“I have 25 years’ experience investing in sports, building companies in partnership with the best rights holders in the world, in addition to investing in teams and leagues themselves. I have always believed in an approach to investment that must be guided by cash flow generation rather than just turnover, and that must be guided as much as possible by non-emotional considerations. However, I have to say that the only case where I occasionally lose this aseptic approach is AC Milan, where the passion of the fans and the importance of the team to everyone is something I have never experienced before in sports“.
Gerald ‘Gerry’ Cardinale, the 56-year-old New York financier who has owned the Rossoneri since 2022, is seated in the foyer of one of Milan’s most elegant hotels when he agrees to meet Calcio e Finanza to talk in the round about what is and what will be his strategy for the club: ranging from the new stadium to the rumours of sale, from the growth opportunities of a brand that he still considers undervalued to the necessary relations with Inter, ending with the management of Serie A, considered very improvable, up to the Super League hypothesis and a theoretical listing of AC Milan on the stock exchange with a dual listing in Piazza Affari and New York.
THE REASONS FOR THE INVESTMENT IN AC MILAN
His involvement in the Rossoneri, as mentioned, is part of investments in companies ranging from the YES Network, Artists Equity, Skydance Media and The Springhill Company in media and entertainment to, more specifically in the sporting sphere, Fenway Sports Group (the holding company that has Liverpool FC, Boston Red Sox and Pittsburgh Penguins), The UFL spring football league in America, the Rajasthan Royals in Indian cricket and Alpine in Formula 1. While it is true that AC Milan is practically a debt-free company (the only debts are operational ones, linked to the football market or to credit advance operations), it should also not be hidden that ACM Bidco B.V., the company with which Cardinale holds 99.9% of the company, has a €550 million vendor loan outstanding with Elliott, the US fund from which Cardinale himself bought the club.
An issue that has given rise to many rumours about possible difficulties and which, according to the New York businessman, are meaningless. “I worked 20 years at Goldman Sachs – he says -, I smile if someone thinks me so naive as to take on a debt to be repaid in just 18 months”. At the same time he denies a possible sale of the club, a sale that often makes headlines when Cardinale himself is in the Middle East. “I am in AC Milan to stay for a long time and if it was up to me I would stay here forever. What is true, however, is that you have to take into account the movements of the global economy and there is no doubt that in the Middle East there is a lot of liquidity and willingness to invest in sport”. In fact, he explains that RedBird has many interests in the Middle East, where the fund also owns offices, and that his visits to that area are often linked to important AC Milan partnerships (Emirates is the jersey sponsor and Casa Milan has an office in Dubai, in the United Arab Emirates, which it shares with RedBird).
A matter that has sparked many rumors about possible difficulties and, according to the New York businessman, these rumors are senseless. “I worked at Goldman Sachs for 20 years – he says – I smile if someone considers me so naive as to take on a debt to be repaid in just 18 months.” At the same time, he denies a possible sale of the club, a rumor that often circulates when Cardinale is in the Middle East. “I am at AC Milan to stay for a long time, and if it depends on me, I would stay here forever. What is true, however, is that we must take into account the movements of the global economy, and there is no doubt that there is a lot of liquidity in the Middle East and a willingness to invest in sports.” He explains that RedBird has many interests in the Middle East, where the fund also has offices, and his visits to that region are often related to important partnerships for Milan (Emirates is the shirt sponsor, and Casa Milan has an office in Dubai, United Arab Emirates, shared with RedBird).
This saying, however, does not hide one thing: “At this moment there is a lot of capital in the Middle East interested in investing in sports and we are open to engaging with potential partnerswho could join us both as sponsors and as partners in construction of the new stadium, or as minority shareholders as truly value added partners, but as I said, I will not relinquish control”.
Cardinale’s theory, on the other hand, is in vogue in many international business circles and is based on the fact that given the push for decarbonisation in Western countries, the Gulf nations will necessarily have to diversify their revenues outside of the oil sector, and sport is one of the most suitable in this context.
Furthermore, explains the businessman, selling AC Milan at this time would be a bad deal given that European football is considered, in many international circles, very undervalued, especially Serie A, England aside. Indeed, Chelsea FC‘s takeover in 2022 was for around €5 billion (almost €3 billion valuation of the club and a further €2 billion planned investment), just under 10 times the London club’s revenues, while AC Milan also changed hands in those months for €1.2 billion equivalent to a multiple of 3.
In this context, Cardinale believes that AC Milan is among the top five best-known European football brands in the world, and is therefore still an undervalued asset in the international business world.
