The LFP, the French professional top-tier soccer structure, has today entered into exclusive negotiations with CVC Capital Partners, the private equity firm, over the latter body taking a stake worth €1.5 billion ($1.66 billion) in a yet-to-be-created company that will handle the LFP’s commercial rights.
The announcement takes to the next stage a process which began in October last year, during which the LFP has steadily winnowed down a host of private equity and investment groups that expressed interest in securing a stake in the LFP’s commercial and media rights vehicle, which will distribute and sell rights to the LFP’s top-tier Ligue 1.
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The LFP has said that the decision to turn to CVC has been taken “following a competitive process and after a detailed review of the firm offers received”, and that the project will involve the LFP selling 13% of the commercial rights vehicle to CVC in exchange for the €1.5 billion sum.
The French soccer body will itself put in another €10 billion, giving the new commercial subsidiary an initial value of €11.5 billion, and the LFP has added that an official announcement “will be made when the final documentation is signed, which should take place in the coming weeks.”
The deal, if and when it is officially confirmed, is likely to result in a seismic shift in how media rights income is allocated for the 20 Ligue 1 clubs in future – a shift that will significantly benefit heavyweights Paris Saint-Germain, who will quite literally be put into a class of their own in terms of distribution.
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The LFP began searching for private equity partners in late October, with the body at that point approaching Centerview, Lazard, and law firm Darrois to act as advisors – between them, these bodies reportedly approached around 30 potential investors.
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By GlobalDataIn early March, it was reported that the four contenders to have submitted official offers for a stake were CVC, Silver Lake, Oaktree, and Hellman and Friedman and that CVC had submitted the most lucrative proposal at that point.
For CVC, this represents the second major European soccer league it has entered into a strategic partnership with in the last three months – in December, it agreed a similar deal with Spain’s top-tier LaLiga, where it will invest just under €2 billion to the league and its clubs in return for an 8% stake in a new commercial entity.
It was also close to concluding the same deal with Italy’s Serie A in 2020 but the proposed tie-up fell through early last year which prompted it to seek out other leagues.
The private equity firm has stakes in multiple rugby union competitions including the Six Nations, England’s top-tier Premiership Rugby, and the Pro14, as well.
For Ligue 1, and its 20 member clubs, meanwhile, the deal will bring much-needed financial stability after a torrid couple of years.
Collectively, French clubs lost around €730 million ($849.5 million) in the 2020-21 season, partly due to the effects of the coronavirus pandemic (fans were not allowed in stadiums), and also due to a collapsed domestic media rights deal with Spanish production firm Mediapro.
As such, the plan is to initially use the money to help clubs return to stable financial positions.
Presently, Ligue 1 generates the lowest revenue out of the European ‘Big Five’, behind England’s Premier League, Spain’s LaLiga, Germany’s Bundesliga, and Italy’s Serie A.
Domestic broadcast rights for both Ligue 1 and Ligue 2 are currently held by a combination of online retail giant Amazon (through its Prime video streaming division) and French pay-TV heavyweight Canal+ until the end of the 2023-24 season.
In terms of future media rights distribution, French media reported in late February that PSG, the country’s most successful team over the last decade and probable champions this campaign, will receive 30% of annual media rights income through the new venture, with that also linked to them being the best-performing French club in the pan-European UEFA Champions League through the past 10 years.
The other 19 teams will have to share the remaining 70% combined.
it is understood that the remaining 70% will also be tiered. The six teams that have also competed in the Champions League over the last few years, as well as in the second-tier Europa League, will reportedly take 40% between them, with the other 13 clubs to split the remaining 30%, taking between 2% and 3% each.
Those six clubs are suggested as being Lyon, Marseille, Monaco, Lille, Nice, and Rennes. They would take around 8% each.
Currently, the two clubs generally accepted as the biggest in the country – Paris Saint-Germain and Olympique de Marseille – receive less than 10% each of total revenue, a situation those heavyweights are no doubt pushing to change.
The CVC deal is possible in the first place due to a sports bill passed by France’s National Assembly in March last year, which gave sports bodies the right to create the kind of commercial subsidiary in question here.
This came after the LFP’s member clubs voted in December 2020 to explore the possibility of creating such an entity by reforming the body’s statutes.
This statute amendment outlines, however, that the LFP “may not hold less than 80% of the capital and voting rights of the company”, meaning that the governing body would maintain full operational control of the division – hence the sale of only 13% to CVC.
In December, LFP president Vincent Labrune said that the 40 teams across Ligue 1 and Ligue 2 collectively face a funding hole of up to €800 million after the damaging financial effects of the Covid-19 pandemic over the last two years, with the collapsed Mediapro rights deal also contributing to the shortfall.
As such, he added at that point that, with regards to inviting outside investment, “we have no choice … Our long-term future depends on the next 18 months.”
