Chelsea Football Club, the glamorous but highly-indebted and loss-making west London Premiership team, was yesterday sold for £60m to a Russian businessman by Ken Bates, its chairman of more than 20 years.
Bates, who has expanded the company that owns the team into other areas of business such as hotels, a travel agency, and a sports club, has sold his shareholding for around £17.5m. But it is understood that the bill could total £140 million because the new owner takes on the club's £80m of debt.
The Russian businessman, Roman Abramovich, who is one of the major shareholders in Sibneft, one of Russia's largest oil companies, is making an offer at 35p a share which has been accepted already by more than 50 per cent of Chelsea shareholders.
Abramovich will pay Â£29.6million to buy 84,908,506 Chelsea Village Shares - around 50million of which are owned by Bates. This gives him an approximate 50.09% share of the Premier League club's parent company.
The price is 20p a share less than the price at which Chelsea shares were originally issued on the stock market in 1996 but this reflects the fact that the football business, and the indebted clubs in particular, are facing an extraordinarily difficult time.
Abramovich, 36, is a leading Russian businessman. Having received a legal degree from Moscow State Law Academy, he worked as director of the Moscow offices of Sibneft, the fifth largest Russian oil producer, and was elected to Sibneft's board of directors in September 1996, a position he held until 2000.
A statement issued by the City of London public relations company, Citigate Dewe Rogerson, said last night that he was a "keen follower of sport and international football."
In May 2003, Sibneft announced a merger with Yukos Oil, Russia's second largest oil producer, to create Russia's largest oil company and the world's fourth largest oil producer. More recently Abramovich has become tied up in politics he recently became governor of Chukotka in north-east Russia.
In his purchase of Chelsea Village, the holding company that owns Chelsea Football Club, Abramovich is being advised by Citigroup, the giant US banking group.
The takeover comes at a crucial time for Chelsea, because the group is burdened with a £97m bank debt. Of this it has an £80m bond which needs to be repaid shortly.
The high borrowings of the parent company have forced the football club in the past couple of years to pare back its expenditure and to consider selling some of its best players.
As yet, no major players have been sold by the Stamford Bridge club but there are signs that Gianfranco Zola, the most popular player in the club's recent history, might consider leaving this summer because he has been offered vastly reduced wages as the management tries to cut back on costs.
Another star player, the French international defender William Gallas, has accused the management of lacking ambition and there are suggestions that he too could be on his way.
In spite of this, Bates and the team manager Claudio Ranieri have managed to take the team to the brink of qualification for next season's lucrative European Champions' League a qualifier must be overcome first and some kind of financial stability will be widely welcomed by the club's players and supporters.
Last year Chelsea Village reported a loss of £16.6m and in the latest six-month period up to the end of December 2002 the group reported a half-year loss of £11.3m as it has struggled to fill its hotels, restaurants and sports club which are situated at its west London home.
Yesterday's statement implied that Bates, now 71, will continue at Stamford Bridge for the time being.
He said last night: "I look forward to working with Roman Abramovich to achieve greater things."
And City sources said last night that Bates had indeed agreed a deal to stay on as chairman until 2005, and then become life president of the club thereafter.
Three of Abramovich's associates will join the Chelsea board, but Abramovich himself will not, sources added last night.
Abramovich said: "We are delighted to agree this deal to acquire what is already one of the top clubs in Europe. We have the resources and ambition to achieve even more given the huge potential of this great club."
Citigroup said that the funds for making the offer were coming from Abramovich's own resources and the bank also said that he has formed a newly incorporated company to make the offer.
The only other significant blocks of shares in Chelsea Village around 21 per cent and 10 per cent respectively are owned by the estate of the late Matthew Harding and by BSkyB, the satellite television group.
It is unlikely that either of these shareholders would block any takeover deal, but their opposition cannot be ruled out, especially if it looked as if a higher offer might have the chance of being secured.
Yesterday's deal was announced after the stock market had closed in London. Shares in Chelsea Village, which were trading below 20p recently, have been moving gradually higher in the past few days on speculation that Bates had found a new investor for the club.
By the close of trading yesterday the shares had moved close to 30p, prompting the official announcement.
Abramovich is believed to be worth around $1bn (£620m).
The big fear for Chelsea fans, however, is that the new owners might decide to relocate the club and redevelop its prime site in west London.
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