The Almost Unknown Billionaires Behind the Chelsea Acquisition

Business is flourishing in the US private equity sector. So much so that when an internationally famous football club is put up for sale, there is a good chance it will end up being acquired by billionaire traders whose names are virtually unknown except to the most attuned of Wall Street observers.

That’s the case with the sale of Chelsea Football Club for more than £4.25 billion to a group of investors backed by Clearlake Capital of Santa Monica, Calif. , but faster growing, in the private equity sector.

The company’s two founders –José Feliciano and Behdad Eghbali– are supporting their friend Todd Boehly, the billionaire founder of Eldridge Industries, Swiss billionaire Hansjörg Wyss, Guggenheim Partners chairman Mark Walter and Conservative member of the British House of Lords (and The Times columnist) Daniel Finkelstein, and offer the necessary financial firepower to support his £4.25bn bid for the club.

Not only is Clearlake financing 60% of the acquisition, Feliciano and Eghbali are using personal money in a side offer by the Denver Broncos, a football team. The sale can reach an even higher value.

The two potential deals are the most important for a company that has quietly become one of the most active buyers of midsize companies in the United States, reports Antoine Gara of Due Diligence.

The pace of new business that Clearlake has been maintaining is backed by $25 billion in new money obtained by the company in the last 12 months, which brings its total assets to more than $75 billion.

Launched in 2006 by Feliciano, born in Bayamón, Puerto Rico, and Eghbali, who emigrated from Iran to the Los Angeles area in 1986, Clearlake focuses on specialized but highly profitable companies in the fields of consumer goods, industry and technology, that it develops through debt-financed acquisitions.

With these specialist acquisitions, Clearlake’s top funds, set up between 2013 and 2018, achieved net returns of between 34% and 56%, according to data provided by public pension funds.

Although its transactions are specialized, Clearlake has perfected a tactic increasingly used by powerful competitors like Blackstone.

The company has become Wall Street’s biggest user of “GP-led secondaries,” the latest trend in the realm of private equity. Here’s how it works: Clearlake finds another private equity firm to buy a large portion of one of its existing investments. Investors then have the option of selling their holdings at the new price, or putting them into a new fund that will hold the investment for about an additional four years.

Clearlake has carried out five such transactions, involving over US$8.5 billion in assets and over US$10 billion in investments, over the past two years.

Blackstone used the same technique in its $14.6 billion sale of BioMed Realty in 2020 and its €21 billion recapitalization of European logistics giant Mileway in February. Late last year, Clayton, Dubilier & Rice used the same strategy to sell most of its investment in auto repair group Belron, also for 21 billion euros, to Hellman & Friedman.

Clearlake, which sold a 20% stake in its capital at a valuation of $4 billion in 2018, is now attracting strong interest from finance executives who want to know what Feliciano and Eghbali will do with the 80% of the company they still control. .

There are banks interested in promoting the company’s IPO – an option that the group is studying but has not yet decided on.

“Wouldn’t that be the next tool, in terms of creating value? If anyone is going to do it, I imagine it’s Clearlake,” a finance executive told Due Diligence.