Liverpool’s £400m shoot out
Despite heavy debts and a tough season ahead, the Anfield club is still luring millionaire bidders eager to buy a team with legions of fans
Matthew Goodman and Ben Marlow
Ryan White threw down his stick and launched himself at Eric Nystrom, landing a couple of hefty punches. The pair traded blows in a typically aggressive ice hockey ruckus before the referee broke them up.
Watching the brawl from his private box high up in Montreal’s Bell Centre arena was George Gillett, the co-owner of Liverpool Football Club — and the then owner of White’s team, the Montreal Canadiens.
The game against the Calgary Flames was gripping, but Gillett had bigger things on his mind. With him in his box were Tom Hicks, his business partner at Liverpool, and Yahya Kirdi, a Syrian footballer-turned-businessman.
Kirdi, they thought, could be the answer to their dreams. He wanted to buy Liverpool. The three men had been introduced earlier that day by Dan Diamond, a sports business consultant who was also in the box.
Nine months on, the negotiations that began at the ice hockey game have made good progress. Kirdi’s representatives insisted last week that a deal is close to being agreed.
If only it were that simple. Liverpool are the latest member of England’s Premier League to attract the attentions of millionaire buyers and are at the centre of an international bidding war.
Numerous exotic names have been mentioned as suitors, all seemingly willing to pay off the club’s debts and buy out Hicks and Gillett. But it is far from certain that any will succeed. “The situation is as clear as mud,†lamented one club insider.
While Kirdi negotiates direct with Hicks and Gillett, Kenny Huang, a Chinese businessman with links to basketball, has been suggested as favourite to clinch the deal. But he, too, faces tough competition.
The man presiding over the confusion is Martin Broughton, the chairman of British Airways, who was appointed to the same role at Liverpool in the spring.
He is working with Barclays Capital, the investment bank, to find a suitable buyer for the club. And while they would like a conclusion sooner rather than later, they are not prepared to be bounced into a quick sale if the bids on the table are not sound.
Huang has publicly declared an interest, although he said he had not made a formal offer. There is also uncertainty about whether the China Investment Corporation, which invests on behalf of the government, is helping to finance his bid.
Sources close to Huang insist he is serious, apparently even sending a delegation to Spain to assure Fernando Torres, who was until recently mulling his future as Liverpool’s star striker, that there would be plenty of money to lavish on new players should the Chinese bid succeed.
Keith Harris, chairman of Seymour Pierce, the stockbroker, and a veteran of football takeovers, last week claimed he was working with “very seriousâ€, “cash-rich†bidders.
Other names resurfaced. The al-Kharafi family from Kuwait was said to be among a handful of wealthy interests in talks with Barclays. Rhone Capital, a New York private equity house, has a standing offer to buy a 25% stake in Liverpool in a deal that would value the club at £400m. Subrata Roy, an Indian billionaire, is also said to be considering whether to submit a bid.
The club is waiting to see the full details of how the bids will be funded. It wants to ensure that, whichever triumphs, the buyer has pockets deep enough to fund a planned new stadium and invest in the squad.
Several observers were dismissive of Kirdi’s attempts to take control of the Anfield club. Although he is said to be ready to pay off the £237m debt owed to Royal Bank of Scotland and Wells Fargo, the American bank, as well as to pay Hicks and Gillett for their equity, the identities of others in his Middle East consortium have yet to emerge.
The doubters claim that Kirdi, a former Syrian football international who has lived in Canada for several years, is nothing more than a stalking horse who is being used to push up the price.
Dan Diamond insisted that was not the case. “I fully appreciate there will be people who question our sincerity or our ability to complete this deal until we do. Our job is clear — to complete the deal.â€
Why would anyone want to own a football club? For those packed into court 52 at the Royal Courts of Justice last Thursday, it might have been a hard question to answer.
Alongside the lawyers and reporters were Portsmouth fans desperate to hear the judge rule on the fate of their club, which went into administration in February with debts estimated at £130m.
The ruling went in the club’s favour, saving it from liquidation, but the legal reprieve hasn’t altered the fact that its finances — and those of many other teams — are a shambles.
Clubs are drowning in debt as they compete for players whose wages they cannot afford. They are living far beyond their means.
A review of football by Deloitte, the accountant, found that Premier League sides spent an average 72.5% of revenue generated on wages. The average wage bill was £66.4m last season, up 14% on the previous year.
It is an unsustainable model that Uefa, the European governing body, wants to change. Its financial fair-play regulations, which will come into force by 2012, aim to curb excessive spending on transfers.
In the meantime, more clubs will struggle for survival. In the past year, Sheffield Wednesday, Cardiff City and Southend United have had to face the taxman in court over unpaid debts. In March, Chester City were wound up.
Last season was Liverpool’s worst for years. They finished seventh in the Premier League, failing to qualify for the lucrative Champions League. That could cost the club £40m in lost income, though insiders insist buyers would not be put off by one season’s performance.
