Texan Liverpool co-owner Tom Hicks is beginning to soften his stubborn approach to selling his share in Liverpool Football Club, as Dubai International step up their efforts to buy the club they missed out on just over a year ago.
According to Chris Bascombe in an article on the News of the World’s website, George Gillett Junior will be the most likely of the two to bail out first, with a healthy profit coming his way as soon as he does. The report says that the duo would share £50m between them, with the negotiations having reached a “key stage”.
The report also says Hicks is “the main obstacle”, with DIC seeking a “swift conclusion”.
Regardless of how hard Hicks tries to deny it, there’s no doubt whatsoever that DIC are in talks with the current owners about buying into the club. PR firms have been engaged to deal with the press on behalf of DIC, and even before that key journalists were getting information to pass on to their readers. And that’s not only coming from DIC, there are people inside the club other than Hicks and Gillett who need to be involved in at least certain aspects of the interest from Dubai.
What is in doubt is just how much money is being put on the table by DIC, and how much the US owners are now demanding. They paid £174m for the club last year. Or at least they borrowed the money to pay for the club, including an additional £45m to pay off the club’s debt at the time of making their offer to shareholders, a total of £219m. In theory you could have gazumped the duo with a quarter-of-a-billion a year ago had you got it to spare (or were able to borrow it).
By the autumn gazumping was out of the question because you’d now have to convince Hicks and Gillett to sell rather than David Moores. And Hicks and Gillett were willing to sell part of their share in the club by then – and began talks with DIC to negotiate such a deal, as Tom Hicks confirmed earlier this year. But now a quarter of a billion wasn’t enough. Hicks and Gillett’s asking price for the partial share in the club was based on a value of £1billion for the whole club.
In six or seven months the club’s value, if Hicks and Gillett were to be humoured, was four times greater. Yet nothing had changed. Drawings of a stadium that turned out to be a fantasy had been produced, and given planning permission too based on a 60,000 capacity. But drawings don’t add value to a club to the extent that it becomes worth four times its previous value. Transfer dealings were no different significantly to other seasons, Rafa spending a pretty standard £20m net in 2007, so the squad wasn’t now worth three-quarters of a billion more than before. Nothing new had happened in terms of new potential income streams either – TV deals were in place before the owners took over, thirty-ninth games hadn’t been mentioned. And thirty-ninth games don’t make a club £750m more expensive either.
With that in mind, DIC politely declined, but their interest had been rekindled.
Hicks and Gillett were sweating on getting a refinancing package in place to replace their loan from a year ago and it went right to the wire before they got it, and not on terms they liked. They wanted to load all £350m of their newer, bigger loan onto the club. The banks weren’t keen, nor were the non-family members of the board. Eventually the loan was split into two portions. £105m went onto the club’s books and the rest was put onto the holding company’s books, but secured against assets owned by the two families. Some of the club’s £105m was to be used, the owners claimed, for transfers and initial work on the new stadium. By then it was too late for the winter transfer window, which had just closed, and we’ve still heard nothing about progress on getting the latest version of the stadium project underway.
According to the report in the News of the World, the club is valued at £400m, and this would leave the £50m for the US owners to split with each other after the £350m had been settled with the banks. Other reports recently have referred to figures as high as £550m, but it seems that a figure in the mid-£400m range is most likely to be a maximum.
Another complication to any DIC takeover which has been suggested previously is a condition of the owners’ original purchase. Both owners are believed to have first refusal on each others’ holdings should one party wish to sell, and this is mentioned again in today’s report. A common business practice, it does leave us all with what Chris Bascombe describes as a “nightmare scenario” – the possibility that Hicks could take that option and become the 100% shareholder in the club.
Gillett certainly couldn’t afford to buy Hicks out; his finances are believed to have been stretched to the limit with the guarantees he had to put in place for the recent loan. Hicks too would struggle to raise that kind of money and no doubt would already have bought Gillett out some time ago had he been both willing and able.
That recent loan was hard for the owners to raise, and Bascombe suggests that perhaps the next stage on that obstacle-laden path to the new stadium, a further loan of £300m, may be one bridge too far for Hicks. He writes that with this in mind, “even Hicks’ hardline stance has softened in recent days.”
