A report published on The Telegraph’s website this morning casts further doubt over the financial capabilities of the group bidding to take control of Leeds United Football Club.

The report focuses on Gulf Finance House, the parent company of GFH Capital whose June 2012 accounts show only £3.6m in cash, down from £800m in June 2008.

It quickly becomes apparent that the huge differences between these sums is a result of the global financial crisis affecting the valuation of assets. In 2008, the total valuation of Gulf Finance House’s assets was £2.17 billion. By June 2012, the value of those assets had dropped by almost 75%.

As alarming as those figures look, they’re hardly unique or the least bit surprising. I’m no economist, but it stands to reason that property values increase during times of boom, and decrease when a financial crisis hits. As such, a company who’s largely invested in property is bound to take a hit – particularly in the Middle East where property prices seem to fluctuate by a lot more than they do in the West.

Nevertheless, it’s impossible to argue that Gulf Finance House are as financially powerful today as they were in 2008, but they don’t appear to be struggling either. A quick Google search of GFH brings up stories about their commitment to a $3bn financial complex in Tunisia that the company are currently in the process of building.

The stories appear to be in great conflict with one another. On one hand, you have reports of serious cash-flow problems and a dramatic plunge in the value of their assets, while elsewhere, Gulf Finance House are busy building $3bn skyscrapers.

The whole situation becomes even more confusing when you read reports from a Frederik Richter via the highly-respected Reuters news agency. Two reports I’ve discovered (1 – 2), both dating from June last year question  the companies business practices and their ability to deliver the developments promised to investors.

What’s even more concerning than the content of the reports is that the writer (Frederik Richter) was expelled from Bahrain around the time of their publication. Whether that had anything to do with those reports is impossible to say, but Gulf Finance House openly admit close ties to the Bahraini government.

GFH Capital’s Deputy CEO, David Haigh, the man who will become Leeds United chairman if his company is successful in their takeover of the club, seems keen to put distance between GFH Capital and Gulf Finance House, pointing out that the financials used in the Telegraph’s article are the parent company’s, not GFH Capital’s.

But to what extend does one company feed the other? Doesn’t the success and failure of the parent company inherently effect it’s subsidiaries (and vice versa)?

Personally, I can’t see how it wouldn’t, but David Haigh insists GFH Capital have the funds to purchase Leeds United Football Club, and the truth is, I don’t really doubt that.

Ken Bates has repeatedly stated that he won’t deal with any potential buyers unless they can prove they have the necessary funds to purchase Leeds United, so the fact GFH Capital have made it this far should put people’s minds at ease. Moreover, this is a company who seem to spend most of their time dealing with multi-billion dollar property investments, to them, Leeds United – with a rumoured cost of £52m – appears to be a relatively small deal.

Perhaps we shouldn’t be questioning whether or not GFH Capital have the necessary funds to takeover Leeds United, but should instead be asking why they want the club in the first place considering it’s relatively small value?

Rather conveniently, I think it’s much easier to answer that question than attempt to unravel GFH’s finances. In all likelihood, the value of Leeds United will only increase. The club is profitable and self-sustaining, it doesn’t really need millions upon millions of pounds of additional funds thrown at it (though it wouldn’t hurt), we just need a shift in priorities; for money to be spent on the pitch, rather than off it.

The fact is, Leeds United are the safest investment in football. It’d take nothing more than promotion to double the club’s current value of £52m and if GFH can return Leeds United to a position of stability and strength within the Premier League, increased turnover would only increase the valuation of the club further. In short, Leeds United are the closest thing you’ll find to a no-risk investment in football.

But I don’t believe the cash alone would make this a worthwhile investment for GFH. As I said previously, the sums involved are relatively small by their standards. The real benefit to GFH is an increased profile in the West. What better way to get yourself noticed in the UK than by buying a football club? Your company will become a household name in hours, the media coverage received – as we’ve already seen – will increase exponentially. Invest £52m in a British company, a few thousand Financial Times readers might notice. Invest £52m in a football club, the whole country starts paying attention. That’s the power of the sport in this country.

What makes me cautiously optimistic about the GFH takeover is that the only way an increased profile benefits them is if the football club is successful. Who wouldn’t want to invest in a company who can show they successfully purchased a football club for £52m, doubling, perhaps even trebling, it’s value within a couple of years? That’s exactly the kind of company I’d want my money invested in.

