Abu Dhabi becomes the largest soccer investor in the world

The City Football Group (CFG) is a holding company founded by Sheikh Mansour bin Zayed Al Nahyan, the deputy prime minister of the United Arab Emirates, who with the Abu Dhabi United Group owns the majority shares (77%). CFG is an increasingly assertive financial leader, which owns 12 football clubs and is about to expand its acquisitions to Brazil and to Holland. From England, to France, from Japan to Uruguay and to Italy, CFG is becoming a force of nature across the football world. In July of 2022, CFG finalized the acquisition of Palermo, the Italian soccer team playing in Serie B (the second most important league) and it is rumored to be finalizing the term sheet (financial papers) to acquire the Dutch team Breda. With these acquisitions, Abu Dhabi is now playing a leading role in the top Italian, Spanish, English and possibly Dutch football leagues.   

There is no doubt that CFG is becoming the most powerful financier and manager in international football. At the corporate level, CGG is a global holding company, with 78% owned by the Abu Dhabi United Group (under the leadership of High Royal Highness Prince Mansour) with minority shareholding positions of American Investor Silver Lake and Chinese Corporation China Media Capital and CITIC Capital. The group is set to expand its ownership base by purchasing more clubs including the Bahia (Brazil) and NAC Breda (Netherlands) which are in advanced due diligence phase. To be more specific, and if the Bahia and NAC Breda acquisition goes through, these teams will join Manchester City, New York City FC, Palermo, Melbourne City FC, Yokohama F. Marinos, Montevideo City Torque, Girona, Sichuan Jiuniu, Mumbai City FC, Lommel SK and ES Troyes AC reaching a total of 13 teams. 

This acquisition and ownership model has allowed Abu Dhabi to acquire over-leveraged teams which are being bought at bargains such as $12 and $13 million respectively for Palermo and Breda. This represents a massive revenue and branding opportunity if management and local culture is managed properly establishing and enhancing stronger ties with the fans base. Additionally, the multi-team ownership structure, also allows the group to easily transfer players between the clubs they own, allowing players to get exposed to different football style while reducing drastically soccer acquisition and transaction cost.

Palermo Soccer Insight: Established in 1900, the team Palermo has a long tradition of soccer having played in the Serie A (the highest soccer league in Italy) for 9 years straight from 2004 to 2014 with outstanding performances particularly during the first 5 years. The Sicilian team went bankrupt in 2019 and began again as an underdog team in Serie D, the fourth tier of Italian football. Despite the financial challenges, Palermo has rapidly risen back up to the top leagues, winning the promotion to Serie B earlier in 2022 beating at the playoff final the northern Italian team Padova. With the bargain acquisition for $ 12 million and the massive brand, it will be easy for CFG to make money on this acquisition. 

What is the strategy for City Football Group?

While most countries are struggling not to be caught in the recession and to deal with unprecedented high inflation (led by volatile food and energy prices), Abu Dhabi is awash with cash and its main energy company TAQA’s profit jumped 63% over Q2 as oil prices boost revenue. Oil price recovery is resulting in big gains in revenues for Gulf Cooperation Council (GCC) countries such as Saudi Arabia, UAE, Kuwait, and Qatar. GCC’s aggregate current account surplus has experienced more than sixfold growth in 2021 to $109 billion from $20 billion in 2020. For 2022 the GCC’s oil and gas revenue is expected to increase from $326 billion in 2021 to $520 billion. This is in part due to the sustained high oil and gas prices since Russia invaded Ukraine in February 2022.

Final Thoughts

At the base of the soccer team's acquisitions carried out by Prince Mansour, is Abu Dhabi's ambition to establish a powerful global football management brand. This approach is based on the belief that Abu Dhabi, under the leadership of CFG can shape the future of sport’s business, establishing powerful branding, accelerating cooperation between clubs, developing women's football, and investing in the future of sports including e-sports. With the massive financing at its disposal (through Sovereign Wealth Funds), the GCC countries will continue to shape the future of soccer particularly in highly indebted football teams in Italy and Spain. 

With such an important sponsor behind the Sicilian team, the local Sicilian fans can start dreaming of getting back to the main Italian league, the Serie A.