The beautiful raise: Juventus return to ECM could be model for other football clubs in tough times

Data InsightECM Explorer 27 October

The beautiful raise: Juventus return to ECM could be model for other football clubs in tough times

Some investments are made with hard headed pragmatism and others with the heart. Italian football club Juventus [BIT:JUVE] is a clear example of the latter.

Italy's most successful club is returning to equity capital markets for its fifth capital raise in the last two decades, a model rarely used by football clubs, but one that seems to work for the Turin-based club.

The four raises since 2007 have contributed EUR 925m to the club’s balance sheet, according to Dealogic data. This week, Juventus signed off on a proposal for EUR 200m more, taking it above EUR 1bn in two decades.

The raise still faces shareholder approval at a meeting scheduled for 23 November, but it is unlikely to be a hurdle. Controlling shareholder Exor [AMS:EXO] (with 63.8%), the holding company of the Agnelli dynasty, confirmed that it will fully subscribe to its share of the raise, which comes to EUR 128m, meaning banks will only need to find EUR 72m.

Two local advisors told ECM Explorer that they will not be looking at underwriting roles, but this news service has reported there is still a deep bench of banks pitching to underwrite the deal.

Juventus has been in the press for the wrong reasons this year: its former chairman Andrea Agnelli and 11 others could face trial after judges in Italy last year launched a criminal case against it over allegations of false accounting; the club has previously denied any wrongdoing, but one of the reluctant advisors blamed the stories for his lack of enthusiasm for the deal.

But the club has had scandal before, including one in 2006, which saw it relegated. Despite that, Juventus was able to raise capital in 2007, with non-Exor subscribed shares totalling EUR 34m.

The new deal, which is expected to launch in early 2024, will help Juve maintain its competitiveness at Italian and international levels, increase the visibility of the brand, strengthen the club’s equity structure and achieve a structural net debt decrease.

Given that Juventus is charged with accounting irregularities in order to met UEFA’s strict financial rules for football clubs, a fresh dose of equity capital could go a long way to helping it maintain a competitive edge in the football transfer market, without burdening its liabilities.

A lawyer with experience of sports deals noted that the Angelli family has a deep affection for the club, which dates back to Edoardo Agnelli acting as chair in the 1920s and 1930s. He ran Fiat, a Turin-based auto company founded by his father in 1899. The brand is now part of Stellantis [BIT:STLAM]. Exor is the largest shareholder in the company.

One ECM banker pondered why other listed football clubs did not turn to equity more. While Juventus has dominated football club cap raises in the past two decades there are other listed clubs who have used ECM.

Germany’s Borussia Dortmund [ETR:BVB] injected EUR 86m and EUR 114m of equity capital onto its balance sheet in 2021 and 2014, respectively, according to Dealogic data.

Fellow Italian clubs Roma [BIT:ASR] and Lavio [BIT:SSL] raised EUR 100m and EUR 110m in 2014 and 2003, respectively, according to Dealogic.

Many clubs could do deals again, with a spike in volumes after the first phase of the COVID-19 pandemic with the deals from Dortmund and Juve.

Subscribing to equity capital raises might also be a way that Sir Jim Ratcliffe could increase his holdings in Manchester United [NYSE:MANU] given reports of wanting to increase his holdings in the club, should the purchase of a 25% stake be successful.

The model might also work in private markets. Chelsea FC’s former captain John Terry was part of a consortium that was considering a possible bid for 10% of the London-based club with the support of fans, as reported.

In the end, though, Chelsea received an investment of USD 500m from Ares Management, as reported. The sponsor-backed club has a score of 21 out of 100, according to Mergermarket's Likely to Exit (LTE) predictive algorithm, so it might want to consider the Juve model when the time comes for ClearLake Capital to exit.*

As Liverpool manger Bill Shankly once said, football is “much more important” than life and death. Fans who own shares in their clubs and have the same attitude will be willing to back capital hikes in way that more cold-hearted investors might find less attractive.

*Mergermarket's LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction

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