Brazilian Super League Eyed by U.S. Private Equity
A potential Brazilian premier league has already drawn the interest of investors, including a U.S.-based group that is considering backing the project to the tune of $750 million to $1 billion, according to former ESPN executive Scott Guglielmino, one of the group’s stakeholders.
Last Thursday, in the wake of the Brazilian national team advancing to its 22nd Copa America final, news of a potential breakaway domestic soccer league in South America’s biggest country surfaced. Nearly all of Brazil’s most prominent clubs, apparently dissatisfied with how the Brazilian Football Federation (CBF) has run the top-level national league, called Brasileirão, have threatened to start a new league if they aren’t given more control over when and under what conditions games are played.
While U.S. private equity investors are interested, Guglielmino said in a phone interview, “The project is Brazilian-led and inspired, and supported by several industry experts.” These international experts aim to “work with clubs to professionalize the structure and the management piece and a commercial piece overall.” But it will not bring a quick turnaround. “All of this is aimed at a long-term plan, to unleash and unlock the value and the promise, frankly, of Brazilian football,” he said.
This is not the first time international investors have been interested in Brazilian soccer. The idea of creating an independent “premier league” in the soccer powerhouse nation is hardly new; in 1987, the country’s most prominent clubs formed a union, called Clube dos 13. Dissatisfied with the CBF, those 13 teams organized a championship, called Copa União, won by Flamengo, Brazil’s most popular club. The tournament and its champion, however, were not recognized by CBF, starting a decade-long legal battle. Since then, Clube dos 13 has held one more championship, in 2000, but today it mainly exists as a collective to negotiate radio and television rights for those teams.
Then, in the late 1990s, the Texas-based private equity firm Hicks, Muse, Tate, and Furst (now called Hicks & Muse) thought it could reshape Brazil’s soccer-crazed market by acquiring these debt-ridden clubs for pennies, then launch a new league, create a sports channel and turn Brazilian soccer into a global operation. Hicks, Muse, Tate, and Furst were not alone either: Between 1999-2001, following Brazil’s 1994 World Cup victory and the team’s second-place finish four years later, Brazil stood in the global soccer spotlight. Parmalat, the Italian dairy company, invested in Palmeiras; ISL, a Swiss sports marketing agency founded by Horst Dassler, put money into Flamengo and Gremio; Bank of America financed Vasco de Gama. They all lost money. ISL even went bankrupt.
Jochen Lösch, the CEO and the founder of London-based JL Sports Investment, was involved in Bank of America’s Vasco de Gama investment. “It only took one attractive offer for the TV rights by TV Globo to the two biggest clubs [Flamengo and Corinthians] in exchange for leaving the new league, and the Copa União was history,” he explained. “It has yet to be seen if the clubs [can] speak with one voice this time around.”
Lösch is not involved in the new upstart league, but he is following the process closely. “As of today, the league does not yet exist. It is just a project,” he said in a phone interview. “The clubs have established a working group, which has 90 days to hammer out a viable project. Once this project is on the table, the CBF’s General Assembly has to approve [it].”
He believes getting the CBF on board could be difficult. Brazil’s soccer governance structure endows state-level federations with more power than the 91 clubs. “The majority of votes of the CBF assembly lies with the State Federations and not [with] the clubs. It has to be seen how much power those State Federations are prepared to lose,” he said. “Besides, the new league would need to agree on the details of a third-party investment. Equity? Or only rights? Size of the share? Financial conditions? All this requires unity among the clubs, something which never existed in Brazil.”
Aside from issues around unity and loyalty, Brazil is not exactly a top destination for foreign investment at the moment. In 2020, the World Bank ranked it 124th out of 190 countries in “ease of doing business.” In addition, Brazil ranked in the “bottom third when registering property and starting a new business.”
Yet, the team behind this new investment is known for its connections to CBF. Aside from Guglielmino, Charles Stillitano, the executive chairman of Relevent Sports, and Lawrence McGrath, the director of Silver Rock Management, are said to be involved, along with lawyer Flavio Zveiter in Brazil. A recent New York Times article also attached Rick Parry to the project.
Guglielmino and his team are optimistic about penetrating the land of jogo bonito, the beautiful game, as soccer is called. They think Brazil is a unique market relative to its “prowess,” in terms of the players’ passion and quality. Therefore, part of their objective is to make sure that the clubs have the wherewithal financially to retain players and improve the quality of the Brazilian national league. “The idea here is to try and unblock kind of a unique value proposition in Brazil,” Guglielmino said.
Meanwhile, Lösch, who has been involved in Brazilian soccer for more than two decades, is wary of investing in Brazil. “So far, every foreign investor had his fingers burnt,” he said. “Not because the business was bad—it wasn’t—but because the contracts weren’t worth the paper they were written on.” Still, he thinks it can be a lucrative investment with enormous growth potential if the “investors spend a lot of thought and expertise on the right structure of their investment,” he added. “Even when holding only a minority share, a certain amount of control is of the essence—especially control of the cash flow.”
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