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The A-Leagues could be forced to buy out its largest shareholder by 2029, a move that would require the cash-strapped sport to find hundreds of millions of dollars or a new investor to stay afloat.
In 2021, private equity firm Silver Lake Partners bought a 33 per cent stake for $140 million in the A-Leagues when the professional game was in financial trouble during the pandemic.
Fans show their disappointment with the Australian Professional Leagues.Credit: Getty
An investigation by this masthead has uncovered some of the generous terms that Silver Lake extracted from Australian Professional Leagues (APL), which owns and runs the A-Leagues, as part of that deal.
Filings with the Australian Securities and Investments Commission reveal the investment gives Silver Lake significant control over the future of professional soccer and the right to sell its A-Leagues’ stake back to APL at market value from 2029.
Even a modest increase in value of Silver Lake’s $140 million investment in the APL would require the APL to find hundreds of millions of dollars to buy out the US private equity giant. If the value of the investment increased by 40 per cent over the eight years, then APL would need to pay Silver Lake almost $200 million.
The terms of its investment also give Silver Lake preferential rights over A-Leagues clubs if the APL were to be liquidated, corporate documents show, which potentially could be triggered if it could not meet financial obligations.
Silver Lake Partners and the APL both declined to comment.
Multinational tax expert and senior lecturer in accountancy at Queensland University of Technology Bronwyn McCredie said the right to sell the A-Leagues back to the APL was a good deal for Silver Lake.
“Well, that’s good business sense when you’re only buying in for a short period of time. You’ve got a get out of jail card that allows you to sell at market value,” she said.
The private equity business model can be controversial and often involves restructuring businesses before selling them off within five to seven years. It can also involve the significant use of debt and heavy cost-cutting.
An investigation by this masthead previously revealed that Silver Lake owned its interest in the APL via a series of offshore tax havens including an infamous PO Box in the Cayman Islands.
That network of companies included jurisdictions with zero or low rates of taxation and limited transparency including the Caymans, Singapore and the US state of Delaware.
Silver Lake has become a major player in world sport, owning a stake in the commercial operations of New Zealand’s national rugby team the All Blacks – an investment also routed through the Cayman Islands.
It is a minority investor in the City Football Group which owns English champion Manchester City and the A-Leagues’ Melbourne City.
While Australia’s national football teams – in particular the Matildas – have drawn big TV audiences and crowds, the domestic professional game has struggled to thrive.
Manager of the English Premier League side Tottenham and a former Socceroos boss Ange Postecoglou recently said that despite the success of the FIFA Women’s World Cup, he did not think the sport would receive the support it needs in Australia.
“When you look at what the Matildas did at the World Cup – unbelievable. But you still won’t see an influx of resources to the game. You won’t. I guarantee it. They’ll build stadiums and other codes will use them,” he said.
The men’s A-League, which started in 2005, was an initial success but crowds and interest trailed off before the pandemic. The A-Leagues were spun out from Football Australia in 2020 after a long battle for control between major clubs and the sport’s national body.
After Silver Lake’s investment, A-Leagues clubs owned 64.7 per cent of the APL, Silver Lake one third and broadcaster Viacom a 2 per cent interest. Football Australia holds a non-financial interest that gives it no rights to profits, but it can receive payments when shares are issued or assets are sold.
When the APL sold Silver Lake its stake in 2021, Football Australia’s accounts showed it received $6.7 million after the private equity investment.
Association of Australian Football Clubs chairman Nick Galatas, who represents clubs at the level below the A-Leagues, said Football Australia gave away a $425 million asset for practically nothing when it transferred the ownership of the A-Leagues to privately owned clubs.
“There’s a lot of big questions,” he said.
Galatas said the game was now structured to drive every paying fan into A-League teams and away from the rest of the existing soccer clubs. “We’ve built all these things on a flimsy foundation and everything is directed at the A-League and the game below suffers,” he said.
A Football Australia spokesperson did not directly answer questions about the Silver Lake investment but defended its decision to “unbundle” the A-Leagues and said it had “elevated” the experience for fans, players and stakeholders.
”This strategic move aligned us with global best practices in sports management, offering a clear distinction between regulatory functions and operational responsibilities,” the spokesperson said.
“Moreover, the unbundling process allowed for greater commercial autonomy, which, we believe, has opened the door to new investment opportunities and partnerships.“
Melbourne Victory, pictured celebrating winning the 2015 A-League grand final, have been one of the most successful A-League clubs.Credit: Getty
Details of the right of Silver Lake to sell its interest in the A-Leagues’ back to the APL was included in an independent report by financial consultants RSM Australia. That report was filed with the corporate regulator as part of Melbourne Victory’s sale to a separate private equity owner, 777 Partners.
That sale came just months after Melbourne Victory, the A-Leagues’ best-supported club, lost $6.7 million and its auditors stated there was “material uncertainty” it could continue as a “going concern”.
Victory’s deal with 777 Partners gives that private equity investor the option to own up to 70 per cent of the club within five years through an investment of up to $30 million.
After four or five years, 777 Partners also had the right to walk away from Victory and be repaid the $30 million at a compounding interest rate of 10 per cent a year.
The Matildas’ run at the World Cup captured the national zeitgeist.Credit: Getty
It is not the only club that’s faced financial trouble. Perth Glory was this week bought from receivers by Melbourne developer Robert Brij while the A-League men’s 2022 champions, Western United, lost $17 million over the previous two years.
The Central Coast Mariners, meanwhile, are looking for a new investor after losing $3 million despite winning the 2023 men’s A-League.
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