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It’s another international break week for global club football as World Cup qualification reaches fever pitch. That is often the moment when domestic fans switch their attentions to the lower leagues, which typically continue to play.
Not so in Turkey, where the third and fourth tiers have been suspended due to a widening betting investigation that has already led to more than 1,000 players and 150 referees being referred to a disciplinary committee. The Turkish football federation chief has described the probe as an effort to “elevate” the game and “to purge it of all its filth”. Yikes.
This week we’re looking at two big deals that tell us a lot about the state of play of investing in sport. Do read on — Josh Noble, sports editor
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How Formula 1 made Toto Wolff a billionaire
Toto Wolff has always loved racing. But once an investor, always an investor. Now he’s poised to make a huge return from selling a small percentage of his holding in the Mercedes Formula 1 team at a record $6bn valuation.
The billionaire is in advanced talks to bring George Kurtz, chief executive of cyber security company CrowdStrike and an avid racing driver, into the holding company that owns his 33 per cent stake in the Mercedes F1 team.
Born in Vienna in 1972 to a Romanian father and Polish mother, Wolff has gone from university dropout to the summit of F1. After giving up his ambitions of becoming a racing driver, he invested in finance and tech companies.
He overcame personal tragedy along the way. When Wolff was just 15, his father died from brain cancer. In 2020, Wolff told me that the “scars and demons” left by the loss of a parent can trigger “superpower” within a child.
Mercedes wasn’t his first F1 team. He was previously a shareholder of Williams, leading a restructure before switching allegiances in 2013. That was when he joined Mercedes F1, taking a 30 per cent stake in the process.
Wolff and former Mercedes F1 shareholder, the late Niki Lauda, paid £40mn (just over $50mn) for their combined 40 per cent stake in 2013.
From 2014-21, Wolff led Mercedes F1 to eight consecutive constructors’ championships and seven driver’s titles. Sir Lewis Hamilton won six of the latter, strengthening his claim to be the greatest driver in the sport’s history even if he is now struggling at rival Ferrari.
Wolff didn’t just run a racing team. He built a business. In 2012, the year before Wolff joined the team, Mercedes-Benz Grand Prix made a net loss of more than £31mn on revenues of £115mn. Last year, the team made a net profit of £120mn on revenues of £636mn. It has paid out £355mn in dividends over four years, according to accounts at UK Companies House.
To be sure, the team’s soaring valuation isn’t just down to Wolff. Liberty Media’s ownership of F1 has transformed the sport.
F1 is succeeding in the US and the Middle East, with new races in Miami, Las Vegas, Qatar and Saudi Arabia. Apple’s F1 movie, starring actor Brad Pitt, built on the mainstream momentum created by Netflix’s behind-the-scenes documentary series Drive to Survive.
The success of Mercedes at a time when F1 enjoyed a huge influx of younger fans has increased valuations up and down the grid. As well as growth, Liberty helped to implement a budget cap that limits how much teams can spend on developing their cars, another attraction for investors wary of runaway costs.
Wolff has waited more than a decade to realise his gains, although the dividends surely didn’t hurt.
Rather than sell down his stake when Sir Jim Ratcliffe’s Ineos, an existing sponsor, bought a third of the team for £208mn in a deal that completed in January 2022, Wolff added a further three per cent. He, Ineos and German automaker Mercedes-Benz became equal partners.
(As an aside, Ineos also stands to benefit from Wolff’s potential deal with CrowdStrike’s Kurtz. At least on paper, the petrochemicals company’s stake is worth $2bn. Bear in mind that Ratcliffe paid $1.6bn for a 29 per cent stake in lossmaking football club Manchester United, which no longer pays dividends.)
The idea is for Kurtz to invest via Wolff’s holding company rather than directly in the team, maintaining parity with Ineos and Mercedes. This allows Wolff to realise some of his investment at a significantly greater valuation than what he paid without losing his power.
Wolff will remain chief executive and team principal, free to chase more titles in pursuit of records held by F1 legends Sir Ron Dennis and Sir Frank Williams.
Bringing Kurtz on board would also showcase the power of relationships in F1. CrowdStrike has been a major partner of Mercedes F1 since 2019. Its logo adorns the car and the race suits of drivers George Russell and Kimi Antonelli.
