Major update on Newcastle chiefs' talks with Chelsea over £60m off-pitch deal

08/14/2024 11:57 AM

There are a number of links between the ownership structures of Newcastle United and Chelsea – to the extent that some commentators have suggested a conflict of interest.

The Saudi Public Investment Fund (PIF), who bought Newcastle United in October 2021, reportedly have billions of pounds worth of assets controlled by Chelsea owners Clearlake Capital.

Clearlake Capital are a US private equity firm who partnered with LA Dodgers co-owner Todd Boehly to buy Chelsea for £2.5bn in May 2022.

They have around £60bn of assets under management in total.

It is not, in isolation, unusual that one of the world’s largest private equity firms would have taken on investment from PIF, one of the largest sovereign wealth funds in the world.

And in any case, Newcastle’s owners would have had to disclose any interest in Chelsea, no matter how small, as part of the Premier League’s regulations for 2024-25.

It has also been reported that the Premier League is satisfied with written assurances it has received from Chelsea about their operational separation from Newcastle‘s owners.

Newcastle are just one star in the Saudis’ expanding football galaxy – and the latest developments relating to Chelsea show that the Magpies aren’t necessarily at the very centre of PIF’s universe.

Chelsea were in talks over £60m deal with PIF

Although Newcastle came close to a Profit and Sustainability Rules breach for 2023-24, they have generally been cautious and tried not to upset the Premier League applecart too much.

Chelsea’s approach has been far more scattergun, and it is only the intra-company sales of on-site hotels and, potentially, the women’s team that are keeping them afloat.

Increasing commercial income will therefore surely be central to Clearlake’s plan if they want to avoid a monumental PSR breach and the likely associated fine and points deduction.

The biggest individual sponsorship asset most Premier League clubs have is their front-of-shirt rights.

Last season, a newly-created sports tech company called Infinite Athlete paid £40m to be Chelsea’s front-of-shirt sponsor.

Chelsea were over a month in the season before they announced that deal, and it appears that they will also go sponsorless for at least the first few weeks of the season again in 2024-25.

That will reduce the value of their rights, not only because a new sponsor is missing out on exposure in the opening weeks but also because the bulk of merchandise sales are completed in the first month.

Interestingly, The Athletic are reporting that Chelsea were at one point in talks over a potential £60m deal PIF-owned Riyadh Air, only for those discussions to collapse.

Again, there is nothing necessarily unusual about a Middle Eastern airline being in talks with a blue-chip Premier League club (see Etihad at Man City and Emirates at Arsenal).

However, it is perhaps significant that PIF could be seen to be helping one of Newcastle’s direct rival out with PSR issues.

Only last week, finance expert and former Man City advisor Stefan Borson suggested that PIF were ‘bailing out’ other Premier League clubs in the transfer market through their stable of Saudi Pro League clubs.

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What are PIF’s long-term ambitions with Newcastle?

Most analysts agree that PIF’s ambitions on Tyneside are nebulous and geopolitical.

They do not appear to want a financial return on their investment, or at least that is not what their activity at St James’ Park would suggest so far.

There are far more efficient ways to spend £305m than on a football club, let alone perhaps another £500m or more on a St James’ Park rebuild.

Saudi Arabia’s soon-to-be official successful bid to host the 2034 World Cup further illustrates that their aims are global in scale.

And although a slowdown in the Saudi economy has led them to take more conservative approach with regards to the Pro League this summer, it is unlikely we will see long-term retrenchment in football.