Bid group blow the whistle
January 5th, 2007
A drop in price may be required to secure a takeover deal for Newcastle United, a leading expert said yesterday after one potential bidder dropped out.
St James' Park Group, backed by US hedge fund Polygon, said yesterday it had ended talks with the major shareholders Sir John Hall and Freddie Shepherd.
Football finance expert Prof Bill Gerrard, of Leeds University, said he was convinced price was the reason for Polygon's withdrawal - as well as chairman Freddie Shepherd's desire to remain at the club.
He said recent high-profile and high-priced deals for Premiership clubs such as West Ham, Aston Villa and Liverpool may have convinced Sir John and Mr Shepherd that they should secure at least £200m for Newcastle. But he said each of those recent deals had been done by wealthy individuals looking for a `toy' to play with, hence they were prepared to pay over the odds.
In contrast, both Polygon and Belgravia Group - the remaining potential bidder for the club - are serious investors looking to make a profit, so are much more cautious about the price they are prepared to pay.
Prof Gerrard said: "My reading is that they (Polygon) could not agree a price that would make the club a financially worthwhile investment. "If they can't get a price that is reasonable, then I think it may be the Halls setting a benchmark based on what has happened with Aston Villa, West Ham, and Liverpool - but those deals don't necessarily stack up in financial terms. "If your aim is not to generate a financial return, you may be prepared to pay over the odds, but as an investment fund, you have to generate a profit. I personally don't think a deal will go through based on an investment fund taking ownership."
Prof Gerrard said he believed Sir John Hall and his family were simply asking too much for their stake in the club. He said: "I would imagine bidders like Polygon would balk at the valuation the Halls will be looking for - of £200m or more, or they can't come to an accommodation with Freddie Shepherd. "He can block any move to take the club private, so they have to reach an accommodation with him, either to buy him out, or else leave him with substantial power in the new set-up."
A statement from Polygon said: "St James' Park Group Limited confirms that it is no longer in discussions regarding such (a) possible offer and has no intention of making an offer for Newcastle United Plc at this time," but nobody was available to explain the company's position further.
However, a spokesman for Belgravia Group did confirm that talks were still ongoing with United shareholders.
One commentator speculated yesterday that the nature of negotiations with a football club could prove challenging due to the volatile nature of an individual team's performances.
Several weeks ago, when speculation on the destiny of Newcastle United was at its height, Newcastle was in the relegation zone of the Premier League, but now with a run of better results, the team has climbed to 14th in the division, which may sway the thinking of both sellers and potential bidders.
Nufcmismanagement view:
Shepherd Out