The future of Italian football club Inter Milan could be soon be determined by Abu Dhabi sovereign wealth fund Mubadala, which is touted by La Repubblica as a front runner for a stake in the Serie A side.

The motivations behind sovereign wealth fund investment in European football clubs are comparable to trophy real estate assets, which are traditionally favored by Middle Eastern funds and billionaires. They represent strategic capital for foreign investors seeking to improve their public image in the West, enabling them to exert “soft power” and establish networks of influence in business and politics. Certainly, an owner willing to invest to revive a club’s fortunes can be assured of loyalty among the fan base. Media rights also generate significant financial gains, particularly in English football which offers avenues for global revenue growth.

Examples of sovereign wealth fund investment in European football are QIA's buyout of French Ligue 1 side Paris Saint-Germain in 2011, making it one of the world's wealthiest clubs. Last year, Bahrain's Mumtalakat bought a 20% stake in Ligue 2 club Paris FC with a view to driving it into Ligue 1 within three years.

Chinese retail giant Suning, which owns 68.5% of the loss-making Inter Milan, is looking for capital injections to bolster the club as it suffers in the wake of the Covid-19 pandemic. Talks with private equity firm BC Partners reportedly stalled over the club’s valuation with Suning pricing it at EUR1 billion and BC looking at less than EUR800 million, including EUR400 million in debt. Italian media is reporting that Mubadala is interested in bidding for a stake in the “Nerazzurri” through a hybrid of debt and equity. Other interested parties include Ares and EQT.

While the Abu Dhabi fund has not yet ventured into ownership of sports clubs, Vice-chair Sheikh Mansour became owner of Manchester City FC in 2008 and pumped significant investment into the English club, radically transforming its fortunes. Mubadala could do the same for Inter, but the pace of takeover talks with Arab funds could take longer than Suning is prepared to wait as finances come under relentless strain.

Mubadala maybe looking at the potential yield in Italian football club investment. KPMG’s Football Benchmark notes that “Despite the overall lackluster performance of Italian football in the past several years, clubs in Italy’s Serie A probably bear even more potential for investors. The country has one of the richest and most prestigious football histories and cultures: an abundance of trophies both at the national and club level, legendary players, top coaches and famous clubs — all great assets when branding is a key factor in a potential deal. Italians clubs are also less expensive by comparison: among the top 32 most valuable European clubs, the six Italian ones on average are worth approximately half of what the Spanish clubs are and only a third of that of the EPL clubs.”

Mubadala’s reported interest in Inter follows a GBP300 million (US$417 million) bid by a consortium led by Saudi fund PIF for the English Premier League side Newcastle United FC last year. The plan hit the woodwork as EPL bosses dragged their heels on whether PIF passed its owners and directors test amid concerns the fund was too close to the Saudi government – a concern they did not express over Sheikh Mansour’s ownership of Manchester City.

The proposed PIF-led takeover was criticised as “sportswashing” of the Saudi government’s human rights record, while there were also concerns over ongoing piracy of EPL match broadcasts in the Middle East. Although PIF withdrew from the deal, many pundits believe the prospect of a take-over by the Saudi-led consortium is still alive as the Magpies’ current owner, retail magnate Mike Ashley, continues to challenge the sports authority’s ruling through legal action and the British government has signalled its support for the deal. Facing a battle against relegation, Newcastle could benefit from the kind of financial bolstering enjoyed by City under the Sheikh Mahmoud and most fans appear to support the takeover.

Related funds Mubadala PIF QIA
Related tags Sports Private Equity