Chelsea Football Club is currently facing a significant internal power struggle between co-owners Todd Boehly (“Boehly”) and Clearlake Capital (“Clearlake”), led by Behdad Eghbali (“Eghbali”).
In May 2022, the duo purchased the club for £2.5 billion, agreeing to joint control and shared governance, with Boehly taking on the role of Chairman of the holding company. Their collective vision centered on boosting the club’s performance through major investments, such as the redevelopment of Stamford Bridge, improvements to the academy, and support for the women’s team and Kingsmeadow stadium, along with maintaining the Chelsea Foundation’s initiatives.[1]
Despite these shared ambitions, the partnership has unraveled in just two years, and both sides are now exploring options to buy each other out.[2]
Ownership Structure
To fully grasp the dynamics of the current situation, it’s essential to understand the ownership structure of Chelsea Football Club. Initially, Todd Boehly appeared to be the prominent figure in the partnership due to his high profile in the sports world, including ownership stakes in teams like the LA Dodgers and LA Lakers.[3] His active role in media engagements and his position as Chairman of Chelsea reinforced his visibility.[4] Despite this, Boehly owns only 13% of the club[5] but holds veto power as a co-controlling owner, meaning his approval is required for major decisions.
In contrast, Clearlake Capital, which owns 61.5% of Chelsea, wields significant influence over the club’s decision-making. Over the past 18 months, Behdad Eghbali, representing Clearlake, has emerged as the most influential figure within the club.[6]
Additionally, the ownership is divided between Class A senior shares, held by Clearlake, which offer greater protection and priority, and Class B junior shares, held by Boehly, Mark Walter, and Hansjörg Wyss. Class B shares are more exposed to losses if the club's value decreases. However, both classes are guaranteed the same rate of return if the shares are sold, ensuring equitable financial terms in any potential buyout.[7]
Relationship Breakdown
Over the past two years, the relationship between Todd Boehly and Behdad Eghbali has significantly deteriorated. Tensions began escalating towards the end of the 2022/2023 season, when Chelsea’s disappointing 12th-place finish highlighted issues within the club.[8] It has also been reported that Boehly has doubts about the club’s recruitment strategy and the failure to make significant progress on redeveloping Stamford Bridge.[9] As a result, both parties now seek to exit the partnership, with each aiming to buy out the other.
Despite holding a smaller stake, Boehly is focused on acquiring Clearlake’s majority share and plans to raise £2.5 billion for this purpose.[10] However, Clearlake is determined to retain control and is contemplating increasing its own share to secure full ownership. Clearlake has also ruled out selling any of its shares and is using its matching rights [11] to block Boehly from selling his shares to outside investors. These matching rights require Boehly to offer any external purchase offer first to Clearlake, who then has the opportunity to match it.[12] These contractual terms are currently being enforced by Clearlake, preventing Boehly from selling to third parties, which is understandably adding to the tension between the co-owners.
Additionally, as part of the acquisition agreement, both parties committed to not selling Chelsea for at least 10 years. However, this agreement does not prevent them from trading shares with each other.
Options Available
Given that both Clearlake and Boehly are unwilling to sell their shares, their options for resolving the deadlock are limited. The most likely avenues they might explore include:
Mediation: A neutral third party could facilitate discussions between Clearlake and Boehly to reach an agreement. This might involve negotiating a buyout of shares between the two parties, selling to a third party, or finding a way to continue co-owning the club harmoniously.
Court Intervention: Should negotiations fail, legal action may be necessary. A court could potentially mandate a forced sale of the company or implement other measures to break the deadlock. This approach is generally a last resort due to the associated costs and risks of losing control.
Change in Corporate Governance: Modifying the governance structure might help alleviate the conflict without necessitating a buyout. For example, appointing a third-party CEO or independent board members could improve management and decision-making processes, potentially reducing tensions between the shareholders.
The course of action will depend on the company’s legal agreements, corporate structure, and the willingness of both parties to collaborate towards a solution. While Clearlake is reportedly prepared to be patient, Boehly is seeking a resolution within the next two months, adding urgency to the situation.[13]
References
[1] Larin, M. (2022). Consortium led by Todd Boehly and Clearlake Capital completes acquisition of Chelsea Football Club. [online] Clearlake Capital. Available at: https://clearlake.com/consortium-led-by-todd-boehly-and-clearlake-capital-completes-acquisition-of-chelsea-football-club/.
[2] Hekato Achumi (2024). Clearlake set to block Todd Boehly’s Chelsea share sale amid ownership feud. [online] The Pride of London. Available at: https://theprideoflondon.com/posts/clearlake-set-to-block-todd-boehly-s-chelsea-share-sale-amid-ownership-feud [Accessed 11 Sep. 2024].
[3] Eldridge. (n.d.). Eldridge - Todd L. Boehly. [online] Available at: https://www.eldridge.com/founders/todd-l-boehly/.
[4] Larin, M. (2022). Consortium led by Todd Boehly and Clearlake Capital completes acquisition of Chelsea Football Club. [online] Clearlake Capital. Available at: https://clearlake.com/consortium-led-by-todd-boehly-and-clearlake-capital-completes-acquisition-of-chelsea-football-club/.
[5] Kaveh Solhekol (2024). Chelsea minority owner Todd Boehly wants to buy out Clearlake but private equity firm unwilling to sell. [online] Sky Sports. Available at: https://www.skysports.com/football/news/11668/13212398/chelsea-minority-owner-todd-boehly-wants-to-buy-out-clearlake-but-private-equity-firm-unwilling-to-sell#:~:text=Boehly%2C%20Walter%20and%20Wyss%20each [Accessed 11 Sep. 2024].
[6] Twomey, L. and Johnson, S. (n.d.). Chelsea’s ownership structure: Who owns what at Stamford Bridge? The New York Times. [online] Available at: https://www.nytimes.com/athletic/5758157/2024/09/11/chelsea-ownership-boehly-clearlake-walter-wyss/ [Accessed 11 Sep. 2024].
[7] Ibid.
[8] Sport, B. (2024). Chelsea ownership row: Todd Boehly & Clearlake split explained. [online] BBC Sport. Available at: https://www.bbc.co.uk/sport/football/articles/c4gvnjvgmm0o [Accessed 11 Sep. 2024].
[9] Kaveh Solhekol (2024). Chelsea minority owner Todd Boehly wants to buy out Clearlake but private equity firm unwilling to sell. [online] Sky Sports. Available at: https://www.skysports.com/football/news/11668/13212398/chelsea-minority-owner-todd-boehly-wants-to-buy-out-clearlake-but-private-equity-firm-unwilling-to-sell#:~:text=Boehly%2C%20Walter%20and%20Wyss%20each.
[10] Hekato Achumi (2024). Clearlake set to block Todd Boehly’s Chelsea share sale amid ownership feud. [online] The Pride of London. Available at: https://theprideoflondon.com/posts/clearlake-set-to-block-todd-boehly-s-chelsea-share-sale-amid-ownership-feud [Accessed 11 Sep. 2024].
[11] Ibid.
[12] Northridge. (2019). Practical guide to matching rights - Northridge. [online] Available at: https://northridgelaw.com/practical-guide-to-matching-rights/#:~:text=Matching%20rights%20typically%20exist%20alongside [Accessed 11 Sep. 2024].
[13] Sport, B. (2024). Chelsea ownership row: Todd Boehly & Clearlake split explained. [online] BBC Sport. Available at: https://www.bbc.co.uk/sport/football/articles/c4gvnjvgmm0o [Accessed 11 Sep. 2024].
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