In the world of sport, rising valuations make it harder to find investors with the finance to buy into teams. Both Ineos and Kurtz backed Mercedes F1 before turning their focus to a deeper relationship. That’s a lesson for sports owners everywhere, not just F1.
Apollo bets big on Madrid, Spain and football
Lift-off for Atlético © Reuters
The other big M&A news this week was that Apollo Global Management has gone ahead with a mooted deal to take control of Atlético Madrid. The takeover values the club at somewhere between €2bn and €2.5bn, depending on who you ask, or between 4.9 and 6.1 times revenue.
This a big moment for Spanish football, and marks the biggest price paid for a European club outside the English Premier League, about double the previous high — RedBird’s €1.2bn purchase of AC Milan in 2022.
New York-based Apollo, a relative newbie to sport, has chosen to deploy permanent capital to buy the club, another sign that investors are recognising that sport — and football in particular — is a longer-term play than private equity firms are used to.
Atlético has a lot going for it. The club has routinely finished in La Liga’s top four since 2012, winning the league title twice. Such consistent domestic performances all but guarantee Atlético’s new owners will be able to bank on Champions League money year in, year out. Spain’s other top clubs are still member-owned, making Atlético the rarest of assets — an investible team with a high floor under both financial and sporting performance.
But the Apollo investment is about much more than sport — this is a bet on the Spanish capital itself. Tied to the club takeover is the Ciudad del Deporte project — a plan to build a sport and entertainment district near Madrid’s main airport. Apollo started talking to the club about helping to finance the project, but pivoted to buying it instead.
The plans involve training pitches for the club’s teams, a 6,000-seat mini stadium, padel courts (of course), an athletics track, an aquatics centre, indoor spaces for handball and volleyball, and a music venue that can hold about 20,000 people. The cost is estimated to be €800mn.
US investors are very familiar — and very comfortable — with the idea of a sports team as the centre piece of far bigger infrastructure play. We’ve written extensively about the push to turn European football stadiums into entertainment complexes with year-round income. Tourist hotspots — London, Roma, Milan, Paris — are particularly appealing, and Madrid certainly fits the bill on that front. Indeed, the city hosts its first NFL game tomorrow, and rejoins the F1 circuit next year after a decades-long hiatus.
Some might take comfort from seeing a big, institutional investor like Apollo diving head first into European football, seeing it as a ringing endorsement of the sport’s enduring appeal by one of the world’s most successful asset managers.
But this looks more like a very specific, opportunistic move to buy a club with some unique attributes that make it seem less risky than a lot of European rivals.
Delivering a significant return for Apollo will, as our colleagues at Lex note, probably require selling Atlético one day to a super-rich billionaire. But that looks like an increasingly crowded trade, especially as valuations rise.
Highlights
Friends in high places © Reuters
Donald Trump has pardoned 88-year-old British billionaire Joe Lewis, the former owner of Tottenham Hotspur football club, who pleaded guilty to insider trading in the US last year.
Sir Keir Starmer has admitted approving the appointment of a Labour donor to head football’s new regulator despite promising to recuse himself from the governance of the sport.
The parent company of sports betting platform FanDuel is partnering with derivatives exchange CME Group to launch a prediction markets platform, allowing it to bypass restrictions in US states where gambling is illegal.
Fanatics is also exploring launching a prediction market with Crypto.com
The heads of the US and global anti-doping bodies have traded barbs in an escalating war of words over the pro-steroid Enhanced Games, which are backed by Donald Trump Jr and due to be held in the US next year.
Major League Baseball and prominent US sportsbooks agreed to a $200 limit for bets on individual pitches and to ban the inclusion of pitches in parlay bets. The move came a day after two Cleveland Guardians pitchers were indicted for alleged pitch rigging.
Final Flurry
© AP
It’s been an unusually warm autumn in the UK so far, which makes the sight of Premier League players running around in gloves look rather absurd when the temperature is still a balmy 15C.
No such worries in Canada, where the country’s Premier League reached its climax last weekend. The final match between Ottawa and Calgary took place in the midst of a blizzard, with temperatures dropping to -8C.
Scoreboard is written by Josh Noble and Samuel Agini in London, with contributions from the team that produce the Due Diligence newsletter, the FT’s global network of correspondents and the data visualisation team. It is edited by Benjamin Wilhelm in New York and Lee Campbell-Guthrie in London.
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