okstate99
Well-Known Member
This is a good read.. Marcotti again.
Expensive Divorce for Barcelona, Ibrahimovic
Both Sides Make Concessions as Striker Sent to AC Milan in Creative Loan-Purchase Move
By GABRIELE MARCOTTI
When you've made the second-biggest deal in the history of soccer and, 12 months later, you're not getting the kind of return you expect, sometimes it's best to bite the bullet and cut your losses.
Barcelona's sale of Swedish striker Zlatan Ibrahimovic to AC Milan in an unusual deal whereby the Italian club takes him on loan for the 2010-11 season (meaning he plays for and is paid by Milan but he technically remains a Barcelona player) and then pays €24 million ($31 million) to acquire him outright next summer is a textbook case of the above.
View Full Image
0829ibrahimovic
AFP/Getty Images
Zlatan Ibrahimovic walks during a training session with Barcelona on Friday, one day before a deal to loan him to AC Milan for this season then sell him to the Italian club was announced.
0829ibrahimovic
0829ibrahimovic
In July of last year, Barcelona acquired Mr. Ibrahimovic from Inter Milan in a deal worth €70 million ($92 million at the time): €50 million ($66 million) in cash, plus forward Samuel Eto'o, who was valued at €20 million ($26 million). The day he was unveiled at Barcelona's Camp Nou stadium, a smiling Mr. Ibrahimovic kissed a billboard of the club emblem, and many saw him as the missing link, who, with his 6-foot-5 frame, could provide the size and strength to make an outstanding team even better.
The fact that Mr. Ibrahimovic signed a five-year contract worth more than $95 million no doubt made the day even sweeter. And, in fact, because he was the beneficiary of the so-called Beckham Law—a tax decree that allows foreign residents in Spain to pay tax at a reduced rate of 24% on all income above €600,000 ($760,000)—his salary was even more lucrative. Mr. Ibrahimovic earned $15.3 million a year after taxes, effectively the rough equivalent of $28 million gross in most of Europe.
It's hard to overstate just how spectacularly the deal backfired. Mr. Ibrahimovic started just 23 of Barcelona's 38 league games. While his tally of 16 Liga goals — plus another four in the Champions League — was more than respectable, he often looked like a foreign object in Pep Guardiola's title-winning team, which was largely based on smaller, quicker and more mobile players.
At the same time, with the proceeds of the sale, Inter financed the signings of defender Lucio, midfielders Thiago Motta and Wesley Sneijder and striker Diego Milito. Effectively, it was as if Mr. Ibrahimovic had been traded for five players, all of whom played key roles as Inter won last season's Champions League, beating none other than Barcelona along the way.
Meanwhile, despite success on the pitch, Barcelona found itself facing cashflow issues, with the club's new president, Sandro Rosell, revealing in early July that a loan of €150 million ($190 million) was being taken out to meet staff and player costs. By that point, the club had spent a further €40 million ($51 million) to acquire striker David Villa from Valencia.
With Mr. Villa, a key figure in Spain's World Cup-winning side, joining Pedrito and Argentine superstar Leo Messi in Barcelona's front line, it became clear that Mr. Ibrahimovic was surplus. ("In the past six months [Mr. Guardiola] has only spoken to me twice," he complained last week. "I don't know what his problem is. When I walk into the room, he walks out...")
Yet given his age (28), enormous contract and lackluster performance, few teams showed any real interest. Enter Mr. Ibrahimovic's agent, Mino Raiola, a 41-year-old Dutch former pizza restaurateur, who in recent years has developed a reputation as a fearsome negotiator, as evidenced by the mega-contract he secured his client a year earlier.
Mr. Raiola was well aware that his client's career—and future transfer value—was at stake. And so he thought creatively, approaching the archrival of his client's old club, Inter: AC Milan. Milan's off-season had been decidedly low-key and devoid of high profile signings, to the point that a group of fans turned on the club's long-time owner, Silvio Berlusconi, showering him with insults during an appearance at the club's training ground. After years of heavy spending ("In excess of $1.4 billion" according to Mr. Berlusconi), Milan was trying to balance the books.
Yet Mr. Berlusconi, whose day job is that of prime minister of Italy, knows a thing or two about sales and generating buzz among fans. A major signing like Mr. Ibrahimovic would serve the dual function of turning Milan back into contenders and restoring enthusiasm to the fan base. But, having preached fiscal conservatism, he couldn't simply go and blow even a cut-price 50 million or 60 million on Mr. Ibrahimovic.
At the same time, Barcelona faced pressure to sell. Another year of Mr. Ibrahimovic on the bench would further hurt his transfer value. And with Barcelona's cash-flow difficulties in mind, the prospect of being on the hook for another $76 million in salary through 2014 was worrying.
