The proposed takeover of Newcastle United by Saudi
Arabia’s Public Investment Fund will, if it goes ahead, arm the club with the most
affluent owners in world football. Along with Sheikh Mansour’s purchase of
Manchester City and Sheikh Tamim bin Hamad Al Thani’s ownership of Paris Saint Germain,
Newcastle will also join an elite group of football clubs effectively controlled by sovereign
states from the Gulf. But that wasn’t always the plan. For years,
rumours of Saudi Arabia’s interest in English football revolved around another club: Manchester
United. And, in 2019, those rumours intensified, with reports of a £4 billion takeover bid
being prepared. In November, a LinkedIn post caused a stir,
when an account purporting to belong to a Saudi “Director of Government Affairs”
published a statement explaining that the takeover had been finalised and to await official
announcement from the club. An announcement which, of course, never came.
The Newcastle takeover rules out Manchester United, as far as the PIF is concerned. Which
begs the question: why choose Newcastle United over Manchester United?
Superficially, they were not an obvious choice. Newcastle lacks a large international airport,
it’s a long way from London, the city most commonly associated with overseas investment
in the UK, and whilst the club is renowned for its loyal support, they haven’t won
a major trophy since 1969. Manchester United, by contrast, are a market
leader. They are one of the biggest sporting brands in the world and have a decadent history
of sporting success. But there are other, more subtle reasons why Newcastle United were
a more attractive proposition. Manchester United have an expectant support,
creating both an immediate appetite for silverware and a pressurised environment. More importantly,
they are not openly for sale. Whereas Mike Ashley made it abundantly clear
he wished to be rid of Newcastle United, with the club’s fans more than reciprocating
that sentiment, Manchester United have never courted buyers in nearly the same way.
The Glazers, on the other hand, would only be interested in relinquishing a minority
position, which is an offer which doesn’t tally with Saudi Arabia’s objectives. They
weren’t going to pay up to £1 billion to have no control over the football club and,
at best, to possess very limited voting power. While Saudi Arabia’s sovereign wealth fund
may be worth $260 billion, its mission statement is still to make sensible economic investments
to diversify their country’s economy. And if the Newcastle project is handled correctly,
there’s no reason why the Saudis couldn’t match what their Gulf neighbours have managed
at Manchester City and PSG, where those assets have tripled in value.
City’s owners have already showed that you don’t have to buy a market leader to achieve
success, while their investment in the local area has cemented their bond with City fans
and earned them positive headlines. Emirati brands, such as Etihad and Abu Dhabi
itself, have also benefited from the link with the beautiful football Pep Guardiola’s
team play. It would have been very different, though, if City were still second-class citizens
in Manchester. Failure at Old Trafford would reflect badly on a country with Saudi’s
ambitions, whereas Newcastle offer a much more forgiving crowd.
With Manchester United already believed to be worth an estimated £4 billion, it is also
hard to see how much upside there is for a new owner, particularly as the Glazers have
so aggressively exploited sponsorship opportunities over the last 15 years. There are only so
many more mattress and noodle partners that even they can accommodate.
The question becomes, then: are Manchester United actually too big to sell?
As a guide, it’s thought that £3 billion would be rejected by the Glazers, £5 billion
would be enough, but that £4 billion would start a conversation.
But the cost of this deal isn’t just in the valuation. To increase the value of the
asset, money would need to be spent. Manchester United have committed close to £1 billion
on transfer acquisitions since Sir Alex Ferguson left in 2013 and not only would the fans’
expectation be for that rate of spending to continue, it would have to out of necessity.
The team is arguably further from winning the Premier League than it was five years
ago. Anyone buying the club would also have to
invest in the stadium. Old Trafford’s 76,000 capacity makes it the biggest club stadium
in the country, but it looks increasingly old fashioned compared with the country’s
best and is showing signs of wear and tear. With the Glazers already making enough money
from the club’s commercial operations, improving the stadium, or even completely rebuilding
it, just isn’t a priority. Further to which, the value in expanding or
renovating Old Trafford is questionable. The primacy of corporate seating is not what it
is in London, where – for instance – Arsenal are able to draw a third of the matchday income
from just 8,000 premium seats, and the clubs in general are able to charge all fans more
per ticket. Conservatively, then, the cost of not just
buying Manchester United, but being able to develop and evolve the club in a meaningful
way is actually closer to £5bn or £6bn over a lengthy tenure.
And who has this kind of money? The cost already rules out Britain’s wealthiest
man, Jim Ratcliffe. A consortium of wealthy investors, like Liverpool’s FSG, might be
feasible. But FFP restrictions and diplomatic tensions make a Russian oligarch unlikely
and the Saudi purchase of Newcastle has likely brought an end to the era of the sovereign
wealth fund. Chinese investment is a possibility but, with
the exception of Fosun International’s ownership of Wolverhampton Wanderers, owners from the
Far East have had very mixed success in Europe and, typically, targeted a different profile
of club. Large tech companies with huge cash reserves
could afford it, but Amazon, Facebook, Google and similar entities are more likely to bid
for Premier League broadcasting rights packages. In Amazon’s case, that step has already
been taken, creating a conflict of interest that effectively prohibits the future acquisition
of a club. Which is to say nothing of the fact that purchases
of such scale are – ultimately - very rare. In fact, the Glazers £800m hostile takeover
of Manchester United remains a record for a football club, even fifteen years later.
To date, no one has yet actually paid over £1 billion for a team.
For the time being, that probably suits the Glazers. Digital streaming remains a nascent
concept for the Premier League sides, with Amazon’s involvement likely to hasten the
league towards a future OTT model. As and when that occurs, a spike in broadcasting
income will follow, ending the current plateau, and the value of the league’s clubs will
again increase. Until the next football market boom at least,
the Glazers are likely to remain in place.