Bahia is The World: What to expect from EC Bahia's entry into the largest Football Multi-Club Ownership Group on the planet?

(Vers?o em Português: https://www.dhirubhai.net/pulse/eleg%25C3%25A2ncia-sutil-de-bob%25C3%25B4-o-que-esperar-da-entrada-do-a%25C3%25A7o-coutinho/?published=t)

It was on January 1, 1931, in the city of Salvador, that the history of Esporte Clube Bahia S.A.F. officially began. Formed, in the early days, mostly by former players of Associa??o Atlética da Bahia and Clube Bahiano de Tênis, Bahia was founded under the motto “Born to win”.

The slogan could not be truer. In the year of its foundation, the Club became champion of the state of Bahia, undefeated. In the following years, it won 6 of the first 10 Bahia Championships it competed in.

Due to his immediate sporting success, with only 17 years of existence, in 1948, it consolidated himself as the greatest Bahian champion, in a condition that it will maintain uninterruptedly and hegemonically until, at least, 2041, for currently having 20 more achievements than the second biggest winner.

In 1959, became champion of the first edition of the Ta?a Brasil, a competition organized by the Confedera??o Brasileira de Desportos, which until then was the highest organization of football in the country. After 29 years, commanded by the player Bob?, immortalized in the lyrics and voice of Caetano Veloso, in 1988 won the Brazilian Championship.

Currently, in addition to being the club that most times became champion of Bahia, it is also the biggest winner of the Copa do Nordeste, alongside EC Vitória, and the club in the northeast region of Brazil with the most participation in the first division of the Brazilian Football Championship.

After almost 92 years organized as a non-profit civil association, taking advantage of the innovations brought by Brazilian Federal Law No. 14193, Bahia promoted the vote for the constitution of Bahia “Football Limited Company” (Sociedade An?nima do Futebol, SAF), approved with 99.83% of the votes of Club members, in record turnout of voters.

On the other side of the Atlantic, in 1880 was founded the “St. Mark's West Gorton", renamed in 1894 as Manchester City Football Club .

It featured, in its first 130 years, as a modest club in England, interspersing passages through the elite of English football with years in the access divisions, having been champion of the first division in only 2 opportunities, in the 1936-1937 and 1967-1968 seasons.

In 2008, the English Club accepted the full acquisition proposal by the Abu Dhabi United Group, ADUG, owned by billionaire Sheikh Mansour bin Zayed Al Nahhyan, politician and member of the royal family of Abu Dhabi.

Shortly afterwards, in early 2013, the story of the greatest example of Football’s Multi-Club Ownership began, namely the City Football Group , CFG, created and, at first, fully controlled by ADUG, with the main objective of expanding its participation in Football.

From then on, it began its expansion process, currently being the majority shareholder of New York City FC , an Major League Soccer team, Melbourne City FC , currently at the elite of Australian Football, Montevideo City Torque , currently at the elite of Uruguayan football, Mumbai City FC , currently at the elite of Indian football, Lommel SK , currently at the Belgian second division, ESTAC Troyes , currently at the elite of French Football, Palermo Football Club, currently at the Italian second division, in addition to Manchester City itself. It is also a minority shareholder of Yokohama F. Marinos, currently at the Japanese Football elite, Girona Futbol Club , currently at the Spanish second division, and Sichuan Jiuniu, currently at the Chinese second division, in addition to being a partner of Fútbol Club Bolívar, currently at the Bolivian Football elite.

City Football Group sports results are very relevant. Since acquiring Manchester City in 2008, have won 6 Premier Leagues, 6 FA Cups, 2 FA Cups and 3 FA Super Cups, in addition to unprecedented reaching the Champions League final in the 2020-2021 season.

With the others, it accumulates titles with New York City FC, Melbourne City FC, Yokohama FM and Mumbai City, in an aggregate total of 25 official titles among all Clubs, in addition to the promotions with ES Troyes AC, Palermo FC and Montevideo City Torque.?

Currently, even though it is involved in the management of 12 Clubs on 5 continents, City Football Group's project is to follow the expansion. And it is at this moment that the stories of Bahia SAF and City Football Group meet.

