Brazilian soccer clubs ready for gold rush to close gap to Europe’s elite

SAO PAULO, Aug 28 (Reuters) – A new law allowing Brazilian soccer clubs to seek outside investment is drawing hundreds of millions of dollars to a country known as soccer’s biggest source of talent, a change that could see the Brazilian teams compete with the highest European level. .

The influx of fresh money, mostly foreign, coincides with an agreement reached last May by Brazil’s biggest clubs to create a league modeled on the British Premier League which will centralize talks to sell transmission rights and contracts. of marketing.

Together, the recent developments have spawned a funding bonanza for Brazilian teams, which have long been fan-owned operations closed to outside investors.

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This could allow Brazil – the world’s biggest exporter of footballers – to keep its best players in the country longer and charge higher fees for talent going abroad.

The biggest pending deal is for a 51% stake in Brazilian league champions Atletico Mineiro, according to two people with knowledge of the matter, who said the club had met with dozens of investors. The deal could bring in 1 billion reais ($200 million), one of the people said.

The individuals requested anonymity to disclose private discussions. The club did not respond to a request for comment.

Guilherme Avila, sports investment banking partner at XP, a Brazilian broker, has predicted that at least 10 fan-owned Brazilian football clubs will become investor-owned companies over the next two years.

In December, the sale of second division club Cruzeiro to former Real Madrid and Brazil striker Ronaldo became the first deal to take advantage of the law, approved around a year ago.

The deal for Rio de Janeiro’s cash-strapped Botafogo followed earlier this year. His Crosstown rival, Vasco da Gama, was sold this month.

Next in line is the possible sale of second division Esporte Clube Bahia to City Football Group, an Abu Dhabi company with investments in Manchester City and 10 other football clubs.

Ongoing negotiations between Bahia and City Football Group were first announced by the Brazilian club’s president, Guilherme Bellintani, earlier this year. Bellintani told Brazilian media that the value of the deal was 650 million reais ($126.4 million).

City Football Group declined to comment on the deal with Bahia. Bahia did not respond to a request for comment on the issue.

SALE OF TV RIGHTS

As for lucrative television rights, talks are expected to begin next year around 2025 and beyond.

The Brazilian network TV Globo has bought the exclusivity of the clubs until 2024 for the national football championship and many regional tournaments. But in future the league will split the rights – as the leagues of England, Italy, Spain and Germany do – into packages for which different groups can bid, including Globo but also others. local and international media companies expressing interest.

Last year, clubs in Brazil’s top division received 3.5 billion reais ($687 million) in transmission rights, mostly from Globo, with some from Amazon Prime.

By contrast, the Premier League of England, which holds the highest football rights revenue in the world, earned $3.9 billion in 2021 from broadcasters such as Sky Sports (CMCSA.O), BT Sport (BT.L) and Amazon.com Inc’s (AMZN.O) First Video.

In a glimmer of things to come, the rights to the Sao Paulo regional championship, long held exclusively by Globo, were split last year for the first time between local broadcaster Record and also YouTube (GOOGL.O), with a pay-per-view games for HBO Max/TNT Sports (WBD.O) as well as Globo. The new model increased revenue by 30%.

ATLETICO LOOKS ABROAD

Atletico Mineiro are advised by investment bank BTG Pactual. The club contacted City Football as a potential suitor but the group were not interested in the deal, one of the sources said.

Rafael Menin, a scion of the family that controls Brazilian homebuilder MRV (MRVE3.SA) and one of four businessmen who have loaned the team some 500 million reais in recent years, told Reuters that the club would prefer an international investor “with experience or ownership of a major European football club”. He declined to comment on the potential price.

Fluminense, 120, from Rio de Janeiro, has also hired BTG to help scout for investors, but three people with knowledge of the matter who spoke with Reuters expect the club to fetch less than Atletico given of its weaker finances.

In a statement to Reuters, Fluminense confirmed it had hired BTG and said it was evaluating how best to complete the project. He noted, however, that no deadline has yet been set, as the plan still depends on a “better understanding” of market conditions.

Three bankers said the biggest clubs, including Corinthians and Palmeiras, could be candidates for initial public offers. Some clubs with healthy balance sheets may be opposed to selling their control to a single investor and would prefer a more diverse shareholder base, bankers say.

“Depending on the finances, a listing may make more sense than a private deal,” said Bruno Amaral, head of mergers and acquisitions at BTG.

Corinthians and Palmeiras did not immediately respond to requests for comment on their IPO potential.

Football club listings elsewhere have had a mixed history, with the world’s largest listed club, Manchester United (MANU.N), having chronically underperformed the S&P index. United made headlines last week when billionaire Elon Musk joked he was buying the famous team, sparking speculation of a takeover.

NEW FOOTBALL LEAGUE

Libra, as the new Brazilian league is called, has 13 clubs including Flamengo, Corinthians, Palmeiras, Sao Paulo and Santos. A second group, called Liga Forte Futebol Futebol do Brasil (LFF) and made up of 25 teams, is in public talks to join Libra.

“A professional league can completely change Brazilian football,” said Alessandro Farkuh, sports and media banker at BTG, which advises the new league. Professional rights negotiation can significantly increase club revenue, he said.

Brazilian clubs derive just 1% of their revenue from international transmission rights, while the Premier League gets 48% and Spain’s La Liga 44%.

XP analysts, in a June report on the football industry, predicted that Brazilian clubs could raise 200 million reais ($39 million) from international rights in the first year, which is still less than 5 % of their total income.

The new scenario could take Brazilian football to $5 billion in annual revenue, said Francisco Clemente, sports and media leader at KPMG, up from $1.3 billion last year. The firm advises Vasco da Gama and Corinthians, Brazil’s second biggest club by number of fans.

“If Brazilian football gets the same share of GDP as Spanish and British football, annual revenue could quadruple,” he said.

It could also reverse the recent trend of Brazilian players being sold to European clubs before they reach their maximum potential, analysts say. The average transfer value in Brazil fell to €12.9m last year from €19.2m in 2018, according to XP.

The average Brazilian deal is only a third of the average Spanish transfer deal of €35.7m.

With higher revenues, Brazilian clubs can afford to take time off for the development of outstanding players, instead of using transfers as recurring revenue, XP’s Avila said. This could lead to higher average transfer values ​​in the future.

“With higher revenues, Brazilian clubs will be able to keep top talent playing in the country longer,” Avila said.

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Reporting by Tatiana Bautzer and Aluisio Alves; Editing by Christian Plumb, Frank Jack Daniel and Lisa Shumaker

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Mary I. Bruner