THE IMPORTANCE OF THE STADIUM AND THE SERIE A VALUE
And it is on this vision that Cardinale considers it crucial for AC Milan, as for every Serie A club, to succeed in two main pillars:
- New stadiums
- Better management of Serie A that increases the value of the entire product
As far as the club’s new home is concerned, Cardinale is satisfied with the progress made on a new stadium in San Donato, and it is no coincidence that something tangible has already happened, such as the purchase of the land in the San Francesco area for just under €20 million. And it is precisely the new facility that will be the key to that cash generation by the club that, as mentioned, is the guiding star of Cardinale’s modus operandi.
Specifically, in the 2022/23 season the budget ended in profit (€6.1 million) for the first time in 17 years, but the current management generated €78 million in cash. This year the cash generation will be lower due to the exit from the Champions League, but AC Milan aims to stabilise between €50 and €100 million per year of positive cash flow. A figure to be reinvested in the squad by increasing the wage bill in a rational way to make the team more competitive. It is no coincidence that Cardinale points out that the sale of Tonali to Newcastle for around €70 million was entirely reinvested in the purchase of six players who will form the basis of the team for the coming seasons.
In this vein, the plan is to increase the sporting value of the squad, a little every year for the next five years, then the stadium should arrive. And it is precisely with the new stadium that, according to Cardinale’s plans, the club will be able to make the leap from €100 to €250 million a year in cash to invest in the transfer market. A spending power that would put the Rossoneri firmly back in the elite of European and world football.
Cardinale explains that he has a great deal of expertise in the construction of new stadiums, as he has created an ad hoc company in America, and has worked with facilities such as the Dallas Cowboys in Texas and Yankee Stadium in New York. And, he points out, it is no coincidence that the legendary Big Apple baseball team is a minority investor in AC Milan and AC Milan’s primary partner in the USA.
Cardinale does not hide either on the news that emerged this week of a call to Zhang. In fact, the businessman explains that he has held talks and discussions with the Nerazzurri counterpart to see if there was convergence on the new facility. “I am totally ready to build the AC Milan stadium on my own, but I am also open to evaluating other options, without excluding a potential collaboration with Inter”, believing that the progress of the triad of clubs driving Italian football, each pushed by a strong and stable ownership, responds to the interest of the entire national football movement.
THE GOAL OF A MORE COMPETITIVE SERIE A
And it is precisely here that the second pillar of the American businessman’s strategy comes into play: that of better management of the Lega Serie A.
On this front too, Cardinale says he wants to make his experience, contacts and deep ties with the American business world available not only to AC Milan but to the entire Serie A . “I believe I can make AC Milan the number one club and at the same time help Serie A become competitive again. Also because in the current conditions the only way to push a club firmly to the top level is also to belong to one of the strongest leagues also as a system”. Consider for example that between the Premier League and Serie A there is a 5:1 difference in television rights revenue. “And the way to narrow this gap is for our league to regain the competitiveness at the European level of the golden years, with the fundamental contribution of our work as owners“.
Cardinale also admits that he was initially seen as an extraterrestrial within Italian football. “I don’t understand why in Italy as soon as someone proposes new things you hear people say: Well, this is how it has always been done! I would understand if things were going well but instead we have a big gap to bridge”. Now, however, things are going better. “With Luigi De Siervo (Lega Serie A CEO, ed) we now understand each other, he has understood that I can help on an international level: just think that with ESPN, Amazon, Fox and all the biggest US media companies I have been doing business successfully for years. My experience and my relationships with these networks can be a resource that can be of great help to Serie A”.
THE SUPER LEAGUE AND RELATIONS WITH UEFA AND ECA
With this in view, Cardinale returns to talk about the Super League hypothesis. “I believe we should operate within the UEFA and the ECA (the European Club Association, ed.) frameworks, which best serve the interests of the game in Europe. The Super League – in whatever form it takes now – is not something we feel is right for AC Milan, Serie A or European football”, he explains.
However, he reiterates, it is also important to realise that there are many things to improve. What we see in global sport at the moment is a growing gap between the smallest and the biggest within single countries, single states and single leagues, it is also happening in the United States. it is something that everyone in the world of sport has to pay attention to globally. Because sport only has value if the competition is credible.
Finally, when asked if a listing of AC Milan could be conceivable, Cardinale explains that at the moment it is not imaginable, but on a theoretical level, as a man of finance, should he ever think of a listing for AC Milan he would see a dual listing in Milan and on the most liquid market in the world, that of New York, just as Sergio Marchionne did with Ferrari, another top brand of made in Italy: “I only met him once and he made a remarkable impression on me”.