In ordinary circumstances, a straight loan deal might have been an option. Milan could have Mr. Ibrahimovic for free for a season, the player could showcase his skills at a big club, prove that he had not lost his mojo and, hopefully, Barcelona could then sell him in a year's time, while getting his salary off the books. Yet the "worst case" scenario terrified the Catalan club. If he moved to Milan for a year, flopped and then returned, the Beckham Law would no longer apply to him. (It came off the books on Jan. 1 of this year, though those who took residency in Spain before that date were grandfathered in.) And since Mr. Raiola had made sure that Mr. Ibrahimovic's contract was based on after-tax wages, it would mean that, in order for Barcelona to pay him his $15.3 million after tax, it would have to shell out an additional $9 million a year for another three seasons.
So a loan was not an option and Milan was simply unwilling to spend more than €20 million to €25 million. And even that would have to be predicated upon Mr. Ibrahimovic slashing his salary. What to do?
The solution came during a nine-hour meeting on Friday in the form of the unprecedented loan-plus-purchase formula, plus Mr. Ibrahimovic agreeing to take a reported 33% after-tax pay cut, down to $10.2 million net or $19 million gross, because of the different tax rates in Italy. Milan gets the big name it coveted and won't have to worry about paying him until next summer. (This is important because Mr. Ibrahimovic's fee is likely to be raised via the sale of current Milan players, such as Dutch striker Klaas-Jan Huntelaar. Without the urgency of needing cash immediately, Milan can take its time and hold out for the best price.)
Mr. Ibrahimovic gets a likely starting spot at a marquee club in a league where he has consistently done well. Even with the pay cut, he remains one of the highest-paid players in the world, while collecting some goodwill karma along the way. Barcelona gets Mr. Ibrahimovic off the wage bill (and out of the dressing room) straight away while getting a guaranteed €24 million ($31 million) in a year's time. A statement yesterday on the club's website celebrating the fact that Barcelona had just saved itself an estimated €60 million ($78 million, in wages and bonuses) smacks a bit of spin—whatever "savings" are made won't change the fact that it bought a player for 70 widgets and sold him for 24 a year later—but that's understandable. Like a toothache, sometimes a bit of pain today is worthwhile, if it helps avoid a lot of pain over the next four years.
Divorce can be expensive for both parties and in this case it was just that, both for Barcelona and for Mr. Ibrahimovic. Hopefully however, it will avoid a whole lot of heartache, financial and otherwise, down the road.
Expensive Divorce for Barcelona, Ibrahimovic
Both Sides Make Concessions as Striker Sent to AC Milan in Creative Loan-Purchase Move
By GABRIELE MARCOTTI
When you've made the second-biggest deal in the history of soccer and, 12 months later, you're not getting the kind of return you expect, sometimes it's best to bite the bullet and cut your losses.
Barcelona's sale of Swedish striker Zlatan Ibrahimovic to AC Milan in an unusual deal whereby the Italian club takes him on loan for the 2010-11 season (meaning he plays for and is paid by Milan but he technically remains a Barcelona player) and then pays €24 million ($31 million) to acquire him outright next summer is a textbook case of the above.
View Full Image
0829ibrahimovic
AFP/Getty Images
Zlatan Ibrahimovic walks during a training session with Barcelona on Friday, one day before a deal to loan him to AC Milan for this season then sell him to the Italian club was announced.
0829ibrahimovic
0829ibrahimovic
In July of last year, Barcelona acquired Mr. Ibrahimovic from Inter Milan in a deal worth €70 million ($92 million at the time): €50 million ($66 million) in cash, plus forward Samuel Eto'o, who was valued at €20 million ($26 million). The day he was unveiled at Barcelona's Camp Nou stadium, a smiling Mr. Ibrahimovic kissed a billboard of the club emblem, and many saw him as the missing link, who, with his 6-foot-5 frame, could provide the size and strength to make an outstanding team even better.
The fact that Mr. Ibrahimovic signed a five-year contract worth more than $95 million no doubt made the day even sweeter. And, in fact, because he was the beneficiary of the so-called Beckham Law—a tax decree that allows foreign residents in Spain to pay tax at a reduced rate of 24% on all income above €600,000 ($760,000)—his salary was even more lucrative. Mr. Ibrahimovic earned $15.3 million a year after taxes, effectively the rough equivalent of $28 million gross in most of Europe.
It's hard to overstate just how spectacularly the deal backfired. Mr. Ibrahimovic started just 23 of Barcelona's 38 league games. While his tally of 16 Liga goals — plus another four in the Champions League — was more than respectable, he often looked like a foreign object in Pep Guardiola's title-winning team, which was largely based on smaller, quicker and more mobile players.
