Summer activity is about to take shape at Newcastle, with the hope that signings will be on the horizon after the announcement of chief scout Graham Carr’s departure earlier this week. Talk of a takeover still looms over the club though, and with a world class manager finally in place, any uncertainty would be coming at an unwelcome time. Media reports, if believed, state that Newcastle could very well see investment rather than a full takeover of the club from current owner Mike Ashley. How would this work in reality?
A partial investment
One option would be for a consortium to invest into Newcastle and purchase something like a 10-20% stake in the club. Ashley apparently values the club at £400m, which is one the factors that is holding up a full sale. Taking these numbers as ball park figures, this would equate to £40-80m coming into the club for a smaller stake in ownership.
This is similar to the agreement Manchester city with Chinese consortium, CMC, last year. They purchased a 13% stake for an eye watering £265m. Of course City is a more valuable financial proposition for investors. than NUFC. An interesting angle is that Manchester City is already owned by billionaires who have no desire to sell the club currently. So why sell a stake? Quite simply, for mutual financial benefit. The owners felt the Chinese market had a lot of untapped potential for them, as despite overtaking Manchester United on the pitch, commercially, they remain behind. A partnership can give you contacts and new sponsorship deals in a new region.
Something similar may be being discussed with Newcastle. Chinese investors have been linked with Newcastle and it appears an unlikely coincidence we have also just announced our commercial sponsorship partnership with Chinese firm FUN88. Ashley may well be discussing a similar deal to that of Manchester City behind the scenes. This would mean investment in the club for new players potentially, whilst ensuring little day to day change. Purchasing this smaller percentage from Ashley would mean all major decisions, like hiring managers and overall budgets, would still firmly rest with him.
Buying a major stake
Another investment option would be for a group to purchase a far larger stake, something that would certainly have greater ramifications on how the club is run day to day. A comparable example to this would be the situation at Everton, with billionaire Farhad Moshiri buying a 49.9% stake in the club in early 2016. It was notably just under the 51% to be the majority owner but a high enough stake that he has assumed major responsibilities away from Bill Kenwright.
By all accounts, this has provided Everton with real financial muscle. Lukaku was signed for £28m with a further spending due on the cards this summer.Of course, not all owners will invest so much in new players as Newcastle fans of course know. However, it does represent an example that if Ashley was to sell a stake of this level it would mean a change in the running of the club and significant power sitting with any potential investors. The higher the percentage bought from Ashley, the more vital the intentions of investors is.
What do investors want in return?
It is important to consider that the goal of investments is to make a return or profit on your initial outlay. Owners can buy clubs with the idea of improving the club and not necessarily making any money from it (Man City and Chelsea are clear examples.) So if someone wanted to buy Newcastle and turn them into a superpower with the clubs interests solely at heart, they would probably attempt to buy the club outright.
Investors will likely see the new TV deal as a chance to grow their own business by having an association with Newcastle United. Of course it is in their interests the club does well, as success on the pitch leads to higher prize money and a better brand. But depending on the deal struck with Ashley, investors taking a smaller stake may want a cut of profits, a percentage of sales in a new market, such as China, or reassurances when they will get their investment back – with interest, at a set date.
Do timescales differ from a full takeover?
A full takeover certainly takes longer. This is due to having to pass fit and proper owner tests from the Premier league and also a more detailed process of due diligence over the clubs books. Investment would theoretically be sorted at a quicker rate and more importantly, should not impact on player trading this summer. Unless it raises capital for new players, which would be great news.
Until more details emerge, you do get the feeling the talk of a takeover or investment is a case or de ja vu. Ashley bought Newcastle over 10 years ago and he seems now, more than ever, to be learning from his mistakes. It would take a deal to line his pockets significantly, either to sell the club or just a chunk of it, for things to change.