The next date that Newcastle United takeover watchers should ring in their diary is February 12.
That is the start of the week when the next Premier League TV rights deal is announced – a moment that will change everything in the long-running St James’ Park takeover saga.
Insiders expect the deal – which will span the years from 2019-22 – to eclipse the astounding £5.14billion that Sky and BT Sports paid to televise 168 games a season for three seasons. To entice more bidders into the fray, the Premier League bumped up the number of live games a season to 200 and there is talk of Amazon, Facebook and other streaming services showing interest.
There has been furious lobbying behind-the-scenes, where the Premier League know that the TV revenue is now core to most of their club’s business plans. To keep growing, they need revenue to follow suit.
And despite some fears that the TV rights bubble may be about to burst, it seems more likely that domestic giants BT and Sky will continue to cough up.
For anyone peering in at the Newcastle takeover, this really matters. In the last published accounts, the TV money accounted for £73million – more than gate receipts, commercial income and matchday money combined. Knowing that they have guaranteed access to even more if the club is in the top flight will likely fortify Mike Ashley’s resolve on his £350million asking price, tempt other bidders and give PCP Capital Partners an idea of just how much further they could go above their initial bids for the club.
In the matter of an afternoon, every single club that aspires to be in the Premier League will have an idea of their revenue stream through to the year 2022. If it’s the 10% increase that some analysts are predicting, it could be a game changer. It will change the
No wonder all sides at the takeover table haven’t changed their stance since Amanda Staveley’s initial bid was knocked back.
But this story is not dead yet: PCP Capital Partners are briefing that they will return in the future while a second bidder has told the Chronicle they are a “few weeks” away from coming back with an offer that would match Ashley’s asking price. Even in the Championship, Newcastle would be attractive.
So is Mike Ashley asking a fair price?
Newcastle owner Mike Ashley (Image: PA)
Mike Ashley has told interested parties – and there have been several enquiries that haven’t gone as far as Staveley’s consortium – that he has valued the club at £350million, with the possibility of staggered payments to entice bidders who want to invest in the club.
There are those who feel that the value of the club is as much as someone is willing to pay. But Ashley’s asking price feels steep: especially for a club that has spent five of its last six Premier League seasons battling simply to stay in the division.
“Newcastle is not worth £350million,” says football finance expert Kieran Maguire. “The reason for that is that at the start of the season Newcastle are a team with a 20% chance of relegation, along with half of the Premier League.
“They are not a Brighton or a Huddersfield, whose chances would be rated higher than that. But if you were thinking about buying Liverpool, for example, it’s a 2% chance of relegation – if that.
“You have to build that into your valuation calculations because for clubs, the biggest source of revenue is being in the Premier League and the prize money and TV money that you get from that. If you drop out of the division – as is the danger at Newcastle – then that drops significantly.”
If United was sold for £350million, it’d be the second biggest takeover in the history of English football – just below the amount paid for Manchester United. Liverpool cost £300million in 2010 but – in mitigation – New England Sports Ventures took on debts at the same time.
So why is Ashley asking so much?
Insiders say he recognises the fact that his is the last big, traditional club with recent Premier League history that is actually affordable. Liverpool is now valued at £1billion. Manchester City sold a 13% stake in 2015 for £265million – which valued the club at £2.1billion. The value of Manchester United would be double that.
English football continues to thrive: Newcastle represent a bargain.
Where could you grow Newcastle?
Maguire tells a story that highlights the problem Newcastle – and any other Premier League club outside the elite – have.
“Could new owners at Newcastle go much further? I was a meeting with a Chief Executive of a Premier League club and he said that the problem is Manchester United are in a league of their own,” he said.
“Every company wants to be associated with Manchester United. Then in the next tier you have Chelsea, Arsenal, Liverpool and Manchester City – as well as Spurs. Then it’s 14 clubs below them and sponsors play them off against each other.
“Yes Newcastle is a huge club with a big passionate fanbase which most fans in England would see as a big club. But to foreign companies that doesn’t mean anything. Yes they get big crowds but all of the stadiums are full – and when they’re in front of a global audience most of those overseas fans are watching the opposition if it’s one of the big six.
“Geographically it’s not ideal and they can’t offer the Champions League. It’s the same for 14 other clubs. It makes it difficult.”
Any bidders for Newcastle will be enticed by the idea of a club with a loyal fanbase and a unique, city centre location but the club is locked into commercial partnerships.
Their kit deal with Puma runs through to 2020 and a catering contract with Sodexo – signed in the aftermath of relegation in 2008 to allow the club to cut overheads – still has another two years to run too, it’s understood. The initial five-year deal was for £38million and protected the club at a time when it was restructuring following relegation.
But it also limits the amount the club can raise from events and on matchdays, when Sodexo provide the food and drink.
