Cricket became the latest sport to be associated with international private equity firm CVC Capital Partners, a prominent investor in global sport, as the group won the bid for one of the two new Indian Premier League franchises.
The BCCI on Monday announced that Irelia Company Pte Ltd. (CVC Capital Partners) won the bid with Rs 5625 crores and would be setting up a team based in Ahmedabad. Sanjiv Goenka’s RP-SG Group claimed the Lucknow franchise for a whopping Rs 7090 crore.
CVC is a Luxembourg-based international equity investment firm and have invested in a number of sports such as Formula One, football and rugby. They have a cash chest of more than 100 billion dollars which it has used to change international sport. They have been investing in sport for years and returning a significant profit.
According to a report by The Times of India, this is not the first time CVC has aimed to be part of the IPL pie. They had previously been in discussions with Rajasthan Royals and Delhi Capitals but that didn’t work out.
“They’ve been phenomenal the way they’ve gone about with their sports businesses. This is a huge shot in the arm for the IPL and league has well and truly arrived on a global stage now,” says BCCI treasurer Arun Dhumal was quoted as saying by TOI.
As per the official website, CVC is a world leader in private equity and credit with $125 billion of assets under management, $165 billion of funds committed and a global network of 25 local offices. The Indian T20 league has become one of the biggest sporting properties in the world. Its brand value was estimated at $6.7 billion in 2019 by the Duff and Phelps financial consultancy.
CVC has already spent several billion dollars to take major stakes in international rugby union and top football properties such as La Liga, Spain’s top-flight football league, and previously in Formula One and Moto GP. But it has not been without controversy.
The group has previously owned Formula One, between 2006 and 2017, before it was taken up by Liberty Media. It was a financially lucrative deal and with an estimated return of over 300%. The group earned more from the rise of the Grand Prix Circuit than anyone else, as per a report by The Guardian.
But this involvement didn’t go down well within the community and there were accusations around them ruining the sport and selling for higher profit. According to another report by The Guardian, Bob Fernley, the then deputy team principal of Force India, said “All their actions have been taken to extract as much money from the sport as possible and put as little in as possible.”
Here’s what the newspaper said about the financials involved:
CVC paid approximately £1.4bn for its majority stake. Over the next decade estimates suggest that it made up to £3.5bn. In 2014 it is reported they took in £347m from a turnover of £1.25bn, at that point representing a return on investment of more than 350%. When they did sell, F1 was valued at £8bn but the sport was poorer.
There was opposition in football too. Earlier this year, Spain’s top football league approved to sell 10% of its business to CVC Capital Partners for 2.7 billion euros ($3.2 billion) to help finance long-term growth. The deal was the first of its type by a major European league.
The deal received the green light from all but four of Spain’s 42 clubs in the top two divisions with heavyweights Real Madrid and Barcelona, apart from Athletic Bilbao and one club which preferred not to be named against it. CVC decided to leave out of the deal the four clubs which opposed it.
The private equity firm initially proposed to inject 2.7 billion euros ($3.2 billion) into La Liga in exchange for a 10% stake in its television rights over 50 years. But the amount was reduced to 2.1 billion euros after the four clubs voted to opt out
According to ESPN, RFEF has called the agreement to sell 10% of its business to investment fund CVC Capital Partners for €2.7 billion as “completely illegal” and “appalling.” Real Madrid announced plans to take legal action against LaLiga president Javier Tebas and CVC Capital Partners over the deal. Real says the CVC deal is an “opportunist” undertaking and noted that CVC had tried but failed to land similar accords with the Italian and German leagues.
In 1998, CVC had also acquired MotoGP company Dorna Sports and reportedly sold it for a much bigger profit in 2006.
Other than this, CVC has also bought into the international volleyball federation and has been in talks in recent months to merge the men’s and women’s international tennis tours and to take a stake in the San Antonio Spurs NBA franchise.
The winning bids beat 20 other top Indian conglomerates and international concerns such as the Glazer family, owners of English Premier League giants Manchester United, to secure the new teams.
Meanwhile, RPGS owns one of India’s top football teams, ATK Mohun Bagan, and used to be part of the IPL with the Rising Pune Supergiants, which took part in the tournament when two teams were banned in 2016-2017 over a corruption scandal.
With AFP Inputs