Abu Dhabi, UAEMonday 19 August 2019

£350m for Newcastle United could be a win for both buyer and seller

Amid takeover talks for the English Premier League club, estimated valuations show that it may already be worth more than the reported figure being offered. Even so, owner Mike Ashley stands to make a profit on his investment.

Newcastle United owner Mike Ashley. Reuters 
Newcastle United owner Mike Ashley. Reuters 

If a sale of Newcastle United proves to go through at the reported price of £350 million, then it could be a win-win deal for both the buyer and the seller, Sports Direct owner Mike Ashley, given current valuations of the club.

Representatives of Emirati businessman Sheikh Khaled bin Zayed Al Nahyan, chairman of Bin Zayed Group, are in talks for a potential takeover, according to a statement which Newcastle has said is authentic.

Media reports have quoted a figure of £350m but no details have been confirmed. An outlay of that size is considerable and Bin Zayed Group, which has interests that include construction, technology and commodities trading, will potentially have to invest more than that to grow Newcastle both on and off the pitch. This is an ambitious project for a private individual.

However, Nick Harris of SportingIntelligence.com says that according to the respected ‘Markham Multivariate Model’, designed by Professor Tom Markham, £350m is not a high price to pay for Newcastle.

Using the model, football finance expert from the University of Liverpool Kieran Maguire put a value on Newcastle of £383m earlier this year, slightly higher than the reported deal value.

The £350m figure should also represent a handsome profit for Mr Ashley given the investment he has made since he first bought into the club in 2007. At the end of 2017, Ashley was said to have turned down a previous offer of about £300 million from a consortium led by PCP Capital Partners, run by Amanda Staveley and Mehrdad Ghodoussi.

Ashley has in the past said he would be willing to sell Newcastle, particularly in the wake of relegation in 2009, before taking the club off the market in the absence of any serious bid. Reports in 2013 put the figure he would be willing to accept to sell the club then at £267m, allowing him to recoup his investment which includes the £134.4m he paid to buy it outright.

However, on top of the asking price, there would be the expectation that new owners immediately invest in buying players. To compete with the so called big 6 – Manchester City, Manchester United, Liverpool, Chelsea, Arsenal and Tottenham – would mean at least matching their spending on the pitch. That could require £150 million for starters.

Regardless of the final outlay required to acquire Newcastle, it is universally agreed that there is plenty of opportunity to be tapped from the growth of the Premier League, the passion of the fan base and the fact that St James’ Park is a world-class stadium, in the city centre, with a 52,000 capacity.

“If the club gets appropriate suitable investment it could be built up to join the elite,” SportingIntelligence’s Harris said.

However, it is unlikely to be as quick a process as fans might hope, even if current Financial Fair Play (FFP) rules are not quite as strict for new owners who come into a club.

“To bridge the gap and make a serious impact on the Big 6? It is impossible to do it quickly. With FFP no one is going to be allowed to come in and spend half a billion on players,” he said.

Added to this is the cost of wages and that transfer fees are always rising meaning £100 million might not buy you much more than a single player of the level needed.

Sheikh Khaled bin Zayed, left, speaking at a workshop held by the Dubai Economic Council. Randi Sokoloff for The National
Sheikh Khaled bin Zayed Al Nahyan, left, speaking at a workshop held by the Dubai Economic Council. Randi Sokoloff for The National

“If it doesn’t click straight away then you’ll be haemorrhaging money by season two or three and fall foul of FFP,” Mr Harris said.

For any buyer of Newcastle, there is also the prospect of more commercial growth potential for the Premier League to come, according to Harris.

Global English Premier League broadcast rights have risen almost 8 per cent to £9.2 billion for the next three seasons. Foreign rights grew about 30 per cent. This growth is likely to continue, and even at a slower pace, it would still give the owners of clubs in the league the chance to increase their value considerably.

Updated: May 29, 2019 03:25 PM

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