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Sports Finance Expert On What Happens Now For Liverpool, Tom Hicks And New England Sports Ventures
Tom Cannon warns Hicks in particular could yet throw a spanner in the works
07-Oct-2010 4:44:00 PM
By Greg Stobart
The Liverpool takeover saga continues to rumble on as American owners Tom Hicks and George Gillett fight the £300 million sale of the club in the High Court.
Liverpool's three non-American directors have agreed the deal with New England Sports Ventures, owners of Boston Red Sox headed by John W. Henry.
Chairman Martin Broughton insists that the American co-owners do not have the power to stop the sale of the club or to change the board.
Goal.com spoke to sports finance expert Tom Cannon, Professor of Strategic Development at the University of Liverpool Management School and chief executive of Idepolis International. Here, he explains what is going on at Anfield and what Reds supporters can expect from their new owners.
Goal.com : What should supporters expect from New England Sports Ventures?
Tom Cannon: There are two ways to view the NESV’s takeover of Liverpool. On the one hand, these are shrewd businessmen. This won’t be a Chelsea or Manchester City situation where they are happy to throw their own money at the club in search of success.
John W. Henry is not a billionaire. He is not on the Forbes rich list and his wealth was estimated to be in the region of £540m in 2006, before the worldwide recession.
But he has a superb reputation as a sports executive. That’s the other way fans can look at this. The Boston Red Sox is a seriously run baseball team which has been successful both in financial and sporting terms.
There is a huge difference between the way the Boston Red Sox are run and the Texas Rangers, which are owned by Tom Hicks. That’s a good sign.
He took over the Red Sox when they were languishing and hadn’t won a World Series in 86 years. Now they’re a side that win trophies. Under Henry they’ve won the World Series twice, which is a real positive and Liverpool fans will want to draw comparisons between the two.
No-one knows yet where the money is coming from but from chairman Martin Broughton’s comments and the news dripping out of the United States, the shareholders of NESV – a 17-member consortium – will raise the cash themselves to fund the transaction.
What happens to the £300m?
Tom Hicks and George Gillett have £237m loans due to be called in by the Royal Bank of Scotland (RBS) next Friday. Approximately £200m of that will be repaid by NESV, who will take on the remaining £40m or so debt as a credit facility for the new stadium project. Another £40m will wipe out money owed to other creditors such as Liverpool City Council, leaving around £20m working capital to be invested in the playing squad and another club matters.
Where does this leave the stadium project?
Broughton has revealed that NESV will explore two options, redeveloping Anfield or building the new stadium. This is intriguing. One of the reasons so many potential buyers have lost interest in buying the club is because of the development requirements and long term-funding requirements that would seem to be needed for the club to move forward.
On top of the acquisition costs (£300m), there is the stadium development (at least £250m) and investment in the squad to compete with the likes of Manchester City (£100m). All told this would cost the best part of £650-700m - $1 billion – and in an environment of global austerity.
They successfully redeveloped Fenway Park in Boston but the main problem with repeating that at Anfield will be how they maximise income from corporate hospitality. I think after the success they had in Boston, this is the option they will go for.
I am firmly of the belief that the only way it will be financially viable to build a new stadium without a billionaire backer is to share with Everton. Neither club can afford to build their own new stadia in the city.
Right now, Hicks thinks he has a leg to stand on because he is on his way to court. Like many American businessmem, he's extremely litigious.
It’s certainly not over and it will come down to the detail of the contract with RBS. If, as Broughton claims, only he had the authority to change the board and there were clauses relating to his authority to negotiate the sale of the club, then Hicks will find it difficult.
The problem for Hicks will be that while he’s in the court and throwing money at lawyers, he is losing time to find some finance and put forward a counter-offer.
Hicks would dearly love to refinance, not least because the club is still a fundamentally solid business. Christian Purslow's recent comments confirm that cash flows are positive while interest charges - although a challenge - can still be serviced. Once the club has the "space" to get on with its real businesses, there is no doubt that it can move forward.
The big question is whether he can raise not only the money to buy out not only the RBS debt, but his ‘partner’. That is a lot of money and so far there is no sign that he can either raise it or push such a change through.
As I understand it, Hicks and Gillett believe they have invested as much as £144m in Liverpool. Walking away from that would be not only financial hit but a real hit to their status where in matters – in North America.
Besides this, they look at the market valuation put on Liverpool by the likes of Forbes – just short of $900m – and wonder why they should take less than that. They would think they would also believe that if they take a hit, why shouldn't RBS?
What do you expect to come of the legal challenge?
I would be surprised but not amazed if the judge sides in favour of Hicks and Gillett. As the club’s shareholders they are not irrelevant and they can argue that Broughton acted precipitously by assuming that they would not be able to repay the debt.
I’m not sure about one or two statements Broughton has made. He says his first responsibility at Liverpool is to the creditors, that is something an administrator would say. When he’s in charge of British Airways he always says he has to act in the best interests of the shareholders – that is the responsibility of directors.
Is there any chance Hicks and Gillett will leave with dignity?
It doesn’t seem that way. They are demeaning themselves now by essentially saying, ‘we want to make money’. They haven’t because they haven’t run the business properly or successfully since they bought it. There is no point moaning about it, we all lose money through bad investments, that’s the nature of the capitalist society that they love.