After months of negotiations, on December 3, 2022, 98.6% of the voting members of Esporte Clube Bahia voted “Sim” – “Yes” – to the proposal and acquisition, by City Football Group, of 90% of Bahia SAF – which was created also approved on the same day –, for the transaction value corresponding to one billion Brazilian Reais (BRL).

With the approval, both parties manifested celebrating the result.

The Spaniard Ferran Soriano, CEO of CFG, declared, in a free translation[1] :

Upon completion of the process, we will implement a long-term strategy for Bahia to boost the club's growth. We will prioritize strengthening squads and youth divisions to compete at a high level, engaging with fans and improving their experience, achieving solid long-term financial sustainability and always keeping in focus the strong values, roots and identity of EC Bahia.

In the same sense, Guilherme Bellintani, President of Esporte Clube Bahia celebrated, also in a free translation:

Today our voting members made a historic and democratic decision, bringing us closer to being part of the largest and most pioneering football group in the world and a new future for our dear and daring club, through Bahia SAF.

At this point, to understand the details of the CFG proposal that seduced almost all of the more than 13,000 voting members who attended the historic vote, it is worth examining the operation.

The data analysed below were obtained through the Document formulated by the Provisional Commission of the SAF of Esporte Clube Bahia

It is important, however, to understand the financial aspects of the business. After all, how will this billionaire investment take place?

For this, it is important to clarify, first, what are the assets and liabilities that constitute the Bahia SAF. In detail, it is included in the constitution of Bahia SAF:

(i) all asset accounts (tangible and intangible) and liability accounts of the Club; (ii) contract signed with Arena Fonte Nova; (iii) the membership program contribution; (iii) sales agreements and loans of athletes' federative rights; (iv) movable property; (v) the Osório Vilas Boas Training Center – “Fazend?o”; (vi) the land located in the Jardim das Margaridas neighborhood; (vii) the “Evaristo de Macedo” Training Center; (viii) vehicles; (ix) rights and contracts with athletes, professionals and amateurs, according to the percentage of economic rights related to each one; (x) contracts with suppliers; (xi) image rights contracts; (xii) labor and civil lawsuits; (xiii) revenues from broadcasting, sponsorships and signing bonuses; (xiv) operation of the store “Loja Esquadr?o” and the museum “Museu do Bahia”.

The set of all elements constitutes the Bahia SAF, and the City Football Group's investment guarantees 90% of it.

Regarding the amount, the first investment to be made by the City Group is the so-called "Initial Investment Value", in the net amount of 190 million Brazilian Reais, used for the payment of urgent debts with public bodies, private entities and specific players.

In this same sense, the City Group will also be responsible for the full payment of the debts constituted by Bahia, estimated at 300 million Brazilian Reais, an amount that is part of the total amount of the operation.

Within the scope of the football economy, the City Group undertakes to contribute at least BRL 500 million in player transfers, spread over 15 years with monetary correction, which amounts to an average of BRL 33.33 million per season. Also, during a period of 8 years, the CFG undertakes to pay, as total wages on its payroll, if it is playing in the first division of the Brazilian Football Championship, whichever is greater between 60% of the Revenue budgeted for that fiscal year and 120 million Brazilian Reais. If Bahia SAF is in the second division of the Brazilian Football Championship, the logic will be maintained, based, in turn, on the value of 77 million Brazilian Reais.

The “remaining” of the amount, estimated at around 200 million Brazilian Reais, should be reversed in investments in the infrastructure of the sports venues, technology and intellectual capital of the Club with an impact on football. Also, the amounts foreseen for the maintenance of the “old Bahia” must be taken into account, notably the minimum transfer, from the SAF to the Bahia association, of 2.5 million Brazilian Reais per year for 90 years, in addition to the absorption by the City Group, of the amounts involved with the cost of the transaction, estimated at 14.5 million Brazilian Reais.

Given the context presented, the analysis carried out by the Bahia association points towards the implicit post-money valuation of SAF being R$1.25 billion, a very considerable value, especially when compared to the recent Brazilian cases involving Botafogo, Cruzeiro and Vasco da Gama.

After a brief analysis of the main financial aspects of the agreement to acquire 90% of Bahia SAF, it is important to raise points of mutual attraction between the parties, which led a global group based in Manchester to acquire 90% of the club based on the other side of the planet, in Salvador.

