July 18, 2008 / 12:12 AM / in 9 years

Sports clubs are the new must-have for commodity barons

LONDON (Reuters) - You’re a billionaire with a fortune built on soaring commodity prices and can buy anything your heart desires. So what’s it to be?

<p>Chelea's owner Roman Abramovich (R) celebrates after his team defeated Manchester City in their English Premier League soccer match at Stamford Bridge in London in this file photo from October 27, 2007. REUTERS/Dylan Martinez</p>

A luxury yacht, a fast car, or perhaps the ultimate plaything -- your very own soccer club?

Some of the world’s richest men who have built their wealth on sky-high oil and metals assets have done just that.

At the height of the commodities boom, Russian steel magnate Alisher Usmanov bought a stake in top English side Arsenal, and Indian steel billionaire Lakshmi Mittal has acquired part of lower division Queens Park Rangers (QPR).

“Commodities players are the current phase of new wealth. They’re driven to be legitimate in the public light, to have boys’ toys and a safe haven,” said Robert Boland, a professor of sports management at New York University.

Buying football teams or other sports clubs can tick several boxes for these successful and driven businessmen.

“I was a fan of the team and realized that, together with the excitement and pleasure I could derive from watching Arsenal’s games, I could also have a good portfolio investment,” Usmanov told Reuters.

Usmanov, born in Uzbekistan but now a Russian citizen, owns half of steel firm Metalloinvest and part owns Red and White Holdings, which has built up a 24 percent holding in Arsenal.

“I haven’t yet made any investments that have made a loss. I‘m 100 percent sure that Arsenal, as a business, is worth twice as much as its current value,” he added.

Rising commodities prices will further boost the ranks of billionaires keen to invest in football or other sports.

Russia’s third richest man, Roman Abramovich, whose fortune was built on oil and aluminum in the 1990s, led the way in England by buying Premier League team Chelsea in 2003.

TELEVISION RIGHTS

For some, such purchases may stem simply from a desire for success and fame in a more public arena.

It can be a lucrative business, however, with potential to rake in revenues from seats, mugs and shirts right through to television rights. High-profile football matches such as the Champions League final can attract around 150 million viewers worldwide, according to estimates by European soccer’s governing body UEFA.

Some may also view football or other sports clubs as a safer place for their money than volatile commodities markets.

Boland said the value of franchises for National Football League (NFL) teams in the United States, for example, had effectively doubled every five to six years.

Global copper prices recently reached an all-time high of $8,940 a tonne, around four times levels seen just under five years ago. Oil prices had almost doubled in the past year alone.

The value of North American franchises such as basketball and ice hockey had also risen strongly over the past two decades, but the pace was expected to slow.

There are still more investment opportunities in European football clubs.

“Some clubs in Europe are proven money makers...some represent good investment opportunities and can be developed into self-sufficient businesses,” Boland said.

Returns on investment are unlikely to be the main driver for these individuals. Chelsea’s Abramovich has bankrolled the London side’s spending and last year the club posted a loss of 74.8 million pounds ($150.3 million).

Abramovich’s Millhouse LLC group in Russia holds stakes in steel maker Evraz Group and Highland Gold Mining Ltd.

Commodities and energy firms are also involved. Russia’s Gazprom, for example, owns Zenit St Petersburg and sponsors German team Schalke 04.

RUSSIAN CULTURE

Russian interest in successful sports clubs, including those in the world’s most watched football league, may be down to long-established competitiveness.

“It’s part of Russian culture -- as part of the old Soviet Union people were used to being (in) first place in sports...It’s difficult to say if it’s purely a Russian phenomenon,” said Sharif Galeev, a partner in Deloitte’s St Petersburg office.

It is unclear whether some of these commodity billionaires are in football for the long haul but it is widely believed they will stay at least until coveted prizes, such as the Champions League, have been won.

QPR fans hope Mittal’s involvement in their club will help to return it to top-flight football. Mittal’s family owns more than 43 percent of top steel producer ArcelorMittal.

Most experts believed that the presence of these commodities billionaires and indeed other wealthy businessmen was positive for the game because of the cash they would make available.

“I think the fans of Chelsea are glad to have Abramovich as their leader,” said business advisory firm Deloitte’s Galeev.

“He did a lot for their wins in the premier league. I think it’s positive for the business and for the game.”

Boland thought their involvement might precipitate a move towards a super league in Europe.

“It may be that the sport will be ”priced out“ of the long-time fans’ ability to afford and become more of a business than it has been,” he said.

“I suspect that the players will win in increased salaries and competition,” he added.

(Additional reporting by Robin Paxton in Moscow)

Editing by Clare Fallon

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