Newcastle Utd set for radical change with a Saudi-led takeover
An investor group led by Saudi Arabia’s sovereign wealth fund and brokered by British financier Amanda Staveley has reached a £300m deal to buy the English football club. FT sports editor Murad Ahmed and deals editor Arash Massoudi talk to Daniel Garrahan about why the Saudis made the move, whether the proposed takeover will be approved, and how the deal might transform the Premier League club's fortunes
Produced and edited by Daniel Garrahan
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An investor group led by Saudi Arabia's Sovereign Wealth Fund has reached a £300m deal to buy Newcastle United. Murad, this deal has been months, if not years in the making. How did we get to this point?
Well, Mike Ashley, the retail magnate and British billionaire who owns Sports Direct chain, bought the club 13 years ago, and it's been tumultuous ever since. He didn't do very much due diligence before buying the club, he found all sorts of financial problems, he is famously a bit of a cost cutter and penny pincher and didn't, at least according to the fans, invest hugely in the playing squad. A club, under his tenure, has been relegated twice but also promoted twice back into the Premier League.
There have been various suitors who looked at the club at various points. And the most serious ones seem to have come from a consortium that had been put together by the British financier Amanda Staveley who was in talks last year to buy the club for about £250m. That deal seemed to fall apart.
Amanda Staveley since has gone away and got big money backing from the Saudi Sovereign Wealth Fund. And this one seems to be further along than any others. I think it's really down to getting Premier League approval at this stage.
If we look at revenues and wage costs of the successful English clubs, there is an obvious trend isn't there? And surprisingly, the so-called Big Six in the Premier League, turn over the most money and pay the biggest wages. Uefa's financial fair play regulations sought to address inequality in the league, but the top clubs' wage bills still dwarf the rest. Big spending new owners transformed Chelsea and Manchester City almost overnight, but is it harder to do that now? Can Uefa's financial fair play regulations stop Newcastle's new owners from splashing as much cash and as quickly as that today?
Yeah, it's an important consideration, this. When Sheikh Mansour, one of the members of the ruling family, bought Manchester City, and when the Qataris bought Paris Saint-Germain, this is before Uefa's financial fair play rules came into force. So they were able to effectively spend unlimited funds, if they wanted to, on players.
Now that they are in force those rules are supposed to stop overspending on players, spending beyond your means, or spending beyond what your revenue base is. However, the rules do not stop other things like infrastructure spending. Newcastle has a really great stadium, really big stadium, probably doesn't need to be a big stadium. It can be spruced up I'm sure. You can build the infrastructure around the club.
There are, of course, as we've seen in the Manchester City and PSG cases, ways to get mega sponsorship deals that you possibly wouldn't be available to otherwise. There's question marks about how that can be funded. But the club does have to raise its revenues to be able to spend big.
The other thing has to be said that Mike Ashley, everything we've heard is that he didn't, even within the FFP rules, never really spent a huge amount or as much as revenues would allow him to spend. So there is wiggle room there. But I think you will find with an ambitious ownership group that they will find ways to spend more. It will look like a radically different club.
Arash, we're in the grips of a pandemic and the IMF says that the economic crisis to follow could rival the Great Depression. Why have the Saudis made this move now?
The Saudis have been looking for quite some time for football asset. Bear in mind that the huge domestic population - there is not a whole lot of entertainment options available to them. There's a huge domestic audience under the age of 35. They're all on social media, they're all very active, and they're barely beginning to see the fruits of what's been available the west for years, going to cinemas, coffee shops, or just mingling between sectors.
None of this was really available to the Saudi audience for many years, and it's slowly becoming available under performance from Crown Prince Mohammed Bin Salman. Its regional rivals or regional allies, like the UAE, which are a huge funders of football, Qatar, who is a huge, with. Sheikh Mansour of course, with Manchester City. And so if you look at it it's a regional battle for supremacy in football, the Saudis are the ones without a trophy asset.
Now, this is of course a return to high profile deal-making for Amanda Staveley. How important was she in brokering the deal, and what role will she play if all goes through?
She was incredibly important to the deal. She's been discussing with Mike Ashley a purchase of the club for a couple of years now, leading to some pretty amazing bust-ups between the two of them, and Mike Ashley saying very nasty things about her as a negotiator.
I think he describes her as a waste of time, so what's changed?
What's changed is I guess they were able to reach an agreement on price, and were in the grip of a crisis of hitting the consumer and the retail industry in particularly hard, the high street, where Mike Ashley is huge. So this isn't something that has been sparked by the coronavirus crisis. But it may be that the coronavirus crisis has focused the minds of many of the parties involved here.
Now Amanda's role in particular is it's all being structured through her private equity vehicle PCP partners. This deal could have been struck at the start of last season, according to one of my sources, had they not gone through this rigmarole of involving Staveley. But I think it just shows what a master controller of the situation she is, and what a master deal maker she is to basically force it through her structure in her way and delivering it. And she's clearly built loyalty with some of the key protagonists. This is a very tight knit world, and she penetrated it and she built loyalty and now the reward is she gets to play a major role in this.
Murad, critics including Amnesty International have condemned the deal as sports washing. Is there a chance that the Premier League could still block it do you think, or is that unlikely?
The Premier League implement something called The Owners and Directors Test. So that brings up questions like the Jamal Khashoggi murder in the Istanbul Consulate by Saudi agents. Everyone I've spoken to says that, actually in reality it's going to be very, very unlikely that this deal won't pass from saying that the Saudis are not proper owners of a football club. It's a different matter and political incident. But I just can't see that being likely.
And finally, what do you both think that Newcastle fans can expect if this all goes through?
I've been getting I've been getting inundated with messages from fans who, half of them should probably become investigative journalists because they're so on top of some of this stuff. But the level of loyalty and passion from the fan base is incredible. When you have a owner, which is so tied to the state, authoritarian state, controversial state, a state that has launched a war in Yemen, has murdered a journalist in Istanbul, and lied about it for weeks before confessing to do it. When you have this kind of owner it's subject to potentially reflecting on the club as well. It seems like the devotion to the club is such that success on the pitch is what matters the most, and the fan base is very focused on that.
If you want to get to the top of the Premier League, that isn't just £100m of spending on players. It's 200, 300, 400 million. The reason why is there is a direct correlation between your wage bill and hour final league placing. And that's quite a huge ramp up to do that.
But we do have a transfer market that looks like it's going to be hugely depressed. There's going to be a lot of clubs who don't want to spend on players, who can't afford to spend on players, and in fact may even be on a fire sale as a result of the pandemic and the need to get new revenues in. Newcastle look like they're going to be in a stronger financial position and it could get pretty high quality players at a cheap price. So it's going to be all change you would think.