Reports have claimed that Roman Abramovich and the UK government are at loggerheads over the sale of Chelsea – how serious is it?
Just when Chelsea fans thought a takeover deal for the club was edging towards a conclusion, reports this week have claimed that the process is in danger due to disagreements between the UK government and Roman Abramovich.
Some sources have even claimed that the Russian billionaire would be willing to “let Chelsea go under” – a position widely contradicted by the noises which have come from the Abramovich camp throughout the sale process.
So what are the key questions to emerge from the latest reports, and why has the deal for the London giants supposedly hit the buffers? We delve into the key aspects surrounding the issue.
Isn’t a takeover deal for Chelsea already done?
It certainly seemed that the takeover was nearing its conclusion. Chelsea confirmed on May 7 that terms had been agreed with a consortium led by US financier Todd Boehly and involving investment firm Clearlake Capital as well as partners Mark Walter and Hansjorg Wyss.
Boehly was recently seen in the stands at Chelsea’s Premier League match against Wolverhampton Wanderers at Stamford Bridge, and also visiting the club’s Cobham training base.
The Boehly-led deal was put at £4.25 billion in total. That includes £2.5 billion to buy Chelsea and £1.75 billion as a guaranteed future investment in the development of the club, including the men’s and women’s teams, the club’s youth academy, and its stadium.
The club said that a sale was “expected to be complete in late May subject to all necessary regulatory approvals.”
Crucially, however, the UK government must also sign off on any deal after Abramovich was placed under sanctions back in April. The Russian businessman must not benefit financially in any way when the club is sold, government officials have said.
What’s the reason for the reported delay?
The issue of government approval appears to be the crucial one.
According to reports in The Times and elsewhere, a major sticking point is the structure of the deal, and specifically a £1.6 billion loan owed to Abramovich by Chelsea through its parent company, Fordstam.
Abramovich has vowed to write off the debt as part of the sale. However, the UK government is said to be demanding that all proceeds from the sale go into an escrow account (effectively a holding account) before being transferred to an independent charitable foundation to aid the victims of the conflict in Ukraine – something Abramovich has pledged will happen.
Abramovich and Chelsea are said to want the £1.6 billion loan to first be repaid to Jersey-registered Camberley International Investments, a company with alleged links to the Russian oligarch.
The funds will then be frozen before being moved to the charity foundation with the other proceeds from the sale. The reasoning behind that structure is believed to be that Chelsea and Fordstam are worried about potential tax liability if the debt was written off and not paid to Camberely, reports have claimed.
Contrary to that view, the UK government is said to be concerned that any money being moved to Camberely could still end up in Abramovich’s hands, breaching the terms of the sanctions.
“Essentially Abramovich seems unwilling to give the same legal commitments which were made in his public statements about a week ago that neither he nor his affiliates could stake a claim to that unpaid debt between Fordstam and Camberley,” The Times quoted a source as saying.
Is time running out for a deal?
When placing Abramovich under sanctions, the UK government granted Chelsea a special operating license which expires on May 31.
Again quoted by The Times, a government source said: “There are pressing deadlines this week, and if there isn’t a breakthrough, we’re quite concerned that the sale of Chelsea could be timed out by certain sporting deadlines.”
There are also the issues of Chelsea’s registration for European competition next season, said to be required by the end of May, and the Premier League’s summer meeting on June 8, when it is due to issue shares for clubs to compete next season.
The UK government could issue an extension for Chelsea’s operating license and it seems highly unlikely that it would allow a club of Chelsea’s stature and importance to collapse completely.
Nonetheless, continued uncertainty is far from ideal for Chelsea as they approach the summer break and aim to plan for life after Abramovich.
What have Chelsea and Abramovich said?
Nothing official in response to the latest reports, although the Blues did release a statement earlier this month on behalf of their Russian owner following claims that he had changed the terms of the takeover deal.
On that occasion, Chelsea and Abramovich were adamant that he had the club’s best interests in mind, and that he would honor his pledge for all proceeds from the sale to go to an independent charitable fund.
It also stressed that Abramovich would have “no access or control of” the funds repaid as part of the loan, and that the UK government was “well aware” of the situation.
What else has been said about the situation?
Despite the widespread reports of “alarm” among members of the UK government, those claims have been contradicted in some quarters.
London’s Evening Standard reported on Tuesday that the takeover is very much “on track,” quoting a source said to be close to the deal as saying: “We are not concerned about the situation and are still confident in the sale.
“There has never been any intention for Roman Abramovich to benefit from these funds.”
The outlet added: “There is belief that the [UK] government are making a late attempt to get more control over the distribution of proceeds.”
CBS reporter Ben Jacobs says figures in the UK’s DCMS (Department for Digital, Culture, Media and Sport) are “still speaking with optimism” about a deal being completed on time.
The suggestion is that a process as complex and unprecedented as this will inevitably involve legal hurdles which need to be overcome, but that ultimately a deal is still likely to get over the line.