The relationship with Sports Direct would likely be dismantled by new owners, offering potential. Similarly, the club’s desire to expand commercial revenue has seen Rugby League’s Magic Weekend pitch up in Newcastle. Ed Sheeran’s concert in the summer offers further potential.
Ticket prices set by Ashley as part of the owner’s drive to make the club more affordable have helped to drive up the walk-up gate. Thanks to the enthusiasm that surrounds Rafa Benitez, United regularly sell out and there would be the option to raise them. But that’s unlikley to be a popular move and even pegged at the more reasonable end of the spectrum, United’s have the 22nd biggest gate receipt yield in Europe.
The best way to grow Newcastle – and the way identified by would-be owners PCP Capital Partners – would be to invest in the team to try and gain a measure of success, which may start the ball rolling again.
That would require 100s of millions of pounds – and an investor willing to put up with the outrageous inflation in prices in the Premier League. But – to quote Ashley himself – sometimes you need to bolt the horse to the cart.
Rafa Benitez:
Newcastle United manager Rafa Benitez (Image: Getty Images Europe)
Benitez remains key to any deal. In the pitch given to interested parties, the presence of a “world class coach” – one paid £5million-a-year – is emphasised. Newcastle want him to remain at the club beyond his contract, which expires next summer and which he intends to honour – even if there will be moments when it might feel like he is ready to walk away.
He is a shrewd political operator who has allies in football and the media. A man of integrity, it would be a surprise if he left Newcastle unless he felt he had absolutely exhausted every avenue he could to improve the club.
And he knows business too – as evidenced by the detailed plan presented to Ashley in their summer summit, which was the source of some acrimony in the close season.
Benitez detailed the deals that he needed to be done to set off a cycle that would see him sell players to raise the funds required to bridge the gap of their difficult first season back in the Premier League. Buying Manchester City’s Willy Caballero, for example, would have seen him sanction deals to sell Karl Darlow and allow Freddie Woodman to go out on loan.
But he was not asking for the world, just freedom to spend in order to get the ball rolling. His approach to running a club is that it must be financially viable and that there is no fast-track to success.
Having at first been wooed by PCP Capital Partners, it feels as if he is now just concentrating on working with whoever can give him the tools to succeed in a difficult job at Newcastle.
PCP Capital Partners:
Written off in some quarters as time wasters, PCP Capital Partners offer a different vision of Newcastle but there are questions to answer.
Their due diligence was comprehensive. As well as looking through decades of United accounts, they also spoke to public bodies such as the City Council and even Newcastle’s other sporting institutions about ways they could work together. They seem to have energy and ideas.
But there is just a vague idea of exactly what kind of governance would be in place at Newcastle – and the source of financing remains opaque. Staveley told the Times her model would be investors but she could pay for it herself. No proof beyond assurances has been offered and cynics say that if she had the financial means to pay for the club herself, a deal might have been done by now.
If she brings in other investors it either means she will share power with them or promise them dividends at some point. Would she take money from the club to pay them – and herself?
The idea that benefactors with deep pockets and a political motivation – something that drove Chelsea and Manchester City’s takeovers – might invest has been down-played. Early speculation about Saudi Arabian interest is understood to have been false.
These are big, relevant queries for Staveley, who – Newcastle sources say – Ashley does not want to do a deal with anymore.
Her camp insist she is going nowhere and will wait until the second half of the season to decide the size of a second bid. There is a lot riding on it.
Will Ashley actually sell?
He will – but it has not gone to plan so far.
Maguire relates the story from the selling side: “I know somebody that’s involved on the selling side. There certainly was intention to get rid of the club but it was always going to be in the
“The intention was to try and put the club up for auction and three or four interested parties who would bid each other up and Mike Ashley would walk away with a good price. PCP are the first bidder and they aren’t going to go down that ego-driven route of ‘We’ll buy it for any price because we don’t want anyone else to have it’.
“There have been too many conditions and clauses and he wants to walk away and wash his hands of it. But without rival bidders, that’s not possible.”
There have been a few “sleepless nights” for those involved in the deal. It has been complicated and drawn out, with attempts to weaponise supporters, the media and even the manager. Ashley suspects his unpopularity with the supporters has been used by rivals to try and drive down a price.
The future:
This, from Benitez in France Football this week, is instructive.
“We were in the Championship last year. That means we missed a lot of money from TV rights while the other teams have been able to add to their squads significantly. We are in a new phase, we must be patient,” he revealed.
“The key is to stay in the Premier League this season, regardless of the final positions. Then we will have a lot of money and we can strengthen ourselves significantly to go higher.”
This third way is what he is working towards but all parties in the takeover saga now anticipate a period of reflection before any further negotiations. Ashley insists he will sell; Staveley that she is not walking away.
Increasingly it feels like that TV deal is the key to what happens next at Newcastle. It is why Ashley has given the green light to some recruitment – and why Staveley’s group say they are not prepared to bid up again until the Spring or close season.
Either way, this is far from over.