Fortress makes 11th hour pitch for slice of Serie A media future
By Jonathan Rest
Fortress, the US private equity firm, has submitted an 11th hour bid to Serie A to partner on the creation of a company that would manage the Italian soccer league's broadcasting rights.
The 20 Serie A clubs are meeting via video conference today where they were due to decide between rival offers from USA's Bain and Italy's NB Renaissance, and a consortium of CVC Capital Partners, Advent and Italian state-backed fund FSI.
However Fortress, whose first offer was rejected by the league earlier in the process, has now returned with two options, both with a media company at the core and with Lega Serie A retaining full ownership.
It remains to be seen whether the Fortress proposal will be entertained by the 20 clubs considering how late it has been submitted, the fact that the rival bids have been fully analysed and the fact the league is keen to press ahead with its plans, considering present rights deals expire this season.
Option one of the Fortress proposal, according to the Calcio e Finanza website, which has seen the documents, involves Serie A receiving €500 million ($590 million) up front without incurring any debt by issuing preferred shares or equivalent equity instruments through the media company. In addition, Fortress provides an option to make an additional €400 million available to the league during the first three years of the partnership.
In a letter to Lega Serie A, Fortress claims it has already begun discussions with a potential commercial partner who would "guarantee" minimum annual revenues of €1.15 billion to the league.
The second, more complex option also immediately guarantees €500 million to the league, with the additional €400 million to be released should annual revenues fall short of €1.35 billion.
In this case, the investor would get the following returns: 4 per cent (with a minimum of €40 million per year) with revenues up to €1.15 billion; or 5 per cent with revenues exceeding €1.15 billion. There would be additional returns depending on if, and how much of, the €400 million is called upon.
Lega Serie A would also have an option for a refund, set at a multiple of the invested capital.
In the event that Lega Serie A chooses the first option (a guaranteed minimum of €1.150 billion) the percentage of return for investors will drop from 4 per cent to 3.5 per cent.
In both cases, Fortress would have a seat on the new media company board.
In its proposal, Fortress said: “This proposal allows Lega Serie A to keep 100 per cent of its stake and therefore not to sacrifice any long-term value that Lega Serie A creates. Furthermore, it allows Lega Serie A to generate income to improve its current liquidity while maintaining the full upside in the value of Lega Serie A and having a director with significant sporting and financial skills to help lead Lega Serie A to maximise the value of MediaCo.”
The other proposals on the table being discussed today involve Bain and NB taking a 10 per cent stake in the new company valued at €1.35 billion, while the CVC consortium offer, also for 10 per cent, is valued at €1.625 billion.
Serie A rights are presently held by pay-TV's Sky and over-the-top subscription service DAZN in three-year deals worth €973 million per year that run to the end of the 2020-21 campaign.
The IMG agency handles international media and other commercial rights to Serie A in an agreement worth more than €360 million per annum.
Infront Italy’s six-year, €5.94 billion minimum guarantee agreement to act as Serie A's exclusive adviser on both domestic and international media rights expires next year.