Conversely of course, we could go the way of Portsmouth, forever ruining the reputation of all those involved. That’s why I’m sure GFH are aware of the potential pitfalls and the risks of owning a football club, they’re putting the reputation of their company on the line with this purchase. Our fates will be inextricably linked, success and failure for one will be mirrored by the other.

  • mrbigwheels

    Excellent David. Some real meat at last. Seven course taster menu infact. Well done. I’ll read it again and digest further. I’m expecting interesting comments in the light of the joint announcement from the Club/Gfhc on the OS.

    • TSS

      I’m still laughing at that one, we have no way to prove who said what and to whom, but it’s incredibly amusing to see how pissed off Ken Bates is by LUST.

      • mrbigwheels

        I think Ken is more than pissed off. There may be a hefty degree of calculation by the Master with the LUST AGM tomorrow eve…. He’s certainly out to ‘divide and conquer’ with the OS statement and of course GFHC men have their names on it too. Where will all this lead I wonder. May unite the fanbase?, be the end of LUST?, or cause yet more confusion. This is not going to go away that quickly…….

        • TimPM

          Possibly it’s a win-win? Cause GFHC an unforeseen backlash, or humiliate the only group that’s been willing to ask him difficult questions.
          Or a bit of both. Either way he’s a happy old megalomaniac in his tax-haven mansion, with the ‘morons’ doing his bidding and attacking LUST or David Haigh.
          ——————

  • bluesman

    A lot of speculation is going round. I think that we will just have to wait and see what happens. Even GFH must know that we are the mighty Leeds United and that we do not need hundreds of millions to be successful. We just need quality, guile, a bit of agression and the ability to look after ourselves. Our strenghs are in the Leeds mindset, the fans, the stadium, the history. Leeds are gladiators who give everything for the fans. Warnock is starting that rebuilding programme and someone else will take us to the next level. MOT

  • Chareose

    I hope people read this article to the end because the end summary is correct, let’s just give GFH a chance, worse case is they will sell up if it goes wrong as they don’t have Bates motivations to hang on to the bitter end……..

    • wjohn228

      Worst case is not just. that they sell up. Look at Coventry if you want to. know how. bad it. can get

  • tim campbell

    Joint statement from GFH & leeds heirarchy – seems like bates is pissed about something – beats me what it cud be lol

  • Jonny

    Here are the facts:
    1) We cannot stop Bates selling to whoever he wants to
    2) We cannot prevent an ‘investor’ buying the club for their own gain and not the good of the club
    3) But what we can do, and GFH must know this, is make their position completely untenable (and unprofitable).
    Therefore anyone buying Leeds United has to do it because they have the money to indulge in seeing a club they own rise to the top again, and if David Haigh thinks he can ‘Do a Bates’ he is seriously stupid, but fortunately that does not appear to be the case.

  • I enjoyed this article and it shows sound reasoning. Your idea about the exposure is also quite well considered. If they use the team shirt to advertise GFH instead of using a separate sponsor, then their potential reach would be huge (provided they ensure Premier League football). Not just UK but Europe wide exposurewithin a few short years!

  • Si

    There’s way too much bullshit flying around Leeds United that even I can smell up here in the Scottish Islands!! I do believe a lot of Journo’s have way too much time on their hands to add 2 and 2 togetehr to get 1,456,996!!

    A joint statement has been released by both courting companies.. so lets just wait and see what does arise should the two sign the deal.

    If and when it happens, lets just hope we’re going to give the new owners TIME! We can’t get braced in expecting a wonderful roller coaster! The sites of people (in the beginning) posting about signing Messi etc and saying we’ll be bigger than Manure and the rest.. think a reality check and strong black coffee will be needed for those dreamers!

    Anyway.. time will tell.

    • TSS

      It does concern me a little that some people’s expectations – like you suggest – are a little over the top. I just want us to spend on football rather than pointless vanity projects that aren’t making the club money and have cost us a fortune. Our turnover is big enough to be serious title contenders in this league, our priorities are simply misplaced.

