Soccer / finance
Alexis Sanchez and the bag of gold
Back in January 2018 Manchester United finalized blockbuster deal by trading Henrikh Mkhitaryan for Alexis Sanchez. The deal was supported by rumors re monstrous salary of Chilean, MU however didn’t officially comment that. Significant changes occurred since that time: Arsene Wenger was sacked by Arsenal, the club however is still around 4th place in EPL; Alexis is fighting for starting position in MU scoring just 3 goals after the move, while the club is in contention for 7th place with Bournemouth. And we still do not know financial details of the trade! As such, I decided to dig MU’s financial statements and share those trade details with you! To do that I used MU’s quarterly financial statements (Q2 and Q3 2017), corresponding press releases and other information. In Q2 press release dated Feb 8, 2018, Ed Woodward commented: Our solid business model has allowed us to invest in the future of the Club with the extension of Jose Mourinho’s contract as manager and the acquisition of Alexis Sanchez. We look forward to the remainder of the season with confidence The contract was reported to be signed on Jan 22, 2018. Different market sources reported the following key details of Alexis’s deal (all amounts are in GBP): 1. Base salary – 350k per week 2. Media rights – 100k per week 3. Signing bonus – 7.5 million 4. Agent’s commission – 10-15 million 5. Contract term – 4 years In addition, MU and Arsenal exchanged player registration rights (Mkhitaryan for Sanchez). Mkhitaryan’s net value was estimated in the range of 25-35 million. Last but not least: Sanchez’s contract with Arsenal was due to mature on Jun 30, 2018 (therefore, he could sign new contract the next day with no compensation to Arsenal). Now, using MU’s financial statements I’ll confirm or disprove those rumors. In its Q2 2017, MU reported the following: Subsequent to 31 December 2017 certain registrations were disposed of for a total consideration, net of associated costs, of £18,556,000. The associated net book value was £24,277,000. Subsequent to 31 December 2017 certain registrations were acquired or extended for a total consideration, including associated costs, of £34,306,000. This statement basically means that Mkhitaryan’s net book value was 24.2 million, which was sold for 18.5 million. The difference of 5.8 million is Mkhitaryan agent’s commission. At the same time, cost of Alexis's contract is 34.3 million. The difference between 34.3 and 24.2 is 10.1 million – this is Alexis agent’s commission. As such, total cost of this trade for MU is the following: 15.8 million in cash (agent’s commissions) and 24.2 million of Mkhitaryan’s contract = 39.8 million. MU wasn’t able to capitalize 5.8 million of it, as it’s “commission on assets sale”, so cost of Alexis’s contract in MU books will be 34.4 million. Next, let’s analyze MU’s payroll: it increased from 69.7 million (for Oct – Dec 2017) to 75 million (for Jan – Mar 2018). Alexis was the only MU’s transfer in that transfer window, hence this increase in payroll is Alexis’s effect. In weekly terms 5.3 million increase is 566k per week (5.3 million divided by 9.71 weeks between Mar 31 and Jan 22) or 29.4 million on an annual basis. Most likely, this amount includes signing bonus (which was reported to be 7.5 million or 36k per week (7.5 divided by 52 * 4)). Without that, Alexis’s weekly salary is 530k (566 less 36). Not bad, ha? Knowing that Paul Pogba’s contract is in the range of 280 – 300k, and Kevin de Bruyne brand new contract is 300 – 330k, Alexis’s seems like almost two times more valuable player. Why? Well, it’s all about the timing of the trade. Alexis was less than 6 months until maturity of the contact. In other circumstances, MU would need to pay transfer fee to Arsenal. Since this was not the case, the “theoretical” transfer value was paid to Alexis directly, just because he decided to sign with MU. Additionally, he was rumored to be approached by both Man City and Man United, so he basically was subject to bidding war between the two. Let’s say, 300k per week is “fair salary” for the player of Alexis level (based on Pogba and KdB comparative). In this case, the weekly premium of 230k (530 less 300) on 4 years contract term is 47.8 million, which MU had to pay to get Alexis’s signature. To sum up, total theoretical transfer value of Alexis constitute the following: 39.8m (Mkhitaryan and agent’s commissions) + 7.5m (signing bonus) + 47.8m (“salary above fair value”) = 95.1 million! Later Jose indirectly confirmed this amount: You have to put things in perspective - how much would Alexis Sanchez cost in a normal transfer with three years left on his contract? Look to the numbers now and I would say roughly between £100-150 million. Of course, Jose tries to make the best from bad bargain: to get Alexis, MU indeed paid 95.1 million. It was masked by complex trade details, but nonetheless it is still around 100 million pounds. Alexis’s team was the winner here, being able to agree probably the best contract among 29-year-old football players. My sympathies go to Ed Woodward, who watches his 566k per week gem starting on a bench week after week…
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