Liverpool FC has been saved from the ignominy of administration and a potential nine point reduction by the £300 million bid from John Henry and the New England Sporting Venture.
After years of uncertainty under American owners Tom Hicks and George Gillett, fans of the club were given the news they were all dying to hear today. Chairman Martin Broughton has received a formal bid for the club from Boston Red Sox owner John Henry and if a legal dispute can be resolved by October 8 the world famous club could find itself moving towards a new era.
LFC Board 3-2 Hicks and Gillett
Last night Martin Broughton brought two formal bids for the club to the board, only to find that both Tom Hicks and George Gillett rejected them. The British Airways chairman was brought into the club by Hicks, Gillett and RBS last April to find credible prospective buyers for the club. After a long search he has delivered New England Sports Ventures who are willing to pay £300 million for the club.
This figure is far below Hicks’ and Gillett’s’ valuation of the club, some £600 million, and in a move to re-assert their grip on the club they tried to sack Christian Purslow and Ian Ayre from the board and replace them with Mack Hicks, Tom Hicks son, and Lori McCutchoen who works for him. The split is such now that neither side recognises the other and a court case over the future of the club is almost guaranteed.
Hicks and Gillett bought the club for £219 million in 2007, all of which was funded by bank loans and have invested £144 million in the last four years. That £219 million has swollen to £280 million through fines and interest over the last four years and it is that fee which NESV are willing to clear, as well as debts to Liverpool City Council which are estimated at around £60 million.
The American duo, who have endured a frosty relationship at the club, seem to have joined forces to keep control of the club and their latest attempt to retain power at Anfield would seem to be their last throw of the dice.
Broughton was brought to the club in April to find a financier for the club who would clear the Reds’ debts with Royal Bank of Scotland and Wachovia, an estimated £350 million. Broughton claims that under the terms of his contract he had sole control of Liverpool’s board and was the only person who could remove anyone from it. From here it would seem that in trying to remove Purslow and Ayre that Hicks and Gillett have violated the terms and conditions of the said contract and now find themselves on rocky ground as far as the proposed takeover is concerned.
In effect, Purslow, Ayre, and Broughton voted together to accept the bid against Hicks and Gillett.
However, Hicks and Gillett deny that any such clause existed and are adamant that they are the only show in town.
The Premier League have been kept abreast of all financial dealings at the club throughout this long process and released a statement where they hope to have the new owners ratified by October 8.
If the bid from NESV goes through Liverpool’s current American owners will lose around £144 million that they loaned to the club through the period in charge. RBS’ loan and fees of £280 million will be cleared entirely and the £60 million that has been spent on a new stadium will also be cleared.
However, Hicks and Gillett have launched a legal challenge to the bid under the caveat that Purslow, Ayre, and Broughton were not acting in the clubs best interests as the potential bids “dramatically undervalued the club”.
Broughton said: “The court will ultimately decide whether the owners were successful. The reasoning behind it was that the owners felt we were reviewing two bids which they considered undervalued the club and therefore they wished to remove Christian and Ian and replace them with Mack Hicks, who is Tom’s son, and Lori McCutcheon, who also works with him.
“We don’t think it was valid to do it. Essentially when I took the role they gave a couple of written undertakings to Royal Bank of Scotland. Those written undertakings included that I was the only person entitled to change the board and that was written into the articles of the covenants, and also that they would take no action to frustrate any reasonable sale. And I think they flagrantly abused both of those written undertakings.”
In going for NESV’s bid for the club, Broughton is believed to have turned down a rival bid from Asia. Without confirming the identity of the individual involved, Broughton did confirm that the bid came from a Singaporean billionaire businessman who had no track record in dealing with sports franchises.
The erstwhile Liverpool chairman obviously felt that the NESV’s past dealings with basketball, motor racing, and the Red Sox in particular gave them the upper hand .
However, the very same thing was said about Tom Hicks’ and George Gillett’s bid back in 2007.
Legal Battle for LFC
Their legal challenge is now the key to where Liverpool FC will move to from here.
As it stands; Liverpool FC has until October 15 to clear their debts with RBS. If the British government owned bank does not have it’s loans cleared by then, it will have the power to force the club into administration.
With the news that NESV are willing to buy the club that would seem entirely unlikely to happen. NESV has launched an official and formal bid so even with the current owners legal challenge, which could take weeks rather than days, all RBS has to do is sit tight and extend the deadline.
It gives them a huge amount of wiggle room.
If the bid is real and tangible, RBS can wait until all legal proceedings are finished and sell the club to the prospective owners. If the deal flounders, they can place the club into administration and if by some amazing piece of financial magic Tom Hicks and George Gillett manage to come up with £350 million they will also be in a position to have their loans cleared. A win-win situation for the bank.
The best news of all for Liverpool FC is that the Premier League has studied NESV’s financial plans for the club and that it would “not” suffer a nine point reduction even if RBS forced the club into administration.
When asked about Liverpool’s debt Broughton had this to say: “All of the acquisition debt that was involved in the current owner’s acquisition will be removed completely. We’ll still have what we call normal working capital debt and there’s a facility there for the new stadium which will remain in place, but to all intents and purposes all the major debt that has been causing our problem has been paid off.”
This would leave Liverpool with an estimated debt of £37 million, one of the lowest in the EPL.