Off the pitch, the debts and losses mounted. The club claimed recently that profitability had improved since Hicks and Gillett took over. The most recent accounts suggest otherwise. Net losses increased to £53m last year, largely because of £40m interest charges. Over two years, the company has racked up losses of £95m, including interest charges of £76m. Net borrowings were £351m, up 17% on the previous year. Included in the outstanding debts is £144m owed to Kop Football (Cayman) Ltd, a company controlled by the co-owners. That debt had climbed £86m in one year.
The club has been forced to renegotiate its borrowings several times. Last July, RBS granted a six-month window. A further six weeks was granted in January, and when the club was put up for sale in April, RBS gave a 12-month extension to allow buyers to be found. However, it retained the right to call in the loans early and it is thought the extension was non-binding.
To compound the delicate situation, Liverpool’s auditor, KPMG, expressed doubts about the club’s reliance on short-term loans and its ability to remain a going concern.
“Plenty of people have looked at the books in the past but have taken flight when they realise how bad the financial situation is,†an adviser to one bidder said. Those connected to the club beg to differ.
Despite the financial risks, tycoons are still keen to get into football. One City source who has advised on club takeovers said: “I get rich people asking me all the time, ‘Should I buy a football club?’. I tell them to buy a vineyard, an Aston Martin or a Picasso. They cost less money, come without the reputational and financial risk, but your friends will still be impressed.â€
Nonetheless, even royalty and foreign governments want a piece of the action. In 2008, Manchester City were bought by a member of Abu Dhabi’s ruling family.
As well as the prospect of making money by revitalising underperforming clubs, investors are attracted by the high public profile that comes with owning a top football team.
The world’s biggest game provides an opportunity to promote other business interests on a global stage. Clubs become trophy assets on which billionaires can afford to lose money.
Others have profited. The Glazer family has made millions from Manchester United over the years. If they sold the club tomorrow, they would probably make a big profit.
Liverpool’s past successes make them attractive to investors. During the 1980s they were one of the top teams in Europe, helping them to create a global fan base. Tim Crow of Synergy, a sport sponsorship agency, said: “Liverpool are a sleeping giant. If you go to the Far East and look at Premier League shirts on sale in stores, you see Manchester United and Liverpool. With the exception of United, Liverpool have more fans round the world than any English club.â€
Many of those fans don’t care about replica shirt sales, they simply want to see the back of Hicks and Gillett and a semblance of stability. They marked America’s Independence day last month with a protest rally. Jim Boardman, founder of Anfieldroad.com, an independent fan website, said: “Most supporters just want the owners out and the debt brought down.†Even advisers to the club say they want an end to “the pantomimeâ€.
It is, though, still far from clear whether the question of ownership will be resolved by the time Liverpool kick off the new Premier League campaign against Arsenal next weekend.
Despite the speculation about the possible takeover, the club and its advisers have remained resolutely tight-lipped. They have spent the past few weeks ensuring that those putting themselves forward as credible bidders are able to put their money where their mouths are. Then the serious business of negotiation begins.
While many would like to see a new owner installed before the transfer window closes at the end of this month, thus giving a new regime time to bring in fresh talent, that is unrealistic. More likely, a preferred bidder will be selected within the next month, who will then be given leave to finalise a takeover.
Hicks has already been forced to sell another of his sports businesses. Last week the Texas Rangers baseball team was sold at auction for $600m (£375m) to a former star pitcher, three months after filing for Chapter 11 bankruptcy protection.
That process had developed into a high-profile dust-up. The tug-of-war for Liverpool is also turning into quite a fight.
Additional reporting by James McCarthy
Sheikh-up at Man City has yet to work
Whoever ends up buying Liverpool, they are going to need some serious financial muscle to compete with the Anfield club’s neighbour 30 miles away.
Since taking over Manchester City nearly two years ago, the Abu Dhabi group led by Sheikh Mansour bin Zayed Al Nahyan has been prepared to spend big in an effort to achieve success.
It has lavished millions on a string of signings. Last year City spent £120m on new players — about a quarter of the total spent by the Premier League clubs.
This year, Manchester City has again been hyperactive in the transfer market, splashing out another fortune to add to its ranks of top talent. It has forked out more than £80m during the current off-season, adding star players such as Yaya Toure — who will receive a basic salary of £185,000 a week — and David Silva.
The question is whether spending all that money will result in a winning team. In the club’s first full season under its new backers, it did not. City were pipped to fifth place in the Premier League, meaning they missed out on qualifying for the Champions League, Europe’s most prestigious tournament as well as its most financially rewarding. The owners will be hoping for a big improvement this season. They want to repeat the experience of other clubs.
Chelsea had not won the title for decades until Roman Abramovich led a takeover in 2003 and launched a huge spending spree on players. Since then, the team has won the league three times.
Similarly, Blackburn Rovers won the Premier League in 1995 thanks to the millions spent on the team by its late benefactor, Jack Walker.
Spending lavish sums is no guarantee of success. Liverpool have been among the Premier League’s biggest net spenders on transfers but have failed to win the competition since its inception in 1992.
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