While football continues to suffer from the pandemic crisis, successive confinements and closed doors, not to mention the bankruptcy of its broadcaster, Téléfoot – La Chaîne, the leaders believe they have found the solution: the establishment of a commercial society. This would allow the Football League to get out of its ancestral associative legal status and, above all, to be able to generate significant funds through the sale of shares to outside investors.
The trading company, what is it?
The idea is simple. Today, since 2020, French clubs have lost between 600 and 800 million euros, TV rights have fallen by almost 50%, from 1.15 billion euros with Médiapro, to only 663 million euros , with the American Amazon. Money must be found, and quickly. The economic and sporting survival of the competitions depends on it. According to the president of the LFP, Vincent Labrune, ” if nothing is done, France risks finding itself at the level of the Slovenian championship “. The latter therefore activated, upon his election, in August 2020, the creation of a commercial company within the League in order to substitute its archaic operating system into a real commercial entity, competitive and capable of managing files as complex as international TV rights or Ligue 1 commercial and marketing rights.
In addition, as a commercial entity, its owners, here the clubs and the French Football Federation, have the right to transfer, like any company, part of its assets to third-party investors in order to derive a capital gain. It is exactly like a public limited company divided into several parts. The majority shareholder or the historical owner can perfectly decide to resell 10, 20, 30, 40% of his shares to interested parties. This will allow him to recover a non-negligible sum, favorable to the financing of investments or to the increase of his capital. As for the buyers of the shares, this will ensure them equity participation in the company, to receive part of the profits, in proportion to their share of participation, to join the board of directors and decision-making of the company, with proportional voting rights and, finally, to be able to resell its shares if they were to grow in size. Which can be very interesting in the future.
In economics, this mechanism is called direct external financing, with a form of fundraising on the financial markets. Here, rather than selling shares, the LFP intends to sell transferable shares in order to generate a large sum, which it will redistribute to professional clubs.
Political negotiations in addition to economic meetings
But all this is not as simple as it sounds. First, the legal status must change and, for that, the law must evolve. While Vincent Labrune and his collaborators within the LFP have already welcomed and selected a certain number of candidates, all Anglo-Saxon investment funds, a bill is being discussed in Parliament. The National Assembly has already gone in this direction but has capped the transferable shares at 20%. In other words, the League, the clubs and the French Football Federation will always retain, whatever happens, 80% of the shares of the commercial company.
Then, the deputies granted themselves a right of inspection in the selection of the candidate investors buyers. They do not wish here to bring into French football potential dangerous players, insolvent or interested only in pecuniary interest before sporting interest. In an amendment to the bill, it is thus specified that, by decree, the deputies may exclude particular persons among the candidates and partners of the commercial company.
But in the end, the Assembly voted by majority for this project and extended its hand to the creation of a commercial company. At the same time, the league therefore continued to prospect and study the application files of investment funds, eager to set foot in French football. According to various sources, the LFP hopes to generate up to 1.5 billion euros through the sale of more than 10% of the shares of the commercial entity. So much money that will replenish the fragile coffers of the clubs and allow them to develop and arm themselves against European competition. Considering the price, it seems like a bargain. In Spain or Italy, these shares tend to trade around 2 billion euros. With a lower entry price but a higher growth prospect,
Nevertheless, although in January 2022, the League selected 4 finalists, the CVC, Oaktree, Silver Lake and Hellman & Friedman funds, all ready to invest 1.5 billion euros for 12% of the shares, i.e. a French football estimated at 12.5 billion euros, the Senate, where the bill comes to second reading, wishes to modify the protocol.
First of all, aware of the risks of leaving the family jewels to foreign investors, the senators would like to reduce the transferable shares from 20, as had been approved by the National Assembly, to 10%. This would not make it possible to generate the 1.5 billion euros hoped for since this represented a sum for 12.5% of the shares. Then, in order to avoid a new Mediapro risk, choosing an insolvent actor blindly and unconsciously, the senators would like to give a right of veto on all decisions taken by the board of directors of the commercial entity to the FFF.
What to put flat the negotiations and the discussions. It is not certain that these decisions are of interest to potential funds. We will see what will happen but everything should settle down in the coming weeks with the ratifications by the National Assembly and the decisions of the LFP.
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