Failed Football Deal Investors Wanted to Make €6.1 Billion with Super League
On Tuesday night, FC Bayern Munich CEO Karl-Heinz Rummenigge was monitoring a spectacle in the stands of the Allianz Arena in Munich – not the football match between Bundesliga record-holder Bayern Munich and Bayer Leverkusen, but the messages popping up on his phone.
Shortly before kick-off, Rummenigge had received news that Chelsea FC would withdraw from the Super League, an exclusive elite league with 12 of Europe’s most prestigious clubs, which had only just been announced on Sunday after a covert organization process. Twitter showed photos and videos of the London club’s supporters cheering the decision outside the stadium.
The article you are reading originally appeared in German in issue 17/2021 (April 24, 2021) of DER SPIEGEL.
Then came one headline after the other. As the clock approached midnight, several founding members announced their withdrawal: Manchester City, FC Liverpool, Tottenham Hotspur and FC Arsenal. As Rummenigge drove home after the Bundesliga match in Munich, the Super League project, which FC Bayern had distanced itself from just in time, lay in ruins.
Fans, football federations and politicians, including British Prime Minister Boris Johnson and French President Emmanuel Macron had protested vehemently against the new league and announced drastic countermeasures. The opposition was so great that the initiators of the elite league, including investors in the United States and Abu Dhabi, withdrew out of fear.
The battle over the future of football isn't over yet
The developments left the traditional football world celebrating a victory against the turbo capitalists. And yet, the battle for the future of football isn’t over. The football bosses’ dream of a Super League lives on. The idea is just too tempting: If such a closed competition is established, an elite circle of clubs would hog the lion’s share of the billions earned from the world’s most popular sport.
Even FC Bayern Munich, who are now making themselves look like virtuous custodians of tradition, have previously explored the idea of the Super League. In 2016, the club discreetly looked into the possibility of participating in such a league. At the time, Michael Gerlinger, the team’s chief legal adviser, had a law firm examine whether and how the club could withdraw from the Bundesliga.
The biggest proponent of the Super League idea, however, is Florentino Pérez, the president of Real Madrid. During an analysis two and a half years ago of documents from the Football Leaks trove, DER SPIEGEL found an email dating from Oct. 22, 2018, addressed to Pérez, who is also a construction magnate. It included an attachment, a 13-page draft of a "Binding Term Sheet ” from 11 top European clubs to establish a European Super League.
Last Sunday, Pérez joined other club bosses in announcing the long-rumored plan. For the heads of UEFA, Europe’s football governing body, who had been preparing to implement reforms to the Champions League, this was tantamount to a hostile takeover.
A headquarters had even been registered for the new league on the fifth floor of an office building in central Madrid. The address: Calle José Ortega y Gasset, number 29. The building houses a Starbucks and a gourmet restaurant on the ground floor. Not unimportantly, there are lots of banks just around the corner.
A 167-page framework agreement - for the benefit of "all fans worldwide"
All founding members of the Super League had signed a 167-page framework agreement. The top of the paper, which DER SPIEGEL has examined, states that this was being done with the best of intentions, "for the long-term benefit of all global fans.”
This was followed by a pledge akin to a Catholic sale of indulgences. It states that the new Super League would "inject significant new resources into the game”; that 8 percent of television revenues, or at least 400 million euros ($483 million), would be spent annually on solidarity payments and charitable causes, and that the Super League would "provide substantial additional benefits to amateur and grassroots football."
The founding members only included teams from England, Spain and Italy. Under the plan, more teams from other leagues were to be invited into the illustrious circle for a season, like sparring partners. The organizers imagined that the selected teams would opt out of UEFA’s matches for that season.
Marketed from a Tax Haven
The planners’ sense of aloofness is clear in the contract. Pérez and fellow organizers promised themselves a windfall in the billions through the sale of the television broadcasting rights. This revenue was to be used to repay an advance from the JP Morgan Chase, the American investment bank.
The bank was to pay out 3.525 billion euros in start-up funding in exchange for a pledge by the clubs to take part for 23 years. Each year, interest included, 264 million euros would have to be paid to JP Morgan, meaning the bank ultimately would have gained 6.1 billion euros – a lucrative deal.
