The world’s biggest private equity sports business, CVC’s Global Sport Group, has been valued at €7bn after a complex financing deal that will see a KKR-owned insurer and bond giant Pimco inject about €3bn of debt.
The deal comes after CVC had spent months trying unsuccessfully to sell a large stake in GSG at a €9bn valuation.
GSG was created last year by the Amsterdam-listed private equity firm to house its sports investments, spanning European football leagues, English rugby and women’s tennis.
Several suitors told the FT they passed on the opportunity of a significant equity deal because of the poor performance of some of GSG’s holdings, including France’s Ligue de Football Professionnel and Premiership Rugby.
Instead, KKR will lend about €1.4bn to GSG using capital from insurer Global Atlantic, according to people with direct knowledge of the matter. About €1bn of that will be in the form of preferred equity, which sits between debt and ordinary shares in a company’s capital structure.
The US private capital firm will also pay up to €200mn for a 6 per cent equity stake in GSG, with CVC owning the rest, the people added. The deal gives GSG an equity value of €3.5bn, one of the people said.
Pimco will extend around €1.5bn in debt to GSG, the person added. GSG has raised a total of €3.7bn, with other lenders contributing smaller sums.
CVC was an early investor in sports and made a healthy return on its investment in Formula 1, selling it for more than $8bn in 2015 — over four times what it had paid nine years earlier.
Since then rival private capital firms including Ares and Apollo have poured capital into sport, which investors believe is resilient and uncorrelated to other asset classes.
CVC’s approach has been to take minority stakes in competitions — its 2017 and 2020 flagship private equity funds invested in seven sports leagues — and then to influence how they are run.
The firm has invested about €4.6bn since 2018 on the assets now managed by GSG, including €1.5bn in LFP, €2.1bn in La Liga, Spain’s top football league, and nearly £700mn across three rugby competitions, including the Six Nations.
A person close to the firm explained that these investments were rolled into GSG to lower their financing costs, making it easier to do more deals in the sector. Investors backing GSG would benefit from diversified revenue streams, the person added.
When CVC began exploring raising capital for GSG, through a combination of debt and equity, a person close to the firm said one option could be that it sells up to a third of the equity.
In September it estimated the value of GSG’s assets at up to €9bn, based on a multiple of about 25 to 30 times ebitda, currently around €300mn. About half of those earnings come from La Liga.
Critics believe CVC created GSG partly to mask some of its unsuccessful investments, including in French football and English club rugby.
One senior sports executive said some of GSG’s assets had performed poorly and that a €9bn valuation would be a “very expensive ticket price for packaging up minority investments”.
The French football league has been particularly troubled. In 2022 CVC took a 13 per cent stake in a new company that collects TV and sponsorship income from the top two divisions. But the value of media rights subsequently plunged, prompting the league to launch its own channel after a broadcast deal with streamer DAZN collapsed.
Nicolas de Tavernost, the media veteran brought in to lead the French league’s new media business, quit last month less than a year into the role.
A person close to the investment said that although the value of CVC’s stake in the league’s commercial arm has been marked down, the firm is still optimistic about the long-term prospects.
Meanwhile, CVC’s 2019 investment in Premiership Rugby has been blighted by the clubs’ financial struggles, with three of the 13 teams that started the 2022-23 Premiership season having gone bust and many others dependent on wealthy owners’ support.
Those running the competition are betting on drastic reforms. The Rugby Football Union, the sport’s governing body, recently approved plans to end automatic relegation from the Premiership, part of an effort to attract greater investment into the teams.
People close to CVC talk up the prospects for its investment in volleyball, a sport with a huge fan base in Brazil and China, and say that women’s tennis is gaining in popularity.
GSG recently made its first investment as a separate entity, taking a controlling stake in the Equine Network. The US-based company organises “cowboy competitions” — roping, rodeo and barrel racing — along with some more mainstream equestrian events.
CVC may sell another 5 per cent stake in GSG and hopes to exit its investment in about three years, either through an IPO or private sale, according to a person close to the firm.
The investors in the CVC funds that originally made its sports investments now own about 95 per cent of GSG between them and will receive payouts from the proceeds of the new financing, the person added.
KKR, Pimco and CVC declined to comment.
With additional reporting by Arash Massoudi and Ivan Levingston in London
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