AC Milan’s record-breaking sale by Elliott Management in 2022 was proof the football club had completed a remarkable turnaround under the US hedge fund’s stewardship.
The Italian team was sold to private equity group RedBird Capital Partners for €1.2bn, the highest price paid for a club outside the English Premier League. It was once again winning Serie A titles and competing in the lucrative European Champions League. Last year, it made its first profits in more than two decades.
But police raids earlier this month have dragged AC Milan back into a messy battle of wills pitting Elliott, the notoriously combative $65bn fund manager, against Blue Skye, a investment firm run by two longtime former partners of the hedge fund and which owned a small stake in the club before the sale.
“Corporate chaos rocks the upper echelons of AC Milan,” ran the headlines in the local press the day after the raids.
The two Italian financiers behind Blue Skye have claimed the hedge fund violated their minority shareholder rights by signing the RedBird deal, and have raised questions over whether Elliott still controls the club.
Elliott is a creditor to AC Milan but has rejected suggestions of operational involvement. It sees the fight as a brazen attempt by a disgruntled shareholder to get a bigger payout from the sale. Blue Skye has pursued the asset manager through courts in Italy and Luxembourg, although some of its claims have been dismissed.
For Elliott, which waged and won a 15-year campaign against the Argentine state over unpaid debts, the row is not just about money — the sums in dispute are in the tens of millions of euros, according to people familiar with the matter.
At stake is also the reputation of the US hedge fund founded by Paul Singer, whose son Gordon has spearheaded the AC Milan investment. It would not be pushed around “by two unknown guys”, said one person close to the firm, referring to Blue Skye’s founders Salvatore Cerchione and Gianluca D’Avanzo.
Another said that Elliott, which is also a lender to French football club Lille, cannot afford to be held hostage by former partners as it could complicate its relationships with others who source investments for them.
The dispute took a dramatic turn on March 12 when Italian police searched the AC Milan’s offices. During the raids, which also took place at the home of the club’s chief executive Giorgio Furlani, Italy’s financial police looked for documents to substantiate claims that somehow RedBird did not truly buy the club. “The suspicion is that Elliott currently maintains effective control of the company”, the search warrant said.
The suspected crime is “obstruction to the exercise of the functions of supervisory authorities”, in this case, Italy’s football federation, according to the public prosecutor.
AC Milan could also be docked points in the next season if the federation’s rules were breached, according to Enrico Lubrano, sports law professor at Luiss University in Rome. The federation said it had yet to receive any information beyond the search warrant, “from which you can’t understand much”.
Following the raids, Elliott said: “AC Milan was sold to RedBird on August 31 2022. As of that date, the Elliott funds have had no equity interest in, or control over, AC Milan.”
The probe, expected to last at least a year, risks frustrating RedBird’s efforts to consolidate AC Milan’s recovery. It comes as the New York firm founded by former Goldman Sachs banker Gerry Cardinale faces pushback over plans to move the club to a new stadium south of Milan. Local authorities hope to convince AC Milan to redevelop the ageing San Siro Stadium it shares with rival Inter Milan.
RedBird said any suggestion it did not own the club was “just false and contradicts all the evidence and facts”, describing it as a “distraction” from its goal of returning AC Milan to “the top of Serie A and European football”.
At the heart of the dispute is a €550mn vendor financing that Elliott provided to help RedBird meet the €1.2bn acquisition price. Carrying an 8 per cent interest rate and due to be repaid in August 2025, it is a large and uncommon arrangement in European sporting deals.
Much of the current leadership team at AC Milan have also ties to the club that predate the 2022 transaction: Furlani and Stefano Cocirio, chief financial officer, worked at Elliott where they oversaw the AC Milan investment. Paolo Scaroni, the influential former chief executive of oil major Eni, has stayed on as club chair. Gordon Singer has kept his seat on the board.
AC Milan, Blue Skye and Furlani declined to comment for this story.
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Blue Skye became a shareholder in AC Milan after brokering a financing deal between Elliott and Li Yonghong, the previously unknown Chinese investor who bought the club in 2017 from former prime minister Silvio Berlusconi.
It was the second time Elliott concluded a deal brought by Blue Skye, which had been instrumental in their joint acquisition of Hotel Bauer in Venice. Blue Skye’s Cerchione and D’Avanzo had been in the spotlight previously for helping revive Harry’s Bar in the Adriatic city.
To finance the AC Milan acquisition, Li borrowed €300mn from Elliott. Blue Skye secured a stake of just over 4 per cent, a management fee and a share of the potential profits from a future sale.
Elliott took control of the club a year later when Li defaulted on the loan, embarking on a turnaround that culminated in AC Milan’s first Serie A title in more than a decade. RedBird bought the club a few weeks later.
People close to Elliott — which has described the suits as “frivolous and vexatious” and struck back against Blue Skye with its own last year — point out that some of the claims contradict the prosecutor’s lines of inquiry: If RedBird did not in effect buy AC Milan, Blue Skye should not be entitled to receive any proceeds. With the matter still in dispute, Blue Skye has not yet taken any payment from the deal.
Italian prosecutors find suspicious that AC Milan’s parent holding company is “based at the same address” as Elliott’s previous controlling company. But Elliott insiders note that the address in question — 1209 North Orange Street in the US state of Delaware — is home to the Corporation Trust Center, where more than 250,000 companies are registered.
The Milan probe also threatens to spiral out of Italy: the search warrant includes claims that Elliott “appears to have a dominating influence” over French club Lille. Prosecutors say this would be in breach of rules set by Europe’s football oversight body Uefa. Elliott is also a lender to Merlyn Partners, which controls the French team. AC Milan and Lille competed in the Champions League in the 2021/22 season.
Uefa bars one entity from exerting “control or influence” at two clubs competing in the same European tournament. A breach would prevent the lower-ranked club from joining the competition.
But Uefa does not address the case of creditors and has been lenient on creative shareholder arrangements. Owning more than one club is increasingly common in European football and has faced little regulatory pushback. According to a Uefa report, 28 Italian clubs are part of a broader ownership structure. RedBird for instance also owns French club Toulouse and holds an indirect stake in Liverpool FC.
Jonathan Brown, consultant at Ankura, said the European rules needed to adapt to keep up, as investors and owners resort to “previously unforeseen financial structures”.
