The Russia-Ukraine War Puts A Global Sports Asset Worth Nearly $4 Billion Up For Sale

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Hey Friends,

The Russian invasion of neighboring Ukraine has sparked global outrage.

The world’s 11th largest economy by GDP has mostly been cut off from SWIFT, a critical international payments system, and the Russian Ruble has fallen more than 30% in the last week alone.

The war between Russia and Ukraine has been going on for a few weeks, and economic sanctions appear to be just the starting point of what might happen next.

Companies like Apple, Visa, Google, Disney, FedEx, UPS, and others have all halted their business within the country, and Russia has responded by placing a nationwide ban on social media platforms like Facebook, Twitter, YouTube, and others.

The Russian government has also passed a new law in which people who spread “fake news” about the war can be jailed for up to 15 years.

This is an extreme reminder that war is an ugly thing with real consequences, and I am hoping for the safety of every citizen caught in the middle of this situation.

But since this newsletter focuses more on sports, business, investing, crypto, and culture, and I’m not an expert military strategist by any means, I want to focus more on the impact that this war (and the resulting sanctions) have on sports globally.

For example, Russia has been suspended by essentially every major global sporting organization, including FIFA and UEFA suspending the country from all international football, including the men’s 2022 World Cup and women’s Euro 2022.

Formula One has terminated its contract for the Russian Grand Prix in Sochi, and the International Olympic Committee (IOC) even sent a memo to all global sporting officials that called for the exclusion of Russian athletes from international events.

The IOC said it was needed to “protect the integrity of global sports competitions and for the safety of all the participants.”

Still, I think one of the biggest stories is what’s happening at Chelsea Football Club.

Russian billionaire oligarch Roman Abramovich acquired the club in 2003 for nearly $200 million and has delivered on his promise to spend lavishly and win at all costs.

For example, since 2003, Abramovich has pumped about $2 billion of personal money into the club—that’s more than any of the other Big Six clubs—and Chelsea has won five Premier League titles, five FA Cups, three League Cups, two Champions Leagues, two Europe Leagues, the UEFA Super Cup and the FIFA Club World Cup.

But for visual learners like me, here’s a couple of excellent charts from @SwissRamble.

This shows how much personal money Abramovich has put into the club each year.

And this shows how Roman Abramovich’s personal funding compares to other clubs.

But with the UK starting to impose financial sanctions on wealthy people with ties to the Russian government, Roman Abramovich has decided to sell the club.

You can read the entire statement here, but I think this is the most important part:

So the TLDR version is that he is selling the club, will not ask to be repaid the $2 billion that he loaned them, and plans to place all “net proceeds” from the sale into a charitable foundation that will benefit “all victims of the war in Ukraine.”

There are some people that are saying that this is all a PR move.

Roman Abramovich has been attempting to sell hundreds of millions of dollars in UK real estate before his assets are frozen, and he initially tried to protect his equity stake in Chelsea by placing the team in a charitable trust so it couldn’t be frozen.

But others will say he is a great owner and wants to leave the club in a good place.

Again, I don’t necessarily think it makes that much of a difference. Sure, the details matter, but there are people that spend much more of their time trying to figure out if he did something illegal, and I don’t think that’s what we should be focused on.

Instead, the interesting part to me is what happens with Chelsea from here.

The 123-year-old club is a crown jewel in the global sports world. These assets rarely go up for sale, let alone a fire sale due to war, and the transaction should be unique.

There are reports that Roman Abramovich is looking for a $4 billion offer, but most valuation reports place the club’s enterprise value closer to $3.1 billion (Forbes), $2.4 billion (KPMG), or even as low as $2 billion (Markham Multivariate Model).

Here’s an update on the sales process from ESPN:

So the Raine Group is actively organizing bids, and most reports suggest that Roman Abramovich is looking to sell quickly. However, my guess is that this still takes some time to play out — multi-billion-dollar deals don’t typically get done in a week.

Regardless, I’ll make sure to keep everyone updated as things progress.

But in the meantime, if you want a deeper dive into the specific finances behind the deal, I’d recommend checking out this thread from Swiss Ramble. It’s fantastic.

I hope everyone has a great day, and we’ll talk tomorrow.

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Extra Credit: I put together a list this weekend of the world’s 50 most beautiful sports venues — check it out and comment on the thread with ones that I missed!