At the same time, with the proceeds of the sale, Inter financed the signings of defender Lucio, midfielders Thiago Motta and Wesley Sneijder and striker Diego Milito. Effectively, it was as if Mr. Ibrahimovic had been traded for five players, all of whom played key roles as Inter won last season's Champions League, beating none other than Barcelona along the way.
Meanwhile, despite success on the pitch, Barcelona found itself facing cashflow issues, with the club's new president, Sandro Rosell, revealing in early July that a loan of €150 million ($190 million) was being taken out to meet staff and player costs. By that point, the club had spent a further €40 million ($51 million) to acquire striker David Villa from Valencia.
With Mr. Villa, a key figure in Spain's World Cup-winning side, joining Pedrito and Argentine superstar Leo Messi in Barcelona's front line, it became clear that Mr. Ibrahimovic was surplus. ("In the past six months [Mr. Guardiola] has only spoken to me twice," he complained last week. "I don't know what his problem is. When I walk into the room, he walks out...")
Yet given his age (28), enormous contract and lackluster performance, few teams showed any real interest. Enter Mr. Ibrahimovic's agent, Mino Raiola, a 41-year-old Dutch former pizza restaurateur, who in recent years has developed a reputation as a fearsome negotiator, as evidenced by the mega-contract he secured his client a year earlier.
Mr. Raiola was well aware that his client's career—and future transfer value—was at stake. And so he thought creatively, approaching the archrival of his client's old club, Inter: AC Milan. Milan's off-season had been decidedly low-key and devoid of high profile signings, to the point that a group of fans turned on the club's long-time owner, Silvio Berlusconi, showering him with insults during an appearance at the club's training ground. After years of heavy spending ("In excess of $1.4 billion" according to Mr. Berlusconi), Milan was trying to balance the books.
Yet Mr. Berlusconi, whose day job is that of prime minister of Italy, knows a thing or two about sales and generating buzz among fans. A major signing like Mr. Ibrahimovic would serve the dual function of turning Milan back into contenders and restoring enthusiasm to the fan base. But, having preached fiscal conservatism, he couldn't simply go and blow even a cut-price 50 million or 60 million on Mr. Ibrahimovic.
At the same time, Barcelona faced pressure to sell. Another year of Mr. Ibrahimovic on the bench would further hurt his transfer value. And with Barcelona's cash-flow difficulties in mind, the prospect of being on the hook for another $76 million in salary through 2014 was worrying.
In ordinary circumstances, a straight loan deal might have been an option. Milan could have Mr. Ibrahimovic for free for a season, the player could showcase his skills at a big club, prove that he had not lost his mojo and, hopefully, Barcelona could then sell him in a year's time, while getting his salary off the books. Yet the "worst case" scenario terrified the Catalan club. If he moved to Milan for a year, flopped and then returned, the Beckham Law would no longer apply to him. (It came off the books on Jan. 1 of this year, though those who took residency in Spain before that date were grandfathered in.) And since Mr. Raiola had made sure that Mr. Ibrahimovic's contract was based on after-tax wages, it would mean that, in order for Barcelona to pay him his $15.3 million after tax, it would have to shell out an additional $9 million a year for another three seasons.
So a loan was not an option and Milan was simply unwilling to spend more than €20 million to €25 million. And even that would have to be predicated upon Mr. Ibrahimovic slashing his salary. What to do?
The solution came during a nine-hour meeting on Friday in the form of the unprecedented loan-plus-purchase formula, plus Mr. Ibrahimovic agreeing to take a reported 33% after-tax pay cut, down to $10.2 million net or $19 million gross, because of the different tax rates in Italy. Milan gets the big name it coveted and won't have to worry about paying him until next summer. (This is important because Mr. Ibrahimovic's fee is likely to be raised via the sale of current Milan players, such as Dutch striker Klaas-Jan Huntelaar. Without the urgency of needing cash immediately, Milan can take its time and hold out for the best price.)
Mr. Ibrahimovic gets a likely starting spot at a marquee club in a league where he has consistently done well. Even with the pay cut, he remains one of the highest-paid players in the world, while collecting some goodwill karma along the way. Barcelona gets Mr. Ibrahimovic off the wage bill (and out of the dressing room) straight away while getting a guaranteed €24 million ($31 million) in a year's time. A statement yesterday on the club's website celebrating the fact that Barcelona had just saved itself an estimated €60 million ($78 million, in wages and bonuses) smacks a bit of spin—whatever "savings" are made won't change the fact that it bought a player for 70 widgets and sold him for 24 a year later—but that's understandable. Like a toothache, sometimes a bit of pain today is worthwhile, if it helps avoid a lot of pain over the next four years.
Divorce can be expensive for both parties and in this case it was just that, both for Barcelona and for Mr. Ibrahimovic. Hopefully however, it will avoid a whole lot of heartache, financial and otherwise, down the road.