatar and everywhere else is that Qatar is a very small country – for business that is a horrible thing. Usually a large chunk of the return comes from the domestic market. When you have an event in a country this size, that’s a big problem,” Fort said. 

What all the controversy does offer is a big opportunity for smaller brands, especially those keen to market themselves as having higher purpose. We’ve already seen the first attempt with Hummel’s sombre “protest” kit to be worn by the Danish national side. It’s likely we’ll be seeing much more of this sort of thing once things kick off on November 20.

Highlights

• Elnaz Rekabi, the Iranian climber who competed in an international competition in South Korea without wearing a headscarf, received a hero’s welcome on her return to Tehran. She said her “clothing had a problem by mistake”. Iran’s authorities have blamed sports and film celebrities for fanning nationwide protests since a 22-year-old Kurdish woman died in the custody of morality police.

• Bernd Reichart, the new chief executive of the failed European Super League, is planning to launch the competition within three years, as Real Madrid, Barcelona and Juventus push ahead with plans to reshape European football.

• Hans Niemann, the 19-year-old chess grandmaster accused of cheating, is seeking at least $100mn in damages from reigning world champion Magnus Carlsen and other defendants. 

• Billionaire Rupert Murdoch has asked the boards of News Corp and Fox to consider a merger, a move that could support a push into sports betting.

• Chinese billionaire Guo Guangchang’s Fosun conglomerate, the owner of English football club Wolverhampton Wanderers, is closing in on $5bn of asset sales this year as it attempts to fight a Rmb260bn ($36bn) debt pile.

• Fall marathon season is in full swing, and one of the latest changes to major races is the establishment of non-binary categories for runners. Scoreboard’s Sara Germano joins this week’s episode of the FT Weekend Podcast for a deep conversation on the many ways in which gender identity and inclusion is evolving in sport.

Transfer Market

• Fanatics is bolstering its emerging betting division, hiring a new chief financial officer in Andrea Ellis, who joins from scooter company Lime. Ellis, an alumna of the University of Pennsylvania and Harvard who was previously at Goldman Sachs and later at Restaurant Brands International, helped Lime’s expansion to nearly 30 countries. Fanatics, which originated in e-commerce for sports clothing and has since branched into collectibles and sports betting, was most recently valued at $27bn this spring. 

Final Whistle

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— Out Of Context Football (@nocontextfooty) October 20, 2022

Cristiano Ronaldo walked off the pitch before the end of play in Manchester United’s 2-0 victory against Tottenham Hotspur this week. The repercussions were swift: the Portuguese superstar won’t be part of the United squad that prepares and plays against Chelsea this weekend. But Ronaldo, who apologised, was overshadowed by another big walk off stage as Liz Truss became the UK’s shortest-serving prime minister. The two events might not appear to be related but Twitter’s meme factory had other ideas. Is that really Norwich City fan Truss marching straight off the Old Trafford turf?