On The Eve Of The Champions League Final Inter Milan Remains An Undervalued Football Asset

Inter Milan posted revenue of $421 million for the 2021-22 season but remains an undervalued asset as the revenue is way below the team’s full potential.

Just as a reference, this is a third of Barcelona revenues ($1.2 billion), and slightly more than half of Manchester City’s ($763 millions).

The latter is the team that will face Inter Milan during the Champions league final taking place in Istanbul, Turkey on June 10th.

While Inter has struggled in the national league in 2022-2023, against all odds, it has reached the Champions League’s final.

Only a few weeks ago, bookmakers gave Inter Milan only a 13% chance of reaching the final. By winning the semifinal against AC Milan, the Neroazzurri reached their sixth European Cup final.

Inter have earned approximately $90 million from the Champions League in prize money. These earnings come from the participation up to the semifinals, and the market pool.

Bookmakers strongly favor Manchester City to win the prestigious European trophy. This is in part due to Inter Milan coach, Mr. Inzaghi unproven track-record internationally.

He has however been a strong performer in competition finals, winning 87.5 percent of them.

While Inter’s performance on the pitch has been improving throughout 2023, we cannot say the same about its finances.

Inter Milan Remains An Undervalued Asset

Inter continues to underperform its peers and reported $150 million loss in 2021-2022 season. What is more, the repayment of the $295-million emergency loan secured in 2021 represents a strong short-term risk for the team’s owners.

This loan was secured at unfavorable terms with Oaktree Capital, carrying a 10% interest, which means that Suning (Inter’s owners) will have to repay $375-million by May 2024. Unless the loan is refinanced.

Suning, is scrambling to refinance the debt as the risk of default looms ahead. Goldman Sachs, the investment bank hired by Inter, is working at refinancing options.

None seem to be easy and cheap. For now, a straight acquisition does not seem in the cards as it will result in a big loss for the Chinese owners.

If Suning misses the repayment, and defaults on its debt, Suning will lose control of the team. The ownership will automatically go to Oaktree.

This is because Suning collateralized the loan by providing Inter as a guarantee.

Is A Sale Of Inter Milan On The Cards?

While rumors abound about interested buyers, I believe the potential investors are playing a quiet long-term game.

Among potential takeover parties, I believe there are Saudi Arabia, Qatar and US Investment funds.

Saudi Arabia is seeking to raise its football profile and anticipating hosting the Fifa World Cup in 2030. That bid that will be presented in tandem with Egypt and Greece.

Qatar, which in March-April was at Inter Milan headquarter to negotiate a sponsorship of Qatar Airlines, continues to show interest in the Italian Serie A.

In the meantime, the Qatari are seeking to acquire from the Glazers, Manchester United for $7.5 billion.

Finally, North American Investment Funds (who already own majority stakes in 8 Serie A and Serie B football teams), are seeking undervalued assets such as Inter Milan.

They believe there are revenue streams to be created across the Italian Serie A.

The Growing Fanbase

Inter Milan is the 9th most beloved football team in the world with 55 million fans. Inter is popular on social media platforms with 7.1 million followers on Instagram and about 27 million on Facebook.

While these numbers are high, they pale in comparison to other fanbases. Manchester United (650 million), Barcelona (450 million), and Real Madrid (350 million) are a few examples.

Because of its strong brand equity, Inter could quickly expand its fan base to AC Milan or Liverpool levels around 100 million.

However, this would require an assertive and competent management that can pursue engaging partnership strategies underpinned by digital platform, gaming, and fans empowerment.

This is where the North Americans have core competencies and could add value to Inter Milan’s growth.

Final Thoughts

While the Nerazzurri continue to struggle financially, its football fans should get used to new ownership structures. As the economic turbulence continues and revenues decline weakens the Suning ownership, it will create takeover opportunities for cash rich oil and gas producing countries in the Gulf.

If Inter’s financial stress increases, US investment funds will also take interest. They will seek to reverse Inter’s financial fortunes and bring the team back to its glorious days.