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January 4, 2022

With Inter Milan acquisition, Saudi Arabia Is Becoming A Major International Football Player (from International Business Times)

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In the coming days, while the legal paperwork reaches Inter Milan headquarter in Italy, a “game-changer” announcement will be made. Saudi Arabia Public Investment Fund (PIF) will acquire the prestigious Italian soccer team Inter Milan. The “Nerazurri,” which is how the Italian team is known in Italy should be acquired for an astonishing $1 billion and the PIF will be the largest shareholder of the Club. PIF is one of the largest Sovereign Wealth Fund with approximately $400 billion under management and with investment across 13 sectors.

The main reason behind the team’s sale is its financial distress. It is well known that the Chinese owners, the Suning Holdings Group which acquired the soccer team in June 2016 have been actively looking for an investor to join them since 2019 to absorb some of the pressure. The Chinese owner’s control 70% of the team shares, and under their leadership Inter did well as a team winning the national league in 2020. However, Inter did very poorly financially and lost $320 million dollars just in 2020-2021. As of now, Inter Milan continues to lose about $15 million dollars per month and despite winning the scudetto (the national league) last year, it was forced to sell two of its best players, Belgian striker Romelu Lukaku and Moroccan Achraf Hakimi, allowing the Chinese owners to recoup $150 million. They also let go of the team’s manager, Antonio Conte, the Italian superstar who brought the national title to Inter after 11 years.

Generally speaking, it is no secret that Italian soccer teams have been desperate to attract new investors as their balance sheet declined, and with the pandemic keeping the fans away from stadiums some of Italy most successful clubs like Inter Milan, Juventus, and Rome have accumulated unsustainable level of debt. This debt became the catalyst for the acceleration of investments in the Italian soccer. As there was mentioned in another article of Nov 2021, over the last 3 years, North American investment funds became the lead shareholders of 6 Serie A Italian team out of a total of 20, pouring billions of dollars into Italian soccer and buying these teams at very attractive financial valuations.

The Saudi acquisition of the Nerazzurri, one of the most prestigious teams in the world, marks the PIF’s second major football club acquisition after Newcastle United (UK Premier League) which was completed in October 2021. This makes Saudi Arabia a more competitive sports champion within the Gulf Cooperation Council (GCC) region, given that the UAE and Qatar have been in the soccer business for a much longer time through their acquisitions of Manchester City and Paris Saint Germain (PSG) respectively. Under Crown Prince Mohammed Bin Salman (MBS), Saudi Arabia has followed its neighbors and embarked on a similar economic development strategy which includes billion-dollar investments in sports, entertainment, and tourism seeking to leverage the powerful brand equity of these sport’s clubs.

What are Saudi’s objectives?

Andrea Zanon, International Tech, Sport, ESG Advisor who has advised over 15 Minister of Finance in the Middle East and international corporation on growth strategies, comments:

Under the leadership of Crown Prince MBS, Saudi Arabia is diversifying its economy aggressively. With Inter acquisition, which adds to the potential acquisitions of the French team Marseille, as well as of an undisclosed Brazilian top tier team, KSA aims to become a major player in international football. These teams’ acquisitions are also in line with the strategic investment prioritized by MBS vision 2030 (the vision selected 13 sectors including soccer, entertainment, and tourism), which is the blueprint of KSA economic vision and transformation.

Simply put, PIF is leveraging its massive liquidity generated by oil revenues, to diversify the Saudi economy away from hydrocarbons and invest in sport, tourism, and entertainment among others. This would have been unthinkable prior to Crown Prince MBS taking over in 2017 and once this acquisition is public, Inter Milan will become the richest team in the World. Furthermore, under the partnership with the KSA, through Inter Milan, Italy can think big and regain the international soccer prestige it has lost over the years.

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