Bloomberg News

Borussia Dortmund Targets Investors to Close Bayern Gap

July 28, 2014

Borussia Dortmund Managing Director Hans-Joachim Watzke

Borussia Dortmund Managing Director Hans-Joachim Watzke gestures during a joint press conference with Evonik Industries AG in Dortmund, on June 27. Photographer: Alexandre Simoes/Borussia Dortmund via Bloomberg

Borussia Dortmund GmbH & Co. KGaA, the soccer club that won Germany’s top league six years after its near collapse in 2005, is seeking new investors to help boost salaries and close the gap on teams including Bayern Munich.

Germany’s only publicly listed soccer club, known as BVB, is targeting an agreement to sell at least a 5 percent stake each to two strategic partners by the end of September, following the sale of a 9 percent holding to Evonik Industries AG (EVK) in June, said Hans-Joachim Watzke, BVB’s managing director.

“It doesn’t necessarily have to be a German company or one of our present sponsors,” Watzke said in a July 24 interview at the club’s headquarters in Dortmund. “A strategic partner mustn’t be a ‘locust’ or a fund” but rather an investor with a “significant long-term sponsoring interest,” he said.

Chemical maker Evonik, sporting-goods company Puma SE (PUM) and insurer Signal Iduna are among the team’s backers as it tries to emerge from the shadow of Bayern, Germany’s most successful soccer club. Since winning the Bundesliga in 2011, BVB took the title again in 2012 and was runner-up to Bayern this year and last. It lost to its Munich rival in the Champions League final in 2013.

“Additional strategic investors make sense,” Marcus Silbe, an analyst at Close Brothers Seydler Research, said by phone from Frankfurt. “I expect that especially major partners of Dortmund are eligible for that. I see that in a positive light to move the club forward.”

BVB closed down 0.6 percent at 5.003 euros in Frankfurt.

League ‘Beacons’

The club’s rise is helping to increase the Bundesliga’s standing internationally, Watzke said.

“Every league that booms needs one, two or three beacons that excel at the national level and which have international appeal,” he said. BVB “is an example that such an ascension is possible. There was nothing, nothing at all that was predestined to put us in the position we’re in today. When we won the title in 2011, we hadn’t played internationally for seven years and six years prior to that we were on the brink of insolvency.”

Five years after its initial public offering in October 2000, BVB had all but spent the funds its raised. Creditors approved a financial restructuring, forgoing part of their claims.

Coach Klopp

Watzke is counting on team coach Juergen Klopp, under contract until 2018, to lead BVB to greater success. Klopp is “one of the biggest hotspots on the world coach market,” Watzke said. “We can rely on each other. The story continues.”

He also expects to persuade defender Mats Hummels, who played for the German side that won this year’s World Cup, and attacking midfielder Marco Reus, who missed out on the tournament in Brazil because of injury, to stay.

Both players have contracts through 2017. BVB is working to convince Reus to accept an extended contract, he said.

New sponsorship deals similar to the agreement with Evonik, which runs through 2025, would help increase the wage pool to as much as 120 million euros ($161 million) from about 80 million euros now, making players salaries more competitive with Bayern Munich and other European clubs, Watzke said.

“We’ll always need creativity to close the gap to clubs like Paris St. Germain, Manchester City or Manchester United (MANU:US),” he said.

Foreign Fans

Germany’s World Cup success will also help boost the Bundesliga’s fanbase abroad, and increase the league’s strength when renegotiating international television licensing agreements when contracts expire next year, Watzke said.

BVB’s shares have gained 6.5 percent since the company’s inclusion in Germany’s SDAX Index, which represents the 50 largest members of the country’s smallcap sector, on June 23.

The shares have benefited from Deutsche Bank AG (DBK)’s consideration of a stake purchase before the Frankfurt-based lender decided against a deal in June, he said while he sees the true value “estimated conservatively at least 600 million euros.” That compares to a market capitalization of 307 million euros.

BVB is taking steps to expand its international fanbase, with plans to open an office in Singapore in October. It’s also considering establishing a presence in the U.S., Watzke said.

To contact the reporter on this story: Tino Andresen in Dusseldorf at tandresen1@bloomberg.net

To contact the editors responsible for this story: Angela Cullen at acullen8@bloomberg.net Sara Marley


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