Roman Abramovich’s asking price of more than £3BN for Chelsea is well over the odds, according to analysts, who put the club’s market value closer to £2BN.
The Russian oligarch is believed to value the West London club at between £3BN and £4BN, but that figure is hard to justify in the current market, or the foreseeable future.
Abramovich has instructed American bank the Raine Group to handle the sale of Chelsea and it is understood that the Russian is targeting American buyers as investment from China, the Far East and Eastern Europe has dried up for clear political reasons
But what can the Blues’ owner expect to make from any sale?
Valuing football clubs is an inexact science, but it is possible to compare with Manchester United, with the Red Devils’ value quoted on the New York Stock Exchange.
United’s shares are worth almost £1.6BN, but there is also £500 million of club debt, giving a total value of £2.1BN.
‘You can benchmark Chelsea against that,’ said University of Liverpool football finance expert, Kieran Maguire. ‘Around £2BN, that is what I would be asking for.
‘There are plenty of billionaires around that would see that as a price at which they would start negotiations.’
Abramovich’s relationship with Vladimir Putin is under scrutiny amid the Ukrainian invasion
Chelsea has effectively been for sale ever since the Home Office declined to issue the oligarch a visa in 2018, with Russia’s invasion of Ukraine giving him fresh impetus to sell.
Labour leader Sir Keir Starmer questioned Boris Johnson in Parliament today on why Abramovich hasn’t yet faced sanctions, as the UK seeks to put the squeeze on oligarchs allegedly close to Russian Premier Vladimir Putin. The Prime Minister responded: ‘It is not appropriate to comment on individual cases at this stage’
Meanwhile, Swiss billionaire Hansjorg Wyss, worth £4.3bn, claims he has been approached to consider buying Chelsea, potentially as part of a consortium.
Chelsea is no doubt a valuable club in world football, but it is by far from being the most valuable.
The Blues have a stadium capacity well below their rivals, with Stamford Bridge holding only 40,000 fans limiting the revenue it can generate, compared to Manchester United’s Old Trafford, which holds 75,000.
Added to that, Chelsea is yet to make the investments in its stadium, which most top clubs have advanced in recent years.
Chelsea were Champions of Europe last season, but they remain well short of being the most valuable club on the continent
Abramovich chose to shelve the development of a new 60,000-capacity stadium, which any buyer will consider to be a cost they will end up meeting. If it is even possible to find an appropriate site in west London, the cost is likely to be around £2BN.
A modern stadium does not only deliver a bigger capacity, but crucially it offers more opportunities for the lucrative hospitality guests and uber-wealthy fans to spend their money.
Chelsea has plenty of both, but the difficulty at Stamford Bridge is how to monetize them. Hence, the development of the West Stand upper tier, which has been rebranded, Westview, with new bars, food outlets and TV screens.
The luxury experience comes at a cost with the season ticket price tripling from £1,250 to £3,900 per padded seat for a tier one ticket on and around the half-way line,
The creation of Westview is a modest attempt to raise revenues within the existing building.
So, there is plenty of scope for negotiation, and if Abramovich needs to sell fast that will have an impact, too, and push the price down further.
Abramovich has brought incredible success to Chelsea, investing £1.5BN in the club
One of the challenges for the Blues is the size of Stamford Bridge compared to rivals’ grounds
‘It could be he wants to divest himself of as many UK assets as possible, because he fears having some assets frozen,’ said Maguire. ‘If that was the case it could result in a substantial discount in the sale price.’
There have been no sales of ‘top end’ football clubs to consider in recent years, but there are models to value clubs.
The University of Liverpool used the Markham Multivariate Model created by Dr Tom Markham, one of the creators of Football Manager, to reach Premier League valuations in 2020, based on three years of accounts to 2019.
The study analysed revenues, assets (for example stadium value), profits, costs (such as legal settlements), player sales, wages, stadium capacity and average attendance and ranked Chelsea sixth in the top flight.
The Russian’s portfolio also includes a £22m three-storey penthouse at the Chelsea waterfront
On these measures in that year, Chelsea had a value of just £1.2BN, Manchester United had a value of £2.1BN and Tottenham Hotspur came out on top with a value of £2.6BN.
The estimated values of clubs change with on field success, which brings additional revenue in prize money and broadcast fees, which boosted Spurs’ position after they reached the final of the Champions League, combined with their relatively low wages.
Since then, Chelsea’s position will have been enhanced by winning the Champion’s League, but the outlays on transfers and high wages will likely have limited the impact on value seen as Spurs.
Another model, created by KPMG, uses the concept of Enterprise Values, based on assessments of profitability, popularity (an assessment of the fan base including on social media), sporting potential, broadcasting rights and stadium ownership.
Swiss billionaire Hansjorg Wyss (R) says he could form part of a consortium to purchase the club
The KPMG European Elite Report 2021 ranked Chelsea as the fourth most valuable club in the Premier League at a maximum value of £1.6BN, behind Manchester United, Manchester City and Liverpool. It was the seventh most valuable in Europe. United’s value was estimated at £1.9BN and Real Madrid £2.5BN.
Football club values are likely to rise in the next report as fans return to stadiums in large numbers.
Maguire says any football club takeover would employ multiple models to assess value, but it is unlikely they will churn out figures of £3BN for Chelsea, even with a post-Covid bounce.
Even so, it is clear now that Abramovich is preparing his Chelsea exit strategy. It emerged on Tuesday that he is also trying to sell his portfolio of London properties.
Abramovich bought Chelsea for £140M in 2003 and in recent years, his valuation of the club has been enduring. He was reportedly giving potential buyers the £3BN price tag pre-pandemic.
One interested party was Britain’s richest man Sir Jim Ratcliffe.
Back in 2018, the Raine Group, which is acting for Chelsea again, entered into talks with US private equity firm Silverlake and Ratcliffe.
The talks broke down and a year later, Ratcliffe told The Times that sums of even £2BN for English football clubs were prohibitively expensive, particularly if ownership entailed ground reconstruction, as it does at Chelsea.
Roman Abramovich has put Chelsea up for sale and wants around £3billion for the club
‘So, you quickly get into some pretty stratospheric numbers,’ Ratcliffe, the chairman and chief executive of the INEOS chemicals group, told the paper. ‘
‘And even though clubs have those valuations today, nobody has ever paid those amounts of money. How much did Abramovich pay for Chelsea, £100 million? The Glazers [at United], what £500 million? You can say it’s worth three, four billion but no one has ever paid those sums. ‘
Ratcliffe’s brother, Bob, who runs the football division of INEOS, reinforced that point in an interview with BBC Radio 5 Live last month.
He said that INEOS and Chelsea ‘were a significant way apart on valuations,’ and referenced the difficulties of renovating Stamford Bridge, or relocating to a new home. Since then, not a great deal has changed other than the current owner may want to sell fast.
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