The effective acquisition of debt ridden Chelsea FC by Russian billionnaire Roman Abramovich opens a new chapter in Britain's football finance saga. However, clubs in financial trouble should not hope that some foreign sugar daddy is going to bail them out. Arsenal and Manchester United were two other clubs that Abramovich looked at which shows the league his playing in. Most rich Russians in London, however, regard Chelsea as the most glamirni (glamorous) club. Apart from anything else, it is close to their homes in Sloan Square, Knightsbridge and South Kensington.
The Russian offer is thought to be worth about £150m including debt. The £70 eurobond, used to build the new west stand, will be serviced. In 1999 every penny earned by the football team in qualifying for the second phase of the champions league simply covered the interest payments. Last summer Chelsea were in the embarrassing position of having to hawk around players like Jimmy Floyd Hasselbaink to try and reduce a crippling wage bill.
Ken Bates will receive more than £17m from the deal which represents an excellent return on the £1 he paid for the business in 1982. Bates is to remain as chairman, but it is thought that he will stay for months rather than the two years specified in the deal.
Abramovich is estimated to be worth at least $8 billion dollars. He made his money during the wave of privatisations that fuelled Russia's transformation to a free market economy during the 1990s. He is close to former president Boris Yeltsin. He told the Financial Times that he did not look on the purchase of Chelsea as a financial investment. 'I look at it as a hobby, as a sport rather than an investment. I'm looking at it as something to have fun with rather than realise a return.' One analyst described the deal as paying for a 'very, very expensive calling card.' He has already acquired over 50 per cent of the shares. He has two thresholds to pass to take the company private - 75 per cent to delist the shares from Aim and 90 per cent to force all shareholders to sell. Fans are thought to own only about nine per cent of the shares. They seem to be more worried about the departure of Zola than the purchase of the club by a Russian whose plans are uncertain. One likely consequence is that ground sharing discussions with Fulham will start again.
'Plonkers' investigate share dealings
Recent share dealings in Chelsea are being investigated by the Financial Services Authority. Ken Bates dismissed them as 'a bunch of plonkers - and you can quote me on that.'
Chelsea Village's shares have doubled since April, but trading on the Monday before the deal, when they jumped by 15 per cent, is most likely to have attracted the attention of the Stock Exchange. The Panel is likely to be interested in whether a 'concert party' existed between Mr Bates and any other shareholders that represented more than 30 per cent of the shares. Chelsea Village has already attracted the scrutiny of the Stock Exchange in relation to ownership as well as share trading.
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