When Liverpool co-owner Tom Hicks reportedly put a figure as high as £800m on the club shortly after he and George Gillett had put it up for sale it shattered any illusion that the owners had finally admitted it was time to move on.
Later figures suggested demands as ‘low’ as £500m – but were still some way short of what was on offer from the only known bidder for the club.
Although Huang had initially suggested his offer would be no higher than £325m his eventual offer is believed to have been £400m. Despite being more than double the price paid by the current owners in 2007 it would still leave them without any profit to speak of. Annual profits have all been eaten up to cover the high costs of the club’s RBS debt. The last official figure on that debt is £237m; by the time the next attempt to refinance is due, in October, it will be nearer £300m.
On top of the debt to the bank is the debt to the owners. Rather than putting any money in as equity they put their money in as intercompany loans that they slap an annual interest rate of 10% onto. This figure stood at around £130m the last time it was officially revealed.
Hicks is said to expect potential revenues from a stadium yet to be built added onto the asking price. He can’t take the risk on the project himself yet expects a premium to allow others to do so. Most observers are astounded at these demands.
£400m is seen as paying well above the club’s true worth.
Getting Hicks to accept a realistic offer for the club has been seen as the biggest stumbling block for any takeover since DIC first returned to attempt a takeover late in 2007. Martin Broughton’s appointment as an independent chairman was expected to address that issue, his control over the sales process was claimed to include making a decision on what constitutes an acceptable price.
But doubts about how independent Broughton actually is are beginning to rise.
The lack of any official response to Kenny Huang’s statement is telling. And Broughton had no problem speaking to the media after Huang had first made his interest known publicly.
The Hicks camp were said to have shown much delight at the imminent appointment of Broughton back in April amidst reports that former Citigroup executive Michael Klein had been involved in persuading the BA chairman to take the task on. Klein’s links to Barclays Capital (he was involved in their acquisition of New York’s Lehman Brothers) were also said to have been a key factor in BarCap’s agreement to run the sales process for Broughton.
Hicks is said to be close to Klein, a long-time associate, and Klein was expected to act as an adviser to Gillett and Hicks as the auction of the club progressed.
The statement the club put out to announce Broughton’s arrival made it clear what his main role was going to be: “The new Chairman will oversee a formal sale process launched by current owners.
“Following numerous expressions of interest from third parties, the Club has engaged Barclays Capital to advise on the sale process. The Club has the full support of its existing bankers for this process and has financing in place which will fully support the Club’s operations.”
The statement also made another promise: “The Club will continue to progress the well-advanced plans for a new, larger, and state-of-the-art stadium which will form an exciting part of the club’s future development.” The club has not made any noticeable progress on those plans. The shovels remain unused. In fact the shovels are still in the shop.
Another promise made was that Hicks and Gillett were looking to sell to “owners committed to take the Club through its next level of growth and development” and that Broughton would “oversee the sales process in the best interests of the Club and its supporters.”
Broughton himself made promises too: “I will run this sale process in the right way, for the benefit of the Club and its fans.”
After the statement came a number of interviews and more of the right kind of words from Broughton: “Whoever comes in has to be the right owner and the board will ensure that we make the right decision,” he insisted.
But he also made it clear that he wasn’t acting just for the supporters or the club: “We will make it very clear what the buyer needs to do from the point of view of the supporters, and Tom Hicks and George Gillett will make clear to us what they are looking for in terms of price.”
And perhaps that is key to why the process has stalled. Did Broughton concede more control to the owners over the sale price than he has claimed in subsequent interviews?
At that time he wasn’t insisting on new owners coming in and taking away the debt: “We will look at every offer that comes in for the club. We are ruling nothing out, but when you look at what we have said we want from a buyer it is very different [to 100% debt]. That sort of bid is not going to be particularly attractive and we would need to be persuaded that it was in the best interests of the club.
“Some debt is inevitable, given the plans for a new stadium, and it would be foolish to run a club like Liverpool with no debt. You would be mismanaging the balance sheet, but there is a major difference between some debt and a hundred percent debt.”
Two-and-a-half months later and Broughton admitted there was yet to be a bid for the club. “There have not been any offers at this stage,” he said. “There haven’t been any offers to turn down and I wouldn’t have expected there to have been at this stage. There are a number of interested parties, but there’s no specific deadline on it. We are looking to the middle of July-ish for the first round of bids but that’s not a final stage – that’s a first entry through.”
So based on getting that first round of bids in by mid-July Broughton had a target for getting the whole deal done: “We’re hopeful – and I wouldn’t put it any stronger than that – that a deal can be done by the end of the transfer season. That was always from the outset a hope rather than necessarily an expectation, because these things can take time. We are on course, pretty well, with where we would have expected to be.”
As it was he still hadn’t had a single bid by mid-July. By the middle of August he’d had at least one bid, with proof of funds included. Yet he was still sending out the message that it would take until October to finalise the process. It’s little wonder Huang was unimpressed.
By now Broughton was denying that the owners could name their price: “The owners can’t block the sale of the club. I read all too frequently numbers being floated about in the media, normally associated with Tom Hicks’ name. I would like to make it clear there is no number. There is no base line.” Not quite what he’d said in April.
He went on to explain what kind of bid would win: “This is a willing buyer, willing seller auction. We will do a deal with what we consider to be the best bidder. The best bidder may not be the highest bidder.”
And then came the claims that in light of last night’s developments seem some way off the truth: “It’s about more than just money. It’s about stadium development, the team and the whole piece. Once we’ve been through the process, the best bidder gets it.”
So it’s not just about the money, it’s also about stadium development and the team. Which brings to mind a statement issued last night by Kenny Huang: “We concluded that a plan that properly capitalizes the business and provides funds for a new stadium and player related costs would allow Liverpool FC to provide its great fans with the success they deserve.” So that’s the money, the stadium and the team all covered. What else does Broughton want?
As of last night there was no evidence of one single other bidder who had both put in a serious bid and proved the funding was in place. By default Huang’s bid was the best bid.
To add more weight to the theories that Broughton had received no other viable bid, suggestions were made earlier this week that potential investors were still being approached about making a bid for the club, well after Broughton’s supposed bid deadline was over.
Less than three weeks ago Broughton still said he was aiming for a deal to be done by the end of this month. Huang had just been named as a potential bidder, it was the 2nd of August, and Broughton said: “It still remains the objective to conclude a deal before the end of the transfer window. That remains the objective but there are no deadlines, and we will continue working to complete the process.”
And Broughton suggested there was no guarantee of a sale price that gave Hicks and Gillett a profit: “There could be a possible realisation of an equity consideration, but both George Gillett and Tom Hicks remain on the board and they have given commitments that the board of Kop Holdings is the party that is responsible for the sale.”
When Huang made his first move for the club, many months after starting work on the project, he went to RBS first, looking at the possibility of buying out the debt as a way of gaining control of the club.
RBS asked him to speak to Broughton instead. He agreed to this and would eventually make his bid for the club through the process Broughton was running. He followed Broughton’s instructions, gave Broughton everything he’d asked for in their talks ahead of the formal bid. Broughton didn’t even bother using his staff discount (assuming he still gets one) to take a flight to Hong Kong or Beijing to meet Huang.
In the end Huang wouldn’t wait any longer for Broughton, now fans are left wondering if that’s what Broughton wanted anyway.