  • gazza

    just get that turd out anybody is better than someone who sells your best young talent and best senior players and spends all the season ticket money on the ground obviously smartening it up for a future sale he had a seven year plan did old uncle albert , keep them stable do up the ground and pay off the debt he s done all that now he will walk away with 50 mill in his pocket , whats he invested =zero, hurry up and get gone lets get someone in who wants to invest in the team they know the money is in the premier league so thats where they will get us the team needs 4 top players and there is plenty of time to do it if warnock is given 3-8 million before xmas, a top striker winger full back and prob another mean centre half and tongy to stay on should see leeds make the top 2 expect zaha a target and craig makel smith or even charlie austin, leeds to get second behind cardiff will do me, pack grandads bag and ship him out a s a p

    • Pompey White

      Best quote Ive seen for a while “just get that turd out”-quality

  • MattBB2

    all the parties who purchased POrtmouth, and even Carson Yeung showed a healthy set of accounts, and through sailed their purchases ditto the Icelandic prawns at West Ham. A balance sheet doesnt say everything. Lets take into account the value of the businesses assets for instance, or secured interests, lets also consider the extraordinary events on the gulf of 4 years ago, where property values crashed even hardr than they did in the UK. The true strength of the GFH bid can (sadly for us) only be visible when it goes through. I suspect Bates is hoping someone else comes in so a dutch auction can begin, but lets remember GFH is a well connected outfit, their accounts tell a fraction of the story about who they are. Bates allegedly made £55m out of selling Chelsea yet hes taken us into administration.

    • Will23

      “The true strength of the GFH bid can (sadly for us) only be visible when it goes through.”

      MattBB2, visibility is one thing we will not have, rest assured, with GFH.

  • wjohn228

    I can’t believe that the Club is sleepwalking towards an inevitable disaster. Why would a company with greatly devalued.assets, no cash, no experience of football, struggling to survive etc want to take over a football Club with limited assets? The answer is the income streams from the Prem league. At this hour of need we have a chocolate fireguard of an organisation -LUST – purporting to represent fans’ interests

  • Captaincrash

    Optimism the only way to sleep

  • Vancouver White

    Great article, and I think all we can rely on is the fact that Bates will only entertain serious players who have the cash, so we can only hope they have proven this to him. The one concern I do have we these guy’s goes back to the comment David Haigh made comparing Leeds United to a young Pamela Anderson, and the apparent, ‘superb assets’ we hold. To the best of my knowledge there are three key assets around this club;
    1. Player Contracts.
    2. The Football Ground.
    3. Thorp Arche.

    The latter two we do not own, so why he feels we hold superb assets I don’t know. Maybe he feels our agreements to buy back these assets are worth something, and being the type of investors who like real estate development this may be their plan, skyscrapers around Elland Rd.

    • TSS

      The number one asset is league share, brand and fanbase. The rest is largely trivial in all honesty. ER and TA are nowhere near as important as some fans seem to think, we have long-term leases on them both – most businesses lease property. All that really matters is turnover, that’s the most important factor in valuing a business.

  • Reiver

    I said weeks ago that we could be jumping out of the frying pan into the fire. Could this be Bates’s revenge on the fans?

  • robbeard

    I do not think today’s joint statement is Bates pissed off. i think it is a joint effort to take LUST down a peg or two. I mean who do they think they are suggesting that they represent Leeds United supporters across the globe? The only people they represent are the 8,000 members, a very small minority. The PR people behind LUST have the biggest egos known to man.

    • merseywhites

      Totally agree, LUST may have good intensions but its really a worthless organization who are clueless , when it comes trying to inform fans on this purchase,,, They should really keep focus on their day Job,,

  • soothillexile

    The relationship between a parent company and its subsidiaries is more often than not governed by the fiscal and corporate legislation in the territories that the organisation (as a whole) operates within. Logic does not play any role. The ability to minimise liabilities, risk and tax burden are key to why sometimes a parent company can appear to be a dead duck, whilst its subsidiaries go off and have a field day. No guarantee that GFH etc are full of cash, but perhaps more of “a newsworthy story” for some sports journalists to go off on one after reading an article or two. In spite of this, I remain to be convinced that GFH are the harbingers of future glory glory Leeds United.. For my kids sake I desperately hope so.. as we are getting fed up of paying through the nose to watch us play the codheads :)
    As for the devalued assets.. just about every financial institution has massively devalued assets on its books. GFH might well have put them all against the parent in order to allow the subsidiaries to breathe.

  • Tyler75

    Good article TSS. I can only add from my knowledge working in the Gulf that, despite our years in the wilderness, LUFC are one of the most recognisable (and well supported) football ‘brands’ in that region (and around the Middle East) – infinitely more so than Man City before the AUH Sheikhs took over or PSG before the Qataris bought them.
    GFH were set-up as a sovereign wealth fund under Islamic rules and regulations- which is as good as it gets in the Gulf as far as any ‘business ethics’ are concerned – remember these are not democratic countries where openness and accountability are central principles. Richter probably did fall out with/offend the wrong people; it was pretty common when I was there, to discover expats working for local companies, suddenly had to leave after having their visas cancelled (you are effectively only a ‘guest worker’ with not much in the way of job security even with a contract !) Its worth noting that GFH built and manage Bahrain Financial Harbour which is a mixed use,mega project, similar to Canary Wharf – I wouldn’t doubt their ability to deliver.

