The West Ham ‘takeover’
Posted by John Beech on January 20, 2010
Barely was the ink dry on the agreement for David Sullivan and David Gold to ‘take over’ (I’ll come back to the reason for single quotes in a minute) than the messiness which had characterised the build up to the event started to re-emerge.
CB Holding, owners through the collapse of the Icelandic bank Straumur, had long made clear that, on the one hand, they were looking to sell, but, on the other, they would not be rushed into a fire sale. In spite of the general lack of appetite for the purchase of fellow Premier League clubs such as Portsmouth and Hull, a number of wannabe owners did appear.
First out of the blocks was one Ali Al Faraj (1). Rapidly however he was off to under-invest in another club, the said Portsmouth.
By early October Eggert Magnusson was said to be ‘plotting his return’ (I’m not making that up – click through here if you don’t believe me!); also interested were investors from the USA (who turned out to be Intermarket) and from Asia (who turned out to be Malaysian Tony Fernandes, of Lotus F1 fame). Definitely not interested at this time was David Sullivan after selling his shares in Birmingham City.
A week later however it was reported elsewhere that a bid from David Sullivan had been firmly rejected (2), only for him to team up with David Gold in a new bid.
By 18 November no formal bid had actually materialised (3), and the club “still envisage the sale will be a medium to long-term initiative.” Media reports continued to suggest there were a number of potential purchasers, but on 23 December the club insisted “Our shareholder CB Holding has made it clear it would like to find new owners for the club in the next three years and that is still the case. In recent months we have had a number of approaches from parties interested in investing in West Ham United. The club have held a number of discussions with those parties and the talks are ongoing. CB Holding is not under pressure to conclude an agreement in the immediate future, but the club will keep supporters informed of any developments when appropriate.” (4).
A late entrant in the form of Massimo Cellino joined the race (5). Cellino had been convicted of deceiving the EU and the Italian Ministry for Agriculture out of £7.5m in 1996, and in 2001 had been given a 15-month suspended sentence for false accounting at Cagliari, the Serie A club he controls.
Although Fernades and Sullivan were seen as the two front runners, it actually emerged that only two formal bids were tabled, a Sullivan and Gold offer for 50% of the club at £50m, and a mischievous bid by a Hammers fan for £351 (6). CB Holding’s choice was unsurprising.
What was surprising, and what led me to use single quotes, was the notion that buying 50% constituted a takeover – it’s oxymoronic in my book. In one report (7) they will “have operational and commercial control of the club with immediate effect“; according to another, they will have “the final say on all matters at the club” (8); a third has that Sullivan “cannot make any significant financial investments without the approval of Straumur” (9). There is certainly ambiguity there, which, given that neither Sullivan nor Gold might expect to win any prizes for diplomacy, will only lead to confrontation.
Apart from these potential problems, there is the immediate problem of the club’s debts. A number of recent reports ‘reveal’ that the debts can be £110 million, and, according to a City insider, ‘spiralling’ (10). The figure would come as no surprise to any one who had read the East London Advertiser last September (11). Surely it could not be that Sullivan and Gold had failed to conduct due diligence properly – after all, they had been so scathing about Carlson Yeung. Sullivan had said shortly after his departure from Birmingham, with Yeung deeply angry with what he had found since taking over, “It’s a bit like me buying a house and failing to conduct a survey and then moaning when the damn thing collapses. The bottom line is that he’s a former hairdresser from Hong Kong who seems to think that he can buy favour with the supporters by consistently having digs at the former board” (12). If it were, ‘hairdresser from Hong Kong’ would have to be changed to ‘local pornographic magazine publisher’. It’s surprising how apt it would be to throw the quote back to them as Sullivan has said in a press conference when referring to Eggert Magnusson, West Ham’s former Chairman, “Clearly Mr Eggbertson, I can’t remember what his name is, Magnusson, Egghead, clearly Mr Egghead thought the owner would subsidise it and he was wrong.” (13)
The last part of this quote suggests that, notwithstanding all the publicity he has generated as being ‘West Ham till I die’ etc., Sullivan is against the benefactor model. Yet he has brought Karren Brady in as Vice Chairman with himself and Gold paying her salary for the next year (14).
So that’s clear – benefactor when it suits, but tough love when that suits.
If their approach is confusing, they have at least set out a clearer business strategy. According to one report (15) they have pledged to:
- Cut West Ham’s crippling £110m debt
- Back boss Gianfranco Zola
- Not sell the club’s star players
- Keep the Hammers in the Premier League
- Open the door for other investors to join their Upton Park revolution
- Target a move into London’s brand-new Olympic Stadium after 2012
- Set a seven-year goal to qualify for the Champions League
- Stay with the club until “they die”
Open the door to other investors? How thoughtful and democratic. Or it is just essential?
It seems to me that they are not a million miles from the underlying business model of the very same Ali Al Faraj who transferred his not-enough backing from West Ham to Portsmouth back in September. If I were a Hammers fan, I think I would be just a tad worried that it will lead to the same situation.
Mind you, Messrs Sullivan and Gold have of course a trump card that Al Faraj hasn’t – the backing of Boris Johnson for a move into the 2012 Olympic stadium. I wonder just what they have in mind for Upton Park… It’s just that there doesn’t seem to have been any mention of the disposal of the club’s major asset.