As widely reported in the media, Chelsea FC recently lost a vote to buy back their own stadium, Stamford Bridge, from Chelsea Pitch Owners (CPO), a company owned by their fans.
Chelsea suffered serious financial troubles back in the 1980s culminating in the decision to sell the Stamford Bridge freehold to a property developer. Following the bankruptcy of the property developer in the early 90s, the then-Chelsea chairman Ken Bates regained control of the stadium.
CPO was subsequently formed as a non-profit company in 1993. Shares in CPO were sold for £100 each and were limited to 100 shares per person to prevent any one person from ever gaining control of the company. It is rumoured that celebrity supporters such as Madness front man Suggs and TV presenter Tim Lovejoy both hold shares in CPO.
In 1997, CPO purchased the stadium freehold for around £10 million along with the Chelsea FC naming rights. Put simply, the intention was that the stadium would never be separated from the club again.
So what is all the fuss about?
Well, following its purchase, CPO agreed to lease the stadium back to the club on the condition that they continued to play their home matches there. In addition, the agreement stipulated that if Chelsea did decide to move away from Stamford Bridge, they would not be able to use the name “Chelsea Football Club”.
As one of the biggest football clubs in Europe, it is not surprising that Chelsea has looked into developing Stamford Bridge, a stadium with a relatively modest 42,000 capacity. However, having carried out the usual feasibility studies, it appears that it will not be possible for Chelsea to develop the stadium due to the size of the site.
Earlier this month, Chelsea chairman Bruce Buck announced that he would be writing to CPO shareholders to advise them that the club wished to purchase CPO in order to gain ownership of the stadium and, of course, the naming rights. The club would then look to sell the stadium site and use the proceeds to help fund the building of a new one close by.
A general meeting of CPO’s shareholders was held yesterday to vote on Chelsea’s offer. In order to acquire the company, Chelsea needed 75% of CPO’s shareholders to vote in favour of the proposal.
As it so happened, only 61.5% of CPO’s shareholders voted in favour of the proposal and as a result, it was not approved.
Chelsea must now go back to the drawing board.
Lessons to be learned?
The media attention on this story has undoubtedly brought into focus the relationship between football clubs and supporters' groups who are set up to financially assist them.
In tough economic times, accepting investment from a supporters' group may be the only course of action a football club can take to avoid going into administration or worse still, bankruptcy. However, similar to any business which is subject to outside investment, serious thought must be given by the club’s owner(s) as to what investors will get in return for their investment.
A football club may be willing to allow a supporters group to appoint a director, but would it be willing to go so far as allowing the group to own the stadium, change the club’s name or even dictate transfers and team selection?
In Chelsea’s case, they gave away ownership of their stadium and naming rights. Whilst no-one could have foreseen the sudden rise of the Chelsea FC brand from the dark days of the 1980s, the decision to transfer so much power to CPO is clearly one which the present owner, one Mr Roman Abramovich, may wish the club had never made.