  • Bobjib

    Did I imagine this – that LUST said that they had been in contact with potential investors, yet, the join statement suggest no one at GFH have been in touch with this LUST lot? I am all for supporters having a voice but I do NOT want this lot speaking for me. That aside – what has happened to the Leeds United Supporters Club, that the likes of Ray Fell used to be part of? They along with many other supporter clubs have been very quite on this takeover, or is that just me missing something?

    • Will23

      But is there a good reason to believe Haigh over LUST?

      Should we take everything Haigh says at face value?

      Are we granting him the honour of believing every word he says before we even know he is as good as his word when so far GFH remain hidden behind a confidentiality statement?

      Just something to consider but I would hope LUST respond to this statement and provide further light on this intriguing contradiction.

      • Bobjib

        @e8a2a470bfb79a850b95a7c1c3d43bc5:disqus good points – but my lack of trust in LUST is from their initial statement before the summer right up to the present period. I like the idea behind the trust, but their ego is getting in the way.

        • mrbigwheels

          I like the idea behind the trust also and I don’t see an ego, an attitude from some of their, let’s say, profound members yes. There is no doubt they need some professional PR guidance to enhance their well mean’t intentions and ‘vision’. It will be most interesting to hear their reply to this evenings joint statement on the OS.
          In support of the LUST statement reference the main issue, the Club/Gfhc have picked on, (other than they have never had any discussion or meeting with LUST), I would say from where I am sitting, LUST are correct in declaring GFHC have only been seen as the bidders for the past six weeks where beforehand they had been acting as brokers/agents for the consortium… so LUST may well be correct but didn’t word their statement that well… They need some help.
          I am not a member of LUST but do think we as fans need a collective that has some professional teeth to enhance the position of all support.
          These are very serious moments in our Clubs history and we need to be organised as the paying customer, to do our best and get the best deal we can to secure the long term future with any new ownership.

    • TSS

      I suspect LUST have spoken with GFH’s PR firm and GFH are unhappy with what the firm has said.The reason I suspect this to be the case is because the statement we received came via a PR firm, rather than direct from the company itself. Standard practice, but it goes someway to explaining the confusion. Obviously there’s some crossed wires somewhere between what GFH want the PR firm to be saying and what they’re actually saying, thus leaving us in a situation where GFH are scrambling to distance themselves from quotes attributed directly to them (it wasn’t just LUST whose quotes they denied after all).

      Problem with PR firms is that they’re not providing direct quotes but acting on what they believe they’re allowed to reveal. When the company they’re acting on behalf of get upset by something the PR firm has said, they can distance themselves very easily.

      It may interest you to know that alongside the statement came additional info from the PR firm who sent it (not published on GFH’s website where you can read the “entire” thing). We used some of this (as did everyone else) when publishing news of the statement, GFH could have very easily distanced themselves from a lot of what was published following that statement, solely because it wasn’t a direct quote but the PR firm attempting to explain the situation.

  • Will23

    Further to the joint official statement which again says nothing of substance, my five funding questions remain unanswered. See comment on other posts on the subject.

    The excellent TSS post above indicates that GFH itself has a business practices model that appears to be shadier than anything Bates has undertaken, with the Reuters articles particularly disconcerting.

    Of course, there remain those “anyone-but-Bates” supporters of the deal who do not like questions over the integrity of Haigh & GFH being raised but until Haigh answers real questions then the jury is out on him and the company.

    Why is the funding arrangement under a confidentiality agreement?

    There is absolutely no reason for this to be the case other than for the simple reason that GFH are not funding the deal out of their own cash (they have none).

    The Reuters article implies there will be third party backers in the background, anonymous, but investing funds through a complicated spiders web of a corporate structure of hidden beneficial ownerships and cross-shareholding arrangements that Bates could only admire.

    Indeed, even if the takeover is completed, Haigh & GFH need to be fully aware that their business dealings will be remain under close scrutiny.

    The fans are the watchmen.

    Yet I fear the fans are the ones who will be picking up the pieces after another failed regime, but this time, one that is potentially more devastating than anything even old Bates could muster.

    Whether GFH take us down the road to riches or the road to ultimate ruin is probably equally likely.

