David Conntalks to Keith Harris, adviser to club-buying billionaires, who says the good times are over
WHATEVER 2009 has in store for English football as economic crisis engulfs the world, it is unlikely to include another giddy round of club takeovers, according to the man who engineered a packet of them, Keith Harris.
At the turn of the year, when Newcastle United, a club that Harris had been instructed to sell, was withdrawn from the market, the club's owner, Mike Ashley, sought to make a virtue out of necessity, telling somewhat sceptical fans: "2009 will be the year we drive the club forward together."
That Newcastle, despite the turmoil, had been considered a prime Premier League club for investors because of St James' Park's 52,000 capacity and the Geordie willingness to fill it but the club was on sale for three months and no buyer bit. Harris said that, despite interest from the US, Middle East and South Africa, a solid offer never arrived.
"The problem was not the price being asked but the general climate," he said. "In a way it is a wake-up call: we're in the toughest economic situation anybody has endured in our lifetime and that means we are unlikely to see much activity on the football takeover scene."
For Harris, a banker with the firm Seymour Pierce, that negative diagnosis includes Everton, which he remains instructed to sell, and the other Premier League clubs publicly for sale, including Portsmouth and Blackburn.
Harris advised the billionaires who bought Chelsea, Aston Villa, West Ham and, at Manchester City, Thaksin Shinawatra, but now says the party is over and clubs - with Sheikh Mansour's City the exception - should go into 2009 committed to tightening belts, not hoping for a sugar-daddy saviour.
"We have been through a time when clubs have been overspending, with very ordinary players commanding huge transfer fees and wages," he said. "The climate has changed and takeovers are not going to be the solution to the woes that they may have been two years ago. That is unequivocal."
Harris painted a picture of straitened times even for billionaires, some of whom, like West Ham United's owner Bjorgolfur Gudmundsson, have been seriously damaged by the banking collapse. In that environment, and with the financial world bracing itself for the inevitable next hideous shock, Harris said those who might have taken a punt on English football's global "brands" have become suddenly more cautious.
"You can't force a club down somebody's throat," he said. "They have to really want to buy it. They may expect to make money out of a club ultimately but a football club is a trophy asset. Confidence is dented everywhere and I do not see much activity on takeovers until we get some form of stability in people's minds."
He argues that the club which might prove the exception and find a buyer is the one most afflicted by the banking collapse, West Ham. Harris believes London clubs have a cachet which still appeals to investors even in this market and that a court action brought by a creditor in Iceland against Gudmundsson's holding company, Hansa, laid bare how crucial a sale has become to the former billionaire.
Hansa is in administration and argued in court that its best chance of paying off its debts, which amount to €122.1 million, lies in selling West Ham - its "largest and most valuable asset". The club has already been put up for sale.
West Ham's vice-chairman, Asgeir Fridgeirsson, has said there are several interested parties, although the suggestion that Dubai International Capital are among them was denied by a DIC representative. In the court action in which Hansa argued for more time to pay its debts, the company's lawyers suggested €277.7 million as a likely price for West Ham. That valuation was based on comparing the club to Manchester City, which the lawyers said Sheikh Mansour took off Thaksin Shinawatra's hands for €255.5 million. Yet that €255.5 million was understood to comprise City's £190 million debts, leaving just €44.4 million for the club shares themselves, of which Thaksin owned almost 100 per cent.
In court Hansa put West Ham's current debts at €55.5 million, so a buyer would be expected to take those on plus give Gudmundsson a price for the shares. Hansa's lawyers argue West Ham has an attraction "because of its location in London, its loyal supporters, its greater possibilities for related real estate projects, its proximity to the Olympic Village and the fact that West Ham owns its own stadium which Manchester City does not". However, sources close to Gudmundsson have conceded what many already felt, that it has become unrealistic to think West Ham will attract a total value of €277.7 million.
So two years after Gudmundsson's €94.4 million takeover sparked a round of extravagant spending in the transfer market, West Ham have become sellers of players, with Mansour's City the potential buyer, and Gudmundsson is publicly having to sell the club itself. Harris believes their chance of finding a buyer depends "massively" on the price they put on the club and the amount West Ham will ultimately have to pay Sheffield United in compensation for the Carlos Tevez saga.
Elsewhere there are mixed signs of clubs' preparedness to face straitened times. Just four Premier League clubs have so far filed recent accounts covering the 2007-08 season and of those, Arsenal, Tottenham and Everton increased their income on the strength of the Premier League's booming €3 billlion, three-year TV deal. All three made profits and were carrying debt generally reckoned not to be alarming.
However, Middlesbrough's accounts for the year to December 2007 showed the club turned over €53.3 million, made a loss of €9.2 million and had increased bank borrowings from €93.3 million to €103.2 million. Boro's total debts were €146.6 million.
The accounts said the chairman, Steve Gibson, had "undertaken to provide financial support to the extent necessary" but there was no evidence he had put any money in last year. All of that lay behind the manager Gareth Southgate's apocalyptic warning that the English game could face a "Serie A style collapse".
Few in the Premier League go along with that and its chief executive, Richard Scudamore, remains confident of securing another TV bonanza. Harris, advisor to Roman Abramovich's 2003 takeover of Chelsea, believes meltdown is a possibility if the clubs making losses do not get a grip of the transfers and wages they pay. "The clubs have been spending too much and the club owners were looking for richer people to buy the clubs and take on the losses," Harris said.
"But we are in a different climate now, where the football clubs have to realise it is back to the fundamental basics of managing their costs. The supply of richer people has proved to be finite."
HIGH FLIERS: WHO'S WHO AMONG THE OWNERS
Liverpool Bought by Tom Hicks and George Gillett for €205m, 2007
Chelsea Bought by Roman Abramovich for €65m, 2003
Manchester Utd Bought by the Glazer family for €900m, 2005
Aston Villa Bought by Randy Lerner for €70m, 2006
Arsenal Danny Fiszman, who owns 24.1 per cent, says Arsenal are not for sale
Everton Put up for sale by chairman Bill Kenwright, 2008
Wigan Athletic Owner Dave Whelan has said he would listen to offers for investment in the club
Hull City Bought by Russell Bartlett, Paul Duffen and Martin Walker for €14.47m, 2007
Fulham Owned by Mohamed Al Fayed, who has said persistently the club is not for sale West Ham Utd Bought by Bjorgulfur Gudmundsson for €94m in 2006; now for sale again
Bolton WanderersChairman Phil Gartside has said the club could be sold if the right offer is made
Portsmouth Bought by Alexandre Gaydamak for reported €52m in 2006; now for sale again
Manchester City Bought by Sheikh Mansour in 2008 for price believed to be around €44.5m
Newcastle Utd Bought by Mike Ashley for €150m, 2007; put up for sale and taken down, 2008
Sunderland US investor Ellis Short bought just under 30 per cent in 2008 for undisclosed price
Tottenham Hotspur The club say they would be duty bound to consider "sensible offer" but not seeking sale
Middlesbrough Majority owned by Steve Gibson, who has not indicated he intends to sell the club
Stoke City Bought by Peter Coates' bet365 group, which invested €11m, 2006
Blackburn Rovers Put up for sale by the trustees of Jack Walker's estate in 2007
West BromChairman Jeremy Peace last month invited "major new investment" in the club
