LFC Talk


Balague on the ownership issue by lfctalk
September 8, 2008, 12:12
Filed under: News

Guillem Balague has given his views and knowledge on the potential DIC takeover of Liverpool FC on his blog:

“To begin with, we need to get away from the idea that it will be Dubai International Capital that ultimately takes control of Liverpool football club. DIC have, until now, been operating on behalf of Sheikh Mohammed bin Rashid Al-Maktoum as the private-equity investment arm of the Dubai Government. However, DIC represents just one of a number of financial vehicles available to Sheikh Mohammed and it is highly likely that an alternative one of those will end up leading the bid to take control at Anfield.

“DIC had been leading the negotiations over a proposed takeover of Liverpool – through intermediary Amanda Staveley, of London based PCP Capital Partners – for the last couple of years.

“However, the financial situation surrounding the club has changed dramatically since DIC’s initial £220 Million bid 24 months ago, and the current climate is now less favourable for such a private equity fund to become involved.

“To begin with, a new bid would have to cover the £350 million debt and Gillett and Hicks will also walk away with a profit of £75 million each from the sale. Add to those figures the costs of building a new stadium under the ‘current global financial climate,’ as Hicks put it last week, and it becomes clear that something close to a billion pound investment will be required to fulfill the club’s ambitions. For an equity fund, like DIC, that would need to see a return on it’s investment within 8- 10 years, rather than generationally, that kind of massive investment may be prohibitive.

“However, while the talks have been low key, ‘they have been ongoing’ with Dubai – as Staveley told an Arab magazine a couple of weeks ago – and both the Dubai ruler, Sheikh Mohammed bin Rashid Al Maktoum, and his right-hand man, Mohammed Al Gergawi, have been personally involved in negotiations.

“Nothing has been agreed yet, and Gillett and Hicks are still resisting the sale of the club to Sheikh Mohammed, leaving it until as late in the day as possible – after all, that is their game as high level debt poker players. However, the pressure is mounting on them to sell as the credit crunch continues to undermine their ambitions for the club: it was only last week that they blamed the global financial climate for the postponement of building work on the new stadium at Stanley Park. The pair are now aware that they simply do not have the resources to deliver upon their lofty ambitions for the club that they promised when they took control in 2007.

“They are also likely to come under pressure to sell from the Royal Bank of Scotland and Wachovia, the banks with whom they secured a £350 million refinancing deal a little more than seven months ago. That deal is due for renewal this coming January and neither bank is certain to grant them the option of a six month extension: a situation that would force a sale as the banks would effectively become the club’s owners and they would be looking to quickly sell the club to the highest bidder.

“It is easy to understand the banks position in all of this. After all, with the club owing annual interest payments of £30 million, Liverpool’s financial security, under Gillett and Hicks, is almost entirely dependent upon future Champions League qualification. The Abu Dhabi takeover at Manchester City, and the increased competition for places in Europe’s elite club competition that it will surely bring, makes Liverpool’s future dependence upon Champions League revenue look even more precarious than it already was.

“The irony is, that as the Americans at Liverpool appear increasingly more helpless in the face of the massive injection of Arab wealth at Manchester City, the new owner at Eastlands, Sheikh Mansour, is married to the daughter of Sheikh Mohammed of Dubai. Those family ties, however, are purely anecdotal and the fact is that the two Arab states are in competition with each other as rivals for status and international prestige. There is no collusion, and the Premier League could provide a platform for the two Arab states to go head to head on the world stage.

“Nevertheless, the Abu Dhabi takeover at City could certainly help pave the way for a similar takeover at Liverpool from Dubai. The RSB and Wachovia have not yet put pressure on the Texan pair to sell, but they are aware of the bid from Sheikh Mohammed and if they fear that the Americans are unable to fulfill their pledges under the current financial climate – and with Arab wealth in Manchester jeopardising Liverpool’s place at the top table of European football – it may only be a matter of time before the banks have no other option but to force Gillett and Hicks to relinquish control at Anfield.”

Source: http://www.guillembalague.com

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