Gerry Cardinale: “Buying Milan was the hardest thing I’ve ever faced… Stadium? American style with 70k seats”

Gerry Cardinale, the RedBird founder and owner of AC Milan, spoke to "The Deal", a Bloomberg podcast, in which he also spoke about the Rossoneri club.

Here are his words as relayed by calcioefinanza.it:

"Buying Milan was the hardest thing I've ever faced, but also the best. But the irony is that it was all self-imposed by me. I had an entrepreneurial need that I had to satisfy, and it was precisely the kind of thing we do more and more often at RedBird. The way institutionalised finance on Wall Street has evolved, it doesn't compensate for that amount of activity, rolling up sleeves, working hard, and everything else. And when I say compensated, I mean not only in terms of money but also in terms of overall effort. I like to play the role of the shadow entrepreneur and I like to solve problems with capital. And it just so happens that in people's careers there's a bit of luck. I happened to find a turning point in sports that I could never have predicted in 2000/2001. If we look back over the last 20 years, we realize that it was really a stroke of luck. I really found a pocket of air where I took off. Now the challenge is navigating this situation because now everyone has discovered sports," he added.

On Billy Beane's role in convincing Gerry Cardinale to invest in football:

"It was Billy Beane who encouraged me to start considering European football. I said to myself, why should I consider European football? An ecosystem where there are sovereign governments and Russian oligarchs cannot be an ecosystem to consider. He told me: 'You haven't understood the point.' He argued that the transfer market in relegations, which is the fundamental pillar of the European football economy, was tailor-made for Moneyball. You build, buy low, and sell high. So we did research on European football, we met 150/200 teams in all countries on the continent and in England. At that time, there weren't many people and capital of our type chasing European football. Everyone was still focused on NBA teams and other things in the United States, but there were ownership restrictions in the United States. So, after doing all this work, we decided to make our first controlling acquisition, which was Toulouse in Ligue 1. And the beauty of that experience was that it was a training investment. As much as we knew about sports, we knew we knew nothing about European football. And obviously, it was about investing abroad, something I learned while working at Goldman."

On Toulouse, Gerry Cardinale said:

"To cut a long story short, Toulouse's valuation was around 60 million euros. It was relegated to the second division. We bought it for 15 million euros within three months. Within three months, with Billy, Luke Bornn, and our team, our data analysis team, we sold our first player for around 15 million euros. And then, after the first year, we got promoted to Ligue 1. And now Toulouse steadily navigates in the middle of the table and has a very reasonable wage bill. This would suggest that we should spend much more to be in the middle of the table as we are. European football is about spending that incremental dollar of capital better than the next. Then we invested in Fenway Sports Group during COVID because I believed in this type of intellectual property ownership and we bet on sports as a rights holder. With FSG, I got to know the greats with Liverpool. So that was the next step in the tutorial, and it was one of the first deals I made in sports."

On AC Milan, Gerry Cardinale said:

"Billy Beane has been attending Milan for several years, and in a way, we observed it. But again, you think you know a lot about sports, but then you realize that's not really the case because of all the feedback you receive. Every time I raised the topic of AC Milan internally or here in the United States, everyone said, 'You're crazy.' 'Never think of investing in Italy.' But the answer to your question is that, in the end, we found ourselves going full circle. Elliott was the owner of Milan. Milan was indebted; originally there was a Chinese owner who made a hole in the water, and Elliott came in, foreclosed on the pledge, and became the owner. So, initially, it's not someone you would associate with owning a club in the sports world. I think Paul would tell you that. But I have to say that the thing that changed my mind was meeting Paul and Gordon Singer, his son, who led the investments and Elliott's team. And I can't speak highly enough of them. They are very informed on how they did a phenomenal job in the four years they owned Milan, from 2018 when they bought it until we bought it in 2022, to turn it around."

Regarding the vendor loan from Elliott, Gerry Cardinale said:

"We own 100% of the capital with a vendor loan. And we bought Milan in a very interesting way. I think we paid a fair price, especially in relation to other prices you see. We bought it at a multiple of four times turnover, and when we bought it, it was just below positive cash flow or breakeven. Now cash flow is significantly positive."

On Milan's growth:

"Obviously, performance helps. We reached the Champions League semi-finals. When I took over, it was a challenge because they had just won the league title. So, actually, I took a different approach than I usually do: for the first year, I did nothing. Really, I just watched. But I'll tell you, the best thing you can do is not go onto the field with guns blazing."

On the stadium project, Gerry Cardinale said:

"It will be the first one built in Italy since 2011. It will be an American-style stadium, with 70,000 seats. We will bring music to Milan and build something. A big live event, an entertainment campus for Milan, really tied to the team, but something like Milan. It's interesting because we'll have to find a way to crystallise the value. But it's something you probably should own forever, which is the epitome of iconicity and opportunity, as a platform. And we will build this new stadium. When we finish building the stadium, I promise you we will have a company specialised in building stadiums."

On the TV rights issue, Gerry Cardinale said:

"Milan is really one of the most important clubs. I believe it is one of the top four brands globally in football. And now, with the breaking down of barriers through streaming and the ability to broadcast these matches live in the United States, younger guys today know everyone, not just the Premier League: I can only tell you that I received more comments from people, people I know, people I didn't know, when we bought Milan from New York and the United States than from Europe. TV rights will also be an evolution. There isn't much competition for TV rights in Europe."