In this scenario, in the sequence, the main points that the parties will be able to explore and enhance with the entry of the Brazilian Club in the MCO of the City Group will be raised and analysed.

It is true that the first point is bordering on the obvious, but it is essential to mention.

The relevance of the City Group's entry into Brazilian football is very evident. Having the only 5-time World Champion men's team, the South American country has been, for many years, among the leaders of national athletes in European leagues, both in the main and in the secondary countries in the Football Map.

To illustrate, in the last UEFA Champions League final, between Real Madrid and Liverpool, the Brazilian was the most present nationality in the squads that started the match, followed by the French, English and Spanish. It is not surprising, therefore, that the match was decided with a goal by a Brazilian, Vinícius Jr., for the champion Real Madrid.

Being one of the largest producers of football stars in the world, there is no doubt of the relevance, for a global MCO like Grupo City, of the focal point for scouting stars in Brazil, for export to the main centres of Europe.

In turn, in addition to the issue of football technique, it is necessary to mention the economic potential of Brazilian Football. The Brazilian Championship progressively consolidated its position among the 10 football championships with the highest market value in the world, being the most valuable outside Europe.

Such a scenario, logically, enables investors to predict, in a concrete manner and in the medium term, the return on the investment made, in addition to guaranteeing their position in a market that is on the rise, in terms of foreign investment, as well as expanding in terms of international television broadcast.

As if that were not enough, it is no secret that football has a huge cultural and social impact in Brazil, almost guaranteeing that a well-developed management of the Club would bring public engagement to the MCO.

The second point is also geographical, and is related to the first capital of Brazil, Salvador.

Founded on March 29, 1549, a key city in Colonial Brazil and the most populous city in the Northeast of Brazil today, the Bahian capital also leads as the largest GDP in the region, being among the ten largest in the country.

Salvador is also located on the coast of the Brazilian Northeast, with tourism being one of its main sources of income. Therefore, it has a relevant hotel offer, from the most luxurious to the most affordable, capable of receiving leisure and business tourism, in addition to an airport with regular flights to Europe and a port that receives passenger ships.

In this sense, the City Group will be able to take advantage of the structure offered by the city to, on the one hand, comfortably establish its local administrative base and receive its guests for professional appointments, and, on the other hand, combine, with the growing football tourism, the various options of tourism in Salvador, from the historic Pelourinho to the natural beauties of Baía de Todos os Santos.

Interestingly, the third major factor to be raised is also a tourist attraction in Salvador. Located on the banks of Dique Tororó, the Fonte Nova is a modern Arena, with capacity for receiving 50,000 spectators.

Inaugurated in 2013, the Arena was built as the successor to the Octávio Mangabeira Stadium, “formerly Fonte Nova”, inaugurated in 1951. Modern and bold, it hosted matches from the 2013 Confederations Cup, 2014 World Cup, 2016 Olympic Games and 2019 Copa America.

It is true that Bahia is not the owner of Fonte Nova. The Arena, which is managed by Fonte Nova Negócios e Participa??es S.A., is publicly owned by the Brazilian state of Bahia.

However, traditionally Bahia is the Club that uses the Arena for its home matches since its inauguration – in fact, since the inauguration of the old Fonte Nova.

This specific circumstance makes it possible for the City Group, in turn, to maintain a first-rate stadium available for its matches, without, however, having to bear its added value in the acquisition of the Club or with eventual future construction.

Although there are signs of obviousness, it is impossible to analyse the operation without highlighting the next point. The Club, as a nonagenarian institution, established the Bahia brand as a very powerful asset in the Brazilian football market.

Bahia, which has the largest number of supporters in its city, Salvador, the largest city in the Northeast and the fourth largest in the country, capital of the fourth most populous state in Brazil, has established itself as one of the Clubs with the biggest number of supporters in the Northeast Region, along with Sport Club do Recife, with an estimated 4 million fans.

Founding member of the historic “Clube dos 13”, which at the time proposed to bring together the 13 most important clubs in Brazil, Bahia is the club in the Northeast Region with the most participations in the Copa Libertadores da América.

