SAO PAULO (AP) — A new law that allows soccer clubs in Brazil to seek outside investment is attracting hundreds of millions of dollars to a country recognized as soccer’s biggest source of talent, a change that could see Brazilian teams compete with the highest level in Europe.
The surge in fresh, mostly foreign cash coincides with a deal last May between Brazil’s biggest clubs to create a league modeled on the British Premier League that will centralize talks to sell broadcast rights and marketing contracts.
Together, the recent developments have spawned a funding bonanza for Brazilian teams, which have long been fan-owned operations closed to outside investors.
That may allow Brazil, the world’s biggest exporter of soccer players, to keep its best players in the country longer and charge higher fees for talent moving abroad.
The biggest deal in the works is for a 51 percent stake in Brazilian league champion Atletico Mineiro, according to two people with knowledge of the matter, who said the club had met with dozens of investors. The deal could be worth 1 billion reais ($200 million), one of the people said.
The people requested anonymity to reveal private discussions. The club did not respond to a request for comment.
Guilherme Avila, a sports investment banking partner at XP, a Brazilian broker, predicted that at least 10 fan-owned Brazilian soccer clubs will become investor-owned companies in the next two years.
In December, the sale of second division club Cruzeiro to retired Real Madrid and Brazil striker Ronaldo became the first deal to take advantage of the law, passed about a year ago.
The deal for cash-strapped Botafogo in Rio de Janeiro followed earlier this year. His rival from across town, Vasco da Gama, was sold this month.
The next step is the possible sale of second division Esporte Clube Bahia to the City Football Group, an Abu Dhabi company with investments in Manchester City and 10 other football clubs.
Bahia’s ongoing negotiations with City Football Group were first announced by the Brazilian club’s president, Guilherme Bellintani, earlier this year. Bellintani told Brazilian media that the deal is worth 650 million reais ($126.4 million).
City Football Group declined to comment on the Bahia deal. Bahia did not respond to a request for comment on the matter.
As for the lucrative TV rights, talks are expected to start next year around 2025 and beyond.
The Brazilian network TV Globo bought the exclusivity of the clubs until 2024 for the national soccer championship and many regional tournaments. But going forward, the league will split the rights, as leagues in England, Italy, Spain and Germany do, into packages that different groups can bid on, including Globo, but also other local and international media companies that show interest. .
Last year, clubs in Brazil’s first division received 3.5 billion reais ($687 million) in broadcast rights, mainly from Globo, with a portion from Amazon Prime.
By contrast, England’s Premier League, which has the world’s highest revenue from soccer broadcasting rights, earned $3.9 billion in 2021 from broadcasters including Sky Sports, BT Sport and Amazon.com Inc’s Prime Video.
In a glimpse of things to come, the rights to the regional championship in Sao Paulo, long exclusively owned by Globo, were split last year for the first time between local broadcaster Record and also YouTube, with a portion of the pay per view games. going to HBO Max/TNT Sports, as well as Globo. The new model increased revenue by 30 percent.
THE ATHLETIC LOOKS TO THE OUTSIDE
Atlético Mineiro is being advised by the investment bank BTG Pactual. The club approached City Football as a possible suitor, but the group was not interested in the deal, one of the sources said.
Rafael Menin, scion of the family that controls Brazilian construction company MRV and one of four businessmen who have lent the team some 500 million reais in recent years, told Reuters the club prefers an international investor “with experience or owned by a major European football club. . He declined to comment on the potential price.
Rio de Janeiro’s Fluminense, 120, has also hired BTG to help it seek investors, but three people with knowledge of the matter who spoke to Reuters expect the club to get less than Atletico because of its weaker finances.
In a statement to Reuters, Fluminense confirmed that it had hired BTG and said it was evaluating the best way to carry out the project. However, he noted that no deadline has yet been set, as the plan still depends on a “better understanding” of market conditions.
Three bankers said that the biggest clubs, including Corinthians and Palmeiras, may be candidates for initial public offerings. Some clubs with healthy balance sheets may be against selling their control to an investor and would prefer a more diverse shareholder base, according to the bankers.
“Depending on the financials, the listing may make more sense than a private deal,” said BTG’s director of mergers and acquisitions, Bruno Amaral.
Corinthians and Palmeiras did not immediately respond to requests for comment on their IPO potential.
Soccer club listings elsewhere have had a mixed history, as the world’s biggest club, Manchester United, has chronically underperformed the S&P index. United made headlines last week when billionaire Elon Musk joked that he was buying the famous team, sparking takeover speculation.
NEW FOOTBALL LEAGUE
Libra, as the new Brazilian league is known, has 13 clubs, including Flamengo, Corinthians, Palmeiras, Sao Paulo and Santos. A second group, called the 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 soccer,” said Alessandro Farkuh, a sports and media banker at BTG, which is advising the new league. Professional rights negotiation can dramatically increase club revenue, he said.
Brazilian clubs get just 1 percent of their income from international broadcast rights, while the Premier League gets 48 percent and the Spanish La Liga gets 44 percent.
XP analysts, in a June report on the business of soccer, forecast that Brazilian clubs could get 200 million reais ($39 million) from international rights in the first year, which is still less than 5 percent of your total income.
The new scenario can lead Brazilian soccer to annual revenues of $5 billion, KPMG sports and media leader Francisco Clemente said, up from $1.3 billion last year. The firm is advising Vasco da Gama and Corinthians, the second largest club in Brazil by number of fans.
“If Brazilian soccer gets the same share of GDP as Spanish and British soccer, annual revenues could quadruple,” he said.
This could also reverse the recent trend of Brazilian players being sold to European clubs before they reach their full potential, analysts say. The average transfer value in Brazil fell to €12.9 million last year from €19.2 million in 2018, according to XP.
The average Brazilian transaction is only a third of the average €35.7 million Spanish transfer.
With higher revenues, Brazilian clubs can afford to spend time developing exceptional players, rather than using transfers as recurring income, XP’s Ávila said. This could result in higher average transfer values in the future.
“With higher revenues, Brazilian clubs will be able to keep top talent playing longer in the country,” Ávila said.