Ligue 1 explores PE stake sale among financing options

In the latest move among elite football tiers to seek external investment, Ligue de Football Professionnel (LFP) – the body that runs professional French football – is considering offering investors around a 20% stake in Ligue 1, two of the sources and the first adviser said. The process is expected to kick off next quarter and advisers have already been lined up for the process, one of these sources said.

An equity sale is likely to be structured like other processes ongoing across Europe's elite football leagues, whereby a stake is offered in a newco containing the league's commercial rights, one of the sources said. Broadcasting rights are expected to be excluded in any investment, with Ligue 1 having secured a domestic deal with Amazon, one adviser said. Amazon's deal to take over the rights to eight league matches a week originally held by Mediapro has given Ligue 1 a solid capital injection already, a lawyer following the situation added.

Ligue 1 started exploring financing options over the summer, two of the sources said, after receiving inbound private equity interest. The league, which had gross financial debt of EUR 558m on 30 June 2019, was also thought to be exploring a debt transaction with Crédit Agricole, one of these sources said. A debt issuance continues to be a "good option" for the league, a second laywer following the situation said, adding that LFP was still evaluating the best option for financing.

Crédit Agricole did not reply to requests for comment.

Logical bidders for an equity stake are likely to be large-cap private equity firms including KKR and Bridgepoint, two of the sources said. Bain Capital, Advent and Blackstone could also be interested, one of them added. One source and one adviser argued that local PE firms such as Astorg would be more likely investors.

Ligue 1's exploration of external capital comes amid a flurry of PE interest in Europe's top football leagues. Italy's Serie A was reported to have revived talks in August with Advent, CVC Capital Partners and FSI to sell a 10% stake in its commercial arm with a valuation of around EUR 1.7bn. CVC announced a EUR 2.7bn investment in Spain's La Liga valuing the league at around EUR 24.3bn, while Germany's top-flight league – the Bundesliga – explored a 25% stake sale in its overseas broadcasting arm, before being shelved after football clubs raised concerns over private equity involvement.

Pandemic penalty
Ligue 1 is in need of "being saved" from falling too far behind its peers, one of the advisers said, as the pandemic hit match-day and commercial revenues.

Ligue 1 clubs' total revenues fell 16% to EUR 1.6bn in 2019/20, more than EUR 450m behind the nearest of their 'big five' European rivals (Serie A), according to Deloitte's latest annual review of the sport. Ligue 1 became the only top-flight European league to cancel its season during the Covid-19 pandemic.

The French league's performance versus European peers may see any equity stake sale come at a discount to comparable processes, the second adviser said. However, investment could still be valued at around EUR 2bn, given that 20% is larger than the stakes on offer in other processes, one of the sources added.

It also remains to be seen how PE firms will view the international upside and proposition in owning a stake in the French league in the long term, the second adviser said. The league's commercial reliance on some of its largest clubs – not least Paris St Germain (PSG) – might also be a concern for potential investors, he added.

Qatar Sports Investments-owned PSG's commercial revenues of EUR 299m were over six times more than the next highest (Marseille FC), according to financial information published by the Direction Nationale du Contrôle de Gestion (DNCG), the administrative branch of LFP that  oversees the accounting of professional clubs in France.

In total, aggregate commercial revenues for Ligue 1 clubs fell by 8% to EUR 738m in 2019/20, according to Deloitte's report.

A possible deal with a private equity investor could be complicated by the ongoing legal dispute between LFP and broadcaster Canal Plus, a lawyer following the situation said.

Canal Plus, the league's long-term partner, took legal action against LFP and announced its intention to pull out of its commitment to show two Ligue 1 matches per match week, reportedly worth EUR 332m per season, through to 2023/24. The Ligue 1 matches originally held by Mediapro were eventually awarded to Amazon for a reported EUR 250m per season, compared with the EUR 780m per season agreed with Mediapro in the original deal.

A spokesperson for LFP declined to comment.

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