Elsewhere there remain rumours that Hicks will retain some interest in the club, a minority holding which would allow him to make further profit in the future if the new regime run the club successfully. In fact depending on the final price paid, he could retain a 10% share of the club having had all his share of the £350m debt paid off.
If DIC valued the club at £450m, but Hicks wanted to retain a 10% share of the club DIC would therefore pay Gillett £225m – 50% of the club’s value – and Hicks would get £180m – 40% of the club’s value. Hicks currently owes half of the £350m loan that was recently taken out, which is £175m. The money from DIC would cover that, and leave him with a nice £5m windfall to spend on a gift for the family. Obviously those figures are nice round numbers, and with £105m of the debt now actually in the club’s name it may work slightly differently, but Hicks could retain a partial ownership of the club, get a say in what happens in the future, and continue to make money from it. And it would have cost him nothing, other than time and aggravation.
Whether we get a complete takeover by DIC or otherwise, it’s now extremely likely that the Arabs will be running the club quite soon. This season has been a write-off in so many ways the summer break can’t come soon enough. We have to hope that it comes back stronger, as it should have done last summer.
From the first signs of trouble last summer, through the mess we’ve seen both sides of Christmas, many of the facts have been broken by Chris Bascombe in both the Echo and more recently in the News of the World. He’s written an interesting chronology of events that lead up to today’s hopeful proximity to a new era for the club, and reveals something which might surprise you:
“In recent weeks an unlikely bond has formed between Hicks and Benitez. The bust-up which prompted so much bad blood splattered across the back pages has been mended.”
This ties in with what was being said earlier in the month that Rafa had been reassured privately about his future and had accepted those reassurances. The reassurances were said to be from Hicks, not Gillett, who remains silent. Rafa now seems to have softened in terms of his view of Hicks, which is quite some turnaround, but of course planning his off-field tactics is as big a part of Rafa’s day now as planning the on-field ones.
Cynics might suggest that Chris’s chronological article, accompanied by images of certain back pages from the paper, is a plug for the News of the World to try and win back some credit after last week. Rob Beasley’s “exclusive” was considered by Rafa to have sufficiently twisted his words that he started to take legal action. In reality the article serves more as a plug for Chris’s work and the stories he’s managed to break through the long-term building of LFC-related sources. It serves as a reminder that not all the NotW reporters should be tarred with the same brush, and that what Chris writes is as important for Reds to read now as it was when he was writing in the Echo. You can read the article in full on the NotW website – http://notw.typepad.com/sport/2008/02/kop-yanks-for-n.html – it makes interesting reading.
Also making interesting reading is an article in the Telegraph. It seems they’ve been tipped off that Peter Crouch is considering using a new ruling that allows players to leave for a fee equal to their remaining wages if they’ve served a specific portion of their contract. This ruling was one of the reasons Rafa made it clear that new deals for Gerrard, Reina, Alonso and others were so important last summer. Before supporters get angry with the England international, the article does suggest that Crouch would be looking to use the ruling to boost his bargaining power in contract renewal negotiations, rather than in a real attempt to leave Anfield.
Crouch… is the latest big name to consider using the loophole. The Sunday Telegraph understands that Crouch is carefully considering exploiting the ruling, one of several options open to the England striker whose current deal expires at the end of next season.
Although both Liverpool and Crouch’s agent Jonathan Barnett refused to confirm that similar action was being taken by the player, it is understood that the threat of buying out his contract and leaving for far less than his market value is likely to form part of Crouch’s negotiations.
Barnett said clubs had nothing to worry about if they behaved responsibly: “Certainly it will change the way things are conducted and we are probably heading for a period of shorter contracts. But I’ve never heard of a player volunteering to leave a club when he is happy and being well-paid.” Whether Crouch is happy is another matter, however; he played yesterday, but has started only six Premier League games this season.
Although the rule applies only to cross-border transfers, Graham Shear, one of the country’s top sports lawyers, says this was an unviable restraint and “would certainly be challenged”.
Crouch was reportedly attracting offers of around £10m last summer, a clear profit on the £7m he was bought for. A player with 16 months left on a £50,000 a week contract could leave for less than £3.5m under this new rule.
I suppose it gives us all something else to think about for a change.