A new law allowing Brazilian football clubs to seek outside investment is attracting hundreds of millions of dollars in a country known for football’s biggest source of talent, a change that could pit Brazilian teams against Europe’s top teams.
The surge in fresh cash, mostly foreign, coincided with Brazil’s biggest clubs reaching an agreement last May to create a league modeled after the English Premier League, which will focus on negotiating the sale of transmission rights and marketing contracts.
In conclusion, recent developments have brought a financial fortune to Brazilian teams, which have long been fan-owned businesses closed to outside investors.
That could allow Brazil – the world’s biggest exporter of football players – to keep its best players at home for longer and charge more for talent moving abroad.
The biggest deal in the works is a 51 percent stake in Brazilian league champion Atlético Mineiro, according to two people familiar with the matter, who said the club had met with dozens of investors. The deal could fetch 1 billion reais ($200 million), one of the people said.
The people familiar with the matter requested anonymity to disclose the private discussions. The club did not respond to a request for comment.
Guilherme Avila, a sports investment banking partner at Brazilian brokerage XP, predicts that within the next two years at least 10 Brazilian football clubs owned by fans will become investor-owned companies.
The sale of second-tier club Cruzeiro to retired Real Madrid and Brazil striker Ronaldo in December was the first deal to take advantage of the law, which was approved about a year ago.
Rio de Janeiro’s cash-strapped Botafogo was acquired earlier this year. Its intra-city rival Vasco da Gama was sold this month.
Next up is the potential sale of second-tier Esporte Clube Bahia to City Football Group, an Abu Dhabi company that invests in Manchester City and 10 other football clubs.
Earlier this year, Brazilian club president Gilchem Bellintani first announced the ongoing negotiations between Bahia and City Football Group. Belintani told Brazilian media that the deal was worth 650 million reais ($126.4 million).
City Football Group declined to comment on the Bahia deal. Bahia did not respond to a request for comment.
TV copyright profits
As for the lucrative TV rights, negotiations are expected to begin in 2025 and beyond.
Brazil TV Globo has purchased the exclusive rights to the National Football Championship and many regional championships from the club until 2024. But going forward, the alliance will, like those in England, Italy, Spain and Germany, divide the rights into packages that different groups may bid on, including Globo and other local and international media companies that have shown interest.
Last year, clubs in the Brazilian Serie A were awarded 3.5 billion reais ($687 million) in transmission rights, mostly from Globo and partly from Amazon Prime.
By comparison, the English Premier League, which has the world’s top football rights revenue, will receive $3.9 billion in 2021 from broadcasters such as Sky Sports, BT Sport and Amazon’s Prime Video.
In the light of what’s to come, the rights to the São Paulo Regional Championship, long held exclusively by Globo, were split between local broadcasters Record and YouTube for the first time last year, with pay-per-view games going to HBO Max/TNT Sports and Globo for the first time last year. . The new model boosted revenue by 30%.
Atletico Madrid looking overseas
Investment bank BTG Pactual is advising Atletico Mineiro. One of the sources said the club had approached Manchester City Football as a potential suitor, but the group was not interested in a deal.
Rafael Menin, a descendant of the family that controls Brazilian homebuilder MRV and one of four businessmen who have loaned the team some 500 million reais in recent years, told Reuters that the club preferred “experience or ownership of big European football” The club’s international investor. He declined to comment on a potential price.
Rio’s 120-year-old Fluminense has also hired BTG to help it find investors, but three people who spoke to Reuters expect the club to sell for less than Atletico due to its weaker financials. Fluminense did not respond to a request for comment.
The biggest clubs, including Corinthians and Palmeiras, could be candidates for an IPO, three bankers said. Some clubs with healthy balance sheets may oppose the sale of control to an investor and want a more diverse shareholder base, bankers said.
“Depending on the financials, going public may make more sense than a private deal,” said Bruno Amaral, head of mergers and acquisitions at BTG.
Corinthians and Palmeiras did not immediately respond to requests for comment on their IPO potential.
Football clubs elsewhere have a mixed history of listings, with Manchester United, the world’s largest listed club, lagging the S&P for a long time. United made headlines last week when billionaire Elon Musk joked that he was buying the famous team, sparking takeover speculation.
new football league
Libra, known as the new Brazilian league, has 13 clubs including Flamengo, Corinthians, Palmeiras, Sao Paulo and Santos. The second group, consisting of 25 teams, is openly discussing joining Libra.
“Pro leagues could revolutionize Brazilian football,” said Alessandro Farkuh, BTG sports and media banker who advised the new league. Professional rights negotiations could significantly boost the club’s revenue, he said.
Brazilian clubs receive just 1% of their revenue from international rights, compared to 48% for the Premier League and 44% for Spain’s La Liga.
In a June report on the football business, XP analysts predicted that Brazilian clubs could receive 200 million reais ($39 million) from international rights in the first year, but still less than 5 percent of their total revenue.
Francisco Clemente, head of sports and media at KPMG, said the new scenario could bring Brazilian football’s annual revenue to $5 billion, up from $1.3 billion last year. The company is advising Atlético de Madrid and Corinthians, Brazil’s second-largest club by fan base.
“If Brazilian football gets the same share of GDP as Spanish and English football, annual revenue could quadruple,” he said.
Analysts say it could also reverse the recent trend of Brazilian players being sold to European clubs before their potential peaks. According to XP, the average transfer value in Brazil fell from €19.2 million in 2018 to €12.9 million last year.
Brazil’s average transfer transaction value is only one-third of Spain’s average transfer transaction value of 35.7 million euros.
XP’s Avila said that as revenue rises, Brazilian clubs may spend their time developing quality players rather than using transfers as recurring revenue. This may lead to larger average transfer values in the future.
“With the increase in income, Brazilian clubs will be able to keep top talent in the country for longer,” Avila said.
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