a $55bn bet on fandom

It’s been a busy week for sports executives, with hundreds of them gathering inside Twickenham’s Allianz Stadium for Leaders Week, a fixture of the sports business calendar.

Aside from the on stage chit chat, those who made it to the home of English rugby could hobnob, gossip and gripe about just how long it takes to get to Twickenham — all while sipping Serie A-branded coffee and munching on mystery bowl food. Scoreboard was there too, keeping an ear to the ground. We’ll bring you more from some of those we caught up with soon.

But there’s been plenty of action elsewhere, including a monster video game deal with huge implications for sport, and a new angle on dealmaking from a big US private equity firm. Do read on — Josh Noble, sports editor

PIF and Silver Lake snap up sport’s ‘front door’

Electronic Arts isn’t just a big deal for gamers. Its catalogue of video games reads like a who’s who of sports.

Think of a sport and chances are that EA makes the game. That’s why the $55bn takeover of the California-headquartered company is of interest, to put it mildly. Private equity group Silver Lake and the Saudi sovereign wealth fund are the money behind the deal, alongside a $20bn loan led by JPMorgan.

The EA Sports FC franchise, formerly known as Fifa, and Madden NFL are among the best-known titles. But EA’s production line also spans hockey, Ultimate Fighting Championship, Formula 1, golf and US college football.

You might notice that a lot of those sports are of interest not only to Saudi Arabia but also technology investment firm Silver Lake.

Saudi Arabia’s $925bn Public Investment Fund owns football teams in England and at home. The country is hosting the World Cup in 2034. UFC hosts events in the kingdom. PIF is the group behind lossmaking LIV Golf. Silver Lake is a minority shareholder in the owner of Manchester City and has a major stake in Endeavor, the controlling shareholder in the parent company of UFC.

Along with Crown Prince Mohammed bin Salman’s love of gaming and Silver Lake dealmaker Egon Durban’s long-standing interest in EA, it makes sense that the two investors would team up to take the games maker private.

Completing the EA deal, which is subject to shareholder approval, would hand PIF and Silver Lake ownership of an asset that is key to cultivating the next generation of sports fans.

In our recent Sports Exchange interview with Cam Weber, EA Sports president, he laid out the case to see the company as “the front door to fandom for younger fans”.

As he explained, EA makes the games that help to define fandom, introducing young gamers to the sports, teams, leagues and athletes that captivate their attention from a young age.

In that light, think of EA not only as a games maker but a platform with huge influence over the sector, both now and well into the future. Is that $55bn price tag making more sense now?

Arctos looks to play the matchmaker

Arctos has been one of the most active sports-specialist investors in recent years, snapping up minority stakes in a range of teams from Paris Saint-Germain and the Utah Jazz to the Chicago Cubs and the LA Chargers. But now it wants to play matchmaker.

Arctos Capital Markets, as its new platform launched this week is called, is “dedicated to identifying and connecting qualified high net worth investors directly with professional sports ownership opportunities”, the firm said.

The aim is to capitalise on the firm’s bulging contact book. As co-founder Doc O’Connor puts it: “We want to be the first call.”

Aside from bringing buyers and sellers together, Arctos wants to help provide financing to help get deals done, and touts its close relationships with all the top leagues, especially in the US.

For the six-year-old firm, it makes sense to try and monetise its network and take on the likes of Raine Group when it comes to putting deals together.

O’Connor said that the arrival of institutional capital to US sports teams had “validated [sport] as an asset class” and sparked “the beginnings of a real thriving market in minority stakes in sports franchises”.

Matchmaking services can quickly spin into liquid markets. That’s sort of how the big auction houses manage things in the world of fine art, jewellery and antiques. Private sales and public auctions are two sides of the same business. Perhaps Arctos sees a similar future for sports.

But launching the new platform for would-be investors could also help the firm make hay from areas of the sports ownership market where it doesn’t necessarily want to put its own capital to work.

While Arctos has a deal with PSG and some indirect exposure to Liverpool FC via an investment in Fenway Sports Group, its view of European football as a whole has been pretty negative.

Speaking at Leaders this week, O’Connor said that the bulk of US sports franchises are now profitable, meaning investors can access “durable, sustainable” growth.

In contrast, European football suffers from a lack of regulation, he said, which has allowed almost limitless debts to pile up and untrammelled spending to cause a financial arms race. A handful of clubs take the lion’s share of the spoils, leaving most teams outside the elite locked out of capital markets.

Becoming a matchmaker means that Arctos can still profit from strong appetite to invest in European football, even if it doesn’t have the stomach for it.

Highlights

• McLaren Racing chief executive Zak Brown was paid £37mn last year as the British team won the Formula 1 constructors’ championship for the first time in 26 years.

• LIV Golf’s UK entity lost nearly $500mn last year, forcing Saudi Arabia’s sovereign wealth fund to foot the bill in an increasingly costly shake-up of the professional game.

• David Beckham is set for another multimillion-dollar windfall after his media and marketing group paid out more than $80mn in dividends on the back of lucrative brand tie-ups.

• New York Mets owner Steve Cohen’s proposed $8bn casino, to be built next to the team’s Citi Field stadium, won approval on Tuesday from a local committee. Cohen’s victory came just days after the Mets, which have a $340mn payroll, were eliminated from playoff contention following an epic collapse in the standings. The state of New York will make a final decision on whether to award a gambling license to Cohen’s casino project.

Transfer Market

Final Whistle

Europe’s various regional football tournaments are now in full swing, which means we get to witness the return of one of the game’s new traditions: middle of the night fireworks displays designed to deprive the visiting team of their beauty sleep.

Liverpool players were treated to this show in Istanbul ahead of their game against Galatasaray earlier this week. It seemed to do the trick. The Premier League champions lost the game, a second defeat on the bounce.