How Did Liverpool FC Get To Here? Built by Shanks Broke by Yanks?
To get to this sorry stage a “perfect storm” of events has combined to cripple one of the jewels of world football. Make no mistake about it, Liverpool FC is mentioned in the same breath as Barcelona, Real Madrid, and Manchester United when it comes to dealing with the true elite in the game. They are a club whose mythos is captivating and it is no surprise to see that the Reds are the most supported English team in Europe and have the most hit football website in the world.
In February 2007, Tom Hicks and George Gillett was brought into the club amid huge fanfare that they would be the very owners to bring Liverpool back to the pinnacle of English football after near on 20 years without winning the league title.
One month later and the duo promised that groundwork’s on a new stadium at Stanley Park would start immediately. However, within 12 months the owners had fallen out with each other and Rafael Benitez, the team’s manager at the time.
That dispute intensified over the next two years eventually ending with Benitez’s departure from the club as both Purslow and Broughton were brought in to find potential buyers and investors for the club as Hicks’ and Gillett’s financial empires suffered.
Over the last year there have been several parties interested in buying the club, but none were willing to meet the American’s £800 million valuation of the club. That caused them to dramatically reduce that figure to £600 million, but today’s bid of £300 million by NESV is way below anything Hicks and Gillett would openly accept.
If the NESV bid goes through, Hicks and Gillett will leave the club making huge losses.
Early indications from Hicks and Gillett are that Mack Hicks and McCutcheon now form the board with them and that they now out vote Martin Broughton by four to one. They do not recognise Purslow or Ayre as board members and will fight the sale of the club for anything below their valuation tooth and nail.
The legal ramifications of this will not be lost on RBS, who may or may not wait to see who stands victor when the dust has settled.
The Rafael Benitez Factor
Unfortunately for some Liverpool fans who still chant his name, Rafael Benitez must also share some blame in the clubs current demise. During his six years at the club he spent around £240 million on transfers and helped see the clubs wage bill rise from £66 million to around £100 million today.
While his net spend is always defended, the standard of players he brought to the club cannot. Roy Hodgson has been rightly criticised for the team’s poor start to the season but he inherited a team in huge decline and for that Rafa is to blame.
John Henry and NESV: Liverpool’s Panacea?
John Henry is the 61-year-old owner of the Boston Red Sox and has something of a reputation for investing in sports franchises. He made his money in the ’70s and ’80s through Hedge Funds and his wealth is estimated at around £800 million.
This figure will be the key one that Liverpool fans will tune into because it means straight away that Henry will not be a sugar daddy owner in the vein of Sheikh Mansour or Roman Abrahmovich.
His interest in LFC is based around the commercial aspect of the and in maximising the brands reach around the world. The days of a football team just being a football team are gone and Liverpool are now a recognised “media company” with a reach to millions around the world.
The clubs current fan base is simply enormous but NESV will undoubtedly try to break into the Chinese and Asian markets to promote their brand. The link up with the Boston red Sox looks like a media/advertising dream on paper but Henry’s bid from Liverpool has already brought stern criticism from fans groups in Boston who do not want their Baseball team to prop up racist fans who chanted anti-American slogans against Hicks and Gillett.
Sky Sports News interviewed several unhappy Red Sox Fans outside Fenway Park with one particular fan going as far as to say that he did not want to be linked with Liverpool.
He said, “I would be totally outraged if we were to be connected in anyway to Liverpool football club. I urge any Sox fans to look at the anti-American hatred that this club has been spurting out over the past few years. Liverpool is a club with many, many problems – if we bail them out those problems will simply spread over to us.”
Henry’s commitment to the Red Sox cannot be put in doubt. In 2002 he took over the flailing brand and helped guide them to the first World Series title in 86 years which they won again three years later.
So he recognises that for his brands to be successful off the pitch they will have to be successful on the pitch.
It is worth noting that Fenway Park, the Red Sox’s Stadium, was in a poor state in 2002 when Henry took over. Much like Anfield is today.
But while rival bidders for the franchise said they would build the Red Sox a new super stadium, Henry merely stated that he would improve the old one. He spent around £100 million improving the 37,000 seat stadium and decided not to build a new one.
NESV has yet to issue any statements and as such have not commented on squad investment but Broughton believes there is cause for optimism: “They don’t want any hostages to fortune, very sensibly, so they’re not going to make any comments about how much or anything like that. But this goes back to the winning mentality.
“I think the demonstration is: let’s look at what they have done at Boston, what they said in Boston, what they have done in terms of investing in players – and I think you get a high degree of confidence of their willingness to do that” and “there’s definitely a commitment to invest in a stadium and we will finish up with a 60,000-plus seater.”
A Light at the End of the Tunnel
The shining knight in Red armour has materialised, it isn’t the sugar daddy that some Liverpool fans may have hoped for. For many, and worse still, the club will pass from one group of American owners to another group of American owners.
However, the club may be just about to be bought by the best people possible. A group who will ensure that LFC is self sustaining and a model of efficiency going forward.
Or maybe it could be Hicks and Gillett part two. NESV don’t have the finances for Liverpool to match the likes of Manchester City and it remains to be seen whether their bid is in equity or if it is a loan that will then be placed onto the club.
Only time will tell. For the moment, Liverpool FC can look forward with optimism.