They have taken a risk and lost – and now they’re asking for a profit.
The Liverpool takeover saga continues to rumble on as American owners Tom Hicks and George Gillett fight the £300 million sale of the club in the High Court.
Liverpool's three non-American directors have agreed the deal with New England Sports Ventures, owners of Boston Red Sox headed by John W. Henry.
Chairman Martin Broughton insists that the American co-owners do not have the power to stop the sale of the club or to change the board.
Goal.com spoke to sports finance expert Tom Cannon, Professor of Strategic Development at the University of Liverpool Management School and chief executive of Idepolis International. Here, he explains what is going on at Anfield and what Reds supporters can expect from their new owners.
Goal.com : What should supporters expect from New England Sports Ventures?
Tom Cannon: There are two ways to view the NESV’s takeover of Liverpool. On the one hand, these are shrewd businessmen. This won’t be a Chelsea or Manchester City situation where they are happy to throw their own money at the club in search of success.
John W. Henry is not a billionaire. He is not on the Forbes rich list and his wealth was estimated to be in the region of £540m in 2006, before the worldwide recession.
But he has a superb reputation as a sports executive. That’s the other way fans can look at this. The Boston Red Sox is a seriously run baseball team which has been successful both in financial and sporting terms.
There is a huge difference between the way the Boston Red Sox are run and the Texas Rangers, which are owned by Tom Hicks. That’s a good sign.
He took over the Red Sox when they were languishing and hadn’t won a World Series in 86 years. Now they’re a side that win trophies. Under Henry they’ve won the World Series twice, which is a real positive and Liverpool fans will want to draw comparisons between the two.
White Knight | John W Henry is heading up the £300m bid to take control of Liverpool
No-one knows yet where the money is coming from but from chairman Martin Broughton’s comments and the news dripping out of the United States, the shareholders of NESV – a 17-member consortium – will raise the cash themselves to fund the transaction.
What happens to the £300m?
Tom Hicks and George Gillett have £237m loans due to be called in by the Royal Bank of Scotland (RBS) next Friday. Approximately £200m of that will be repaid by NESV, who will take on the remaining £40m or so debt as a credit facility for the new stadium project. Another £40m will wipe out money owed to other creditors such as Liverpool City Council, leaving around £20m working capital to be invested in the playing squad and another club matters.
Where does this leave the stadium project?
Broughton has revealed that NESV will explore two options, redeveloping Anfield or building the new stadium. This is intriguing. One of the reasons so many potential buyers have lost interest in buying the club is because of the development requirements and long term-funding requirements that would seem to be needed for the club to move forward.
On top of the acquisition costs (£300m), there is the stadium development (at least £250m) and investment in the squad to compete with the likes of Manchester City (£100m). All told this would cost the best part of £650-700m - $1 billion – and in an environment of global austerity.
They successfully redeveloped Fenway Park in Boston but the main problem with repeating that at Anfield will be how they maximise income from corporate hospitality. I think after the success they had in Boston, this is the option they will go for.
I am firmly of the belief that the only way it will be financially viable to build a new stadium without a billionaire backer is to share with Everton. Neither club can afford to build their own new stadia in the city.
Staying put? | The new owners of Liverpool could look to redevelop Anfield
Right now, Hicks thinks he has a leg to stand on because he is on his way to court. Like many American businessmem, he's extremely litigious.
It’s certainly not over and it will come down to the detail of the contract with RBS. If, as Broughton claims, only he had the authority to change the board and there were clauses relating to his authority to negotiate the sale of the club, then Hicks will find it difficult.
The problem for Hicks will be that while he’s in the court and throwing money at lawyers, he is losing time to find some finance and put forward a counter-offer.
Hicks would dearly love to refinance, not least because the club is still a fundamentally solid business. Christian Purslow's recent comments confirm that cash flows are positive while interest charges - although a challenge - can still be serviced. Once the club has the "space" to get on with its real businesses, there is no doubt that it can move forward.
The big question is whether he can raise not only the money to buy out not only the RBS debt, but his ‘partner’. That is a lot of money and so far there is no sign that he can either raise it or push such a change through.
As I understand it, Hicks and Gillett believe they have invested as much as £144m in Liverpool. Walking away from that would be not only financial hit but a real hit to their status where in matters – in North America.
Besides this, they look at the market valuation put on Liverpool by the likes of Forbes – just short of $900m – and wonder why they should take less than that. They would think they would also believe that if they take a hit, why shouldn't RBS?
What do you expect to come of the legal challenge?
I would be surprised but not amazed if the judge sides in favour of Hicks and Gillett. As the club’s shareholders they are not irrelevant and they can argue that Broughton acted precipitously by assuming that they would not be able to repay the debt.
I’m not sure about one or two statements Broughton has made. He says his first responsibility at Liverpool is to the creditors, that is something an administrator would say. When he’s in charge of British Airways he always says he has to act in the best interests of the shareholders – that is the responsibility of directors.
Is there any chance Hicks and Gillett will leave with dignity?
It doesn’t seem that way. They are demeaning themselves now by essentially saying, ‘we want to make money’. They haven’t because they haven’t run the business properly or successfully since they bought it. There is no point moaning about it, we all lose money through bad investments, that’s the nature of the capitalist society that they love.
They have taken a risk and lost – and now they’re asking for a profit.
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