As befits football’s super-rich,, the Super League founders -- with the help of Clifford Chance, a commercial law firm -- had thought extensively about how to minimize tax payments while setting up the business. A 26-page draft document viewed by DER SPIEGEL reveals that the marketing was to be managed by a subsidiary company in a tax haven.
The start-up financing from JP Morgen was to end up at a Luxembourg company, which in turn would have been owned by a Dutch foundation through another company. Revenues from the TV rights also would have flowed to Luxembourg. A PR agency working for the Super League confirmed those structures. "You need a vehicle to centrally pay out the teams,” a spokesman for the Super League told DER SPIEGEL, pointing out that Luxembourg is a member of the European Union.
An army of lawyers to protect the project
Of course, the project’s godfather, Pérez, had factored in possible resistance to the Super League. A whole army of lawyers was meant to protect the new entity from sanctions from UEFA and FIFA, the global football governing body, or from possible proceedings for damages.
The Super League had been preparing for war against officials with the federations and associations governing football and refused to be cowed by UEFA President Aleksander Čeferin, who last week eviscerated the renegades as "snakes” and "liars.”
Salary caps, live broadcast rights for clubs, litigation: These clauses are in the secret founding contract of the Super League
What the group apparently hadn’t reckoned with, however, was the fury from fans and their own players. Liverpool FC’s professional players and their coach Jürgen Klopp immediately distanced themselves from their employer’s Super League plans. By signing the founding contract, the club had essentially treated the players like a plug-and-play product that could just be inserted into a completely different competition without even telling them or asking for their opinion.
Pep Guardiola, Manchester City’s Spanish coach, also expressed his clear disdain of the plan to his club’s management. "It is not a sport if success is guaranteed or if it doesn’t matter when you lose.”
Statement from FC Arsenal
If you want to launch a new product, you have to develop a vision and promote it cleverly. Football markets itself through emotion and the charisma of its stars, but Pérez and the people around him didn’t even bother recruiting big-name professionals to their cause. They just wanted to carry out their plan, like a robbery.
In the end, their arrogance and megalomania became their own undoing. FC Arsenal, for one, retreated because of outrage among its fans. "We made a mistake, and we apologize for it,” the club wrote in a letter to supporters.
Within business circles, the 12 clubs’ clumsy coup attempt is causing a lot of head-scratching. A marketing expert with one consulting firm says that "the acceptance” of a Super League "should have been checked out better in advance.” It also appears that the question of whether the major TV and streaming companies, as the biggest backers, would accept the new product also wasn’t sufficiently investigated.
700 million euros a season for every Super League club
Pérez still wants to stick with his plans and says he wants to "save football” with the Super League. But it would be more accurate to say he wants to save his own team. With slumping sales at Real Madrid, he’s apparently afraid the team is in mortal danger. He defiantly announced that a fresh attempt will surely follow soon. The entrepreneur also knows he has the backing of FC Barcelona, which has accumulated around 1 billion euros in debt.
The Super League is to save the staggering Spanish giants from collapse. The foundations were laid, as the current contract shows. The paper shows how the clubs intended to divide revenues from the competition between them according to an elaborate formula. Insiders estimate that each Super League club could have received 700 million euros a season.
One addition appears at the end of one section of the contract: During the first two seasons, Barcelona and Madrid were each to receive an extra 30 million euros a year. Just Barça and Real – and no other club.
Will the banks now continue to back Pérez? The controversial football deal has already had consequences for JP Morgan. Standard Ethics, one of the agencies that rates companies based on the so-called ESG criteria, has downgraded the U.S. bank from "adequate” to "non-compliant.”
That may sound minor, but it could be expensive for the bank given that investors have become increasingly conscious of whether companies meet environmental, social and regulatory ESG standards when they make decisions about purchasing stocks.
In justifying the decision, the rating agency said the bank and clubs’ plans didn’t meet the sustainability standards formulated by the United Nations, the OECD and the EU.