Brazil’s elite passes new law to ‘allow hundreds of millions of new investments’

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A new law allowing Brazilian football clubs to seek outside investment is drawing hundreds of millions of pounds to a country renowned as football’s biggest source of talent, a change that could see Brazilian teams compete at the top tier European.

The influx of fresh money, mostly foreign, coincides with an agreement reached last May by Brazil’s biggest clubs to create a league modeled on the British Premier League which will centralize talks to sell transmission rights and contracts. of marketing.

Together, the recent developments have spawned a funding bonanza for Brazilian teams, which have long been fan-owned operations closed to outside investors.

(L to R) Rodyrgo, Vinicius Jnr, Casemiro and Eder Militao all left Brazil for Europe

This could allow Brazil – the world’s biggest exporter of footballers – to keep its best players in the country longer and charge higher fees for talent going abroad.

The biggest pending deal is for a 51% stake in Brazilian league champions Atletico Mineiro, according to two people with knowledge of the matter, who said the club had met with dozens of investors. The deal could bring in 1 billion reais (£170.2m), one of the people said.

The individuals requested anonymity to disclose private discussions. The club did not respond to a request for comment.

Guilherme Avila, sports investment banking partner at XP, a Brazilian broker, has predicted that at least 10 fan-owned Brazilian football clubs will become investor-owned companies over the next two years.

In December, the sale of second division club Cruzeiro to former Real Madrid and Brazil striker Ronaldo became the first deal to take advantage of the law, approved around a year ago.

Former Brazilian and Real Madrid star Ronaldo bought second division team Cruzeiro last December

Former Brazilian and Real Madrid star Ronaldo bought second division team Cruzeiro last December

The deal for Rio de Janeiro’s cash-strapped Botafogo followed earlier this year. His Crosstown rival, Vasco da Gama, was sold this month.

Next in line is the possible sale of second division Esporte Clube Bahia to City Football Group, an Abu Dhabi company with investments in Manchester City and 10 other football clubs.

Ongoing negotiations between Bahia and City Football Group were first announced by the Brazilian club’s president, Guilherme Bellintani, earlier this year. Bellintani told Brazilian media the value of the deal was 650m reais (£107.2m).

City Football Group declined to comment on the deal with Bahia. Bahia did not respond to a request for comment on the matter.

SALE OF TV RIGHTS

As for lucrative television rights, talks are expected to begin next year around 2025 and beyond.

The Brazilian network TV Globo has bought the exclusivity of the clubs until 2024 for the national football championship and many regional tournaments. But in future the league will split the rights – as the leagues of England, Italy, Spain and Germany do – into packages for which different groups can bid, including Globo but also others. local and international media companies expressing interest.

Last year, Brazilian Premier League clubs received 3.5bn reais (£584.7m) in broadcast rights, mostly from Globo, with some from Amazon Prime.

The Premier League earned £3.3billion in 2021 from broadcasters like BT Sport and Sky Sports

The Premier League earned £3.3billion in 2021 from broadcasters like BT Sport and Sky Sports

By contrast, England’s Premier League, which has the world’s biggest football rights revenue, earned £3.3bn in 2021 from broadcasters including Sky Sports, BT Sport and Prime Video. of Inc.

In a glimmer of things to come, the rights to the Sao Paulo regional championship, long held exclusively by Globo, were split last year for the first time between local broadcaster Record and also YouTube, with a slice of games at the map. go to HBO Max/TNT Sports as well as Globo. The new model increased revenue by 30%.

ATLETICO LOOKS ABROAD

Atletico Mineiro are advised by investment bank BTG Pactual. The club contacted City Football as a potential suitor but the group were not interested in the deal, one of the sources said.

Rafael Menin, a scion of the family that controls Brazilian homebuilder MRV and one of four businessmen who have loaned the team some 500m reais (£84m) in recent years, said to Reuters that the club prefers an international investor “with experience or ownership of a major European football club”. He declined to comment on the potential price.

Brazilian club Fluminense has hired BTG to help them find new financial investors

Brazilian club Fluminense has hired BTG to help them find new financial investors

Fluminense, however, should not be sold as much as Atletico Mineiro

Fluminense, however, should not be sold as much as Atletico Mineiro

Fluminense, 120, from Rio de Janeiro, has also hired BTG to help scout for investors, but three people with knowledge of the matter who spoke with Reuters expect the club to fetch less than Atletico given of its weaker finances. Fluminense did not respond to a request for comment.

Three bankers said the biggest clubs, including Corinthians and Palmeiras, could be candidates for initial public offers. Some clubs with healthy balance sheets may be opposed to selling their control to a single investor and would prefer a more diverse shareholder base, bankers say.

“Depending on the finances, a listing 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 club listings elsewhere have had a mixed history, with the world’s largest listed club, Manchester United, having chronically underperformed the S&P index. United made headlines last week when billionaire Elon Musk joked he was buying the famous team, sparking speculation of a takeover.

NEW FOOTBALL LEAGUE

Libra, as the new Brazilian league is called, has 13 clubs including Flamengo, Corinthians, Palmeiras, Sao Paulo and Santos. A second group, made up of 25 teams, is in public talks to join Libra.

“A professional league can completely change Brazilian football,” said Alessandro Farkuh, sports and media banker at BTG, which advises the new league. Professional rights negotiation can significantly increase club revenue, he said.

Flamengo midfielder Lazaro is another talent who has been linked with a move to Europe

Flamengo midfielder Lazaro is another talent who has been linked with a move to Europe

Brazilian clubs derive just 1% of their revenue from international transmission rights, while the Premier League gets 48% and Spain’s La Liga 44%.

XP analysts, in a June football industry report, predicted that Brazilian clubs could raise 200m reais (£33m) from international rights in the first year, which is still less than 5% of their total income.

The new scenario could take Brazilian football to £4.2bn in annual revenue, said Francisco Clemente, head of sports and media at KPMG, up from £1.1bn last year. The firm advises Atletico and Corinthians, Brazil’s second biggest club by number of fans.

“If Brazilian football gets the same share of GDP as Spanish and British football, annual revenue could quadruple,” he said.

Neymar left Santos for nearly £50m at Barcelona before being sold to PSG for £188.2m

Neymar left Santos for nearly £50m at Barcelona before being sold to PSG for £188.2m

Neymar's move to PSG in 2017 is still the record amount paid for a player to date

Neymar’s move to PSG in 2017 is still the record amount paid for a player to date

It could also reverse the recent trend of Brazilian players being sold to European clubs before they reach their maximum potential, analysts say. The average transfer value in Brazil fell to £10.9m last year, from £16.2m in 2018, according to XP.

The average Brazilian deal is just a third of the average Spanish transfer deal of £30.2million.

With higher revenues, Brazilian clubs can afford to take time off for the development of outstanding players, instead of using transfers as recurring revenue, XP’s Avila said. This could lead to higher average transfer values ​​in the future.

“With higher revenues, Brazilian clubs will be able to keep top talent playing in the country longer,” Avila said.

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