Added to Bahia's victorious history is the current lack of football achievements in the Northeast Region of Brazil in the national context, which once carried considerable relevance in the country.

In the last 30 seasons, Clubs from the region won a national title in just one opportunity, with the title of the 2008 Copa do Brasil, by Sport Club do Recife. In that same period, Northeastern teams reached the top 4 in the Brazilian Championship on 2 occasions and, in the Copa do Brasil, on 8 occasions.

It is clear, therefore, from the historical weight that Bahia carries, together with its local context, that with an investment accompanied by good management, provides a scenario of enormous economic and sporting potential for the City Group.

In turn, beyond the question of what factors make Bahia interesting to the CFG, it remains to analyse the reverse premise.

Now, it is evident and undeniable that the fact of receiving a proposal of one billion Brazilian Reals would probably impact 99.99% of any possible negotiation in the country. But the operation is even deeper.

Bahia, at least according to the approved proposal, will have immediately resolved, through direct investment by the investor, its debts, one of the main problems of Brazilian Clubs today, unlike the much-adopted models of judicial recovery, which pay off progressively, with interest.

Also, the investment of 500 million Brazilian Reais for hiring new players is very significant, even if diluted in 15 years. For a Club that had an annual record investment of 9 million Brazilian Reais, for a decade and a half to have guaranteed an amount almost 4 times higher is relevant. Although 33.33 million a year is not comparable to the investment made by the small group of 3 or 4 Brazilian clubs that currently operate more aggressively in the market, it is undeniable that the amount changes Bahia's level on the national scene.

As relevant as the hiring amounts, the minimum investments to Bahia's payroll are worth mentioning. The terms of the approved proposal are clear, concrete and relevant, guaranteeing Bahia SAF stability for at least 8 seasons. In terms of comparison with Brazilian football, even though, at least based on what the market interprets from payrolls based on the balance sheets published by the main Clubs in the country, Bahia SAF does not reach the values practiced by the same 3 or 4 Clubs already mentioned, the amount is already well above the 87.9 million invested by Bahia the last time it played in Série A of the Brazilian Championship, in 2021.

In this scenario, there is little doubt that the current transformation of Bahia will bring elements capable of expanding its sporting and financial potential.

However, it is not just the numbers that are relevant in this case. Bahia SAF was not merely acquired by an eccentric tycoon who became interested in football, or by an investment group that only seeks profit at all costs. With the formalization of the acquisition, Bahia SAF will become part of what is currently the main Football Multi-Club Ownership on the planet.

With football know-how and a successful history, being part of the City Football Group, in itself, is a huge plus point for Bahia. Although the intention, in theory, is not to put together a star-studded squad to seek all the titles in the 2023 season, it comes to the point of improbability that CFG's medium and long-term planning in a football centre as relevant as Brazil will not bear fruit on the way.

If the moment is one of transformation, Bahia has all the conditions to materialize one of the most important and positive moments in its history.

There are many factors that make a sports project successful or not. Football is unpredictable – some would even say it is “unfair” – sometimes rewarding mistakes or punishing exemplary organizations.

Still, some issues should be highlighted.

City Football Group's global project is already a success. It accumulates sporting achievements and economic success literally all over the world. Like it or not, admire or reject it, encourage it or scold it, regardless of what is the understanding about this phenomenon of Globalised Football called Multi-Club Ownership is, it is insurmountable that it exists and is consolidated, and, among many others, the City Group is currently the most important in the world.

Undeniable, too, is the potential of Bahia. The Club, which was hugely successful in the past and located in one of the most important cities in Latin America, is ready to progressively retake the role it once played. It has the complete package: supporters, stadium – even if it does not own it – and is among the elite of local football. Manages to unite the tradition of the past with a consolidated project for the future.

If success cannot be guaranteed, the fundamental elements to achieve it are on the table.

In this context, fans of Brazilian football will have the opportunity to accompany the Tricolor fan from Bahia on his path in the universe of Globalised Football.

Referências

COUTINHO FILHO, José Eduardo. Futebol Globalizado: Paix?o de bilh?es, mercado de trilh?es. Belo Horizonte: D’Plácido, 2021.

[1] EC BAHIA. Nota Oficial. https://www.esporteclubebahia.com.br/nota-oficial-59/.