    Only LUFC could manage to find a bunch of Arabic businessmen with mighty plans and ambitions but without any clout to fulfill those dreams, but at the same time extracting fees for “services”, Ridsdale-esque, whilst they can. Milking the cow whilst killing it.

  • If I was being totally honest, I don’t really want oil money owning Leeds United. Think of all the wrongs of Empirical capitalism over the years, and then add a hint of enslavement, and we have the Gulf states.

    I look at what the Sky millions have done to competitive football and I feel nothing but utter contempt. Times that by 10 and we have the effect of oil money on English football a la Scumchester City

    FIFA and UEFA talk the talk about making football clubs abide by Financial Fair Play Rules, but we have yet to see the outcomes, and Scumchester City have proven there are ways around such rules through alleged sponsorship of the stadium by parent companies. And do we really think UEFA will ban the financially crippled Real Madrid ?

    Getting rid of Bates will be the only plus to come out of all this, being owned by GFH/GFH Capital or some other bunch of oily bankers I fear may not be the answer we all desire.

    Todays “joint” statement seems to me to be another case of putting LUST in their place, and sadly some Leeds fans lap it up.

    • Counts of monte fistso

      I understand your sentiment, I despise the obscene sums of money being paid to very average players in the prem league. Sugar daddy owners have destroyed competition and if we went up we would be no different to the other mid table dross hoping for the safety net every year. Tbh my only reason for wanting to go up is to put all of the your not famous anymore clubs in their place. Hull city, Barnsley, cleckuddersfax. Posh etc are not our rivals they happen to share a division with us because of bates mismanagement. I have misgivings about gfh but I would have an Arabian dictator in charge of us over this clown anyday. Bates is destroying the club and isn’t motivated by money but his own ego, if the new owners are crap they will be easier to get rid of than the odious Leeds hater we have now. In terms of LUST I couldn’t care one way or another only I speak for me not them or ray fell or anyone else. My hope post KB that every comment I make from that point is about football not finance, law, pr, ownership, just football which is my hobby after all

  • Geordie Loves Leeds United

    Not wishing to be negative ..erm …but.., as much as I long for positive takeover to move our club forward I am starting to get concerns! We hear nothing for months from KB or GFHC and it seems suddenly there are comments, joint statement, and individual comments by various parties involved in this particular proposed takeover of our club. Why now? I really don’t understand why either party could not have made these media statements about the sale of LUFC earlier (much earlier). It clearly would have had no bearing on the position of the club sale to the point it currently stands at (IMO).
    Is there any need to worry about GFHC finances? Are GFHC actually pulling the wool over everyone’s eyes including Bates’? Are GFHC starting to get panicky in fear of being found out and is this why they are releasing statements publicly stating they want the deal done very soon?.
    I trust NW and the current squad, I think Warnock is doing a brilliant job and its great to see a leeds united team putting in a shift on match days, wearing the shirt because they want to play for it. Quietly optimistic this season. MOT

    • mrbigwheels

      Why all this sudden action?. Why all this the statement , counter statement?. Well obviously the LUST put the wind up things yesterday, (perhaps well done… at least they induced a response from both parties), but consider that GFHC are blustering and keen to seal the deal due to other parties waving the dosh at KB and we all know what he will do. He said it the other day, (simplified), ….. they’re keen to do a deal but I’m still in charge and nothing has changed… fans. Expect some action GLLU.

  • Sunnyleeds

    Good article. I for one am more than “cautiously optimistic” that GFH will make a success of Leeds because they are abundantly rich. Liquidity is of lesser importance. Don Revie’s dream of Leeds becoming a Real Madrid did not meet its destiny on three missed opportunities since Don left: Clough, Cantona and Abramovich. This is another golden opportunity which should take us where we belong. To the very very top.

  • ropey wyla

    LUST = Leeds United Saboteurs and Traitors or Lots of Untrue Statements Touted or Let’s Usurp Saudi Take-over.

  • wjohn228

    Read about GFH’s business model in ‘ The Rise and Fall of GFH’ by Mohammed Khnifer. Google it. It’s available on the academia website free of charge.

  • Ben

    I think a lot has to be said for the type of work that GFH do, seeing how a lot of it is investment work (such as their Tunisian plans), promising returns rather than instant wealth therefore the immediate figures that are displayed about the GFH can always be questioned.

  • craigwhit88

    i agree that their vision is on buying a club that is going to get them and their brand a lot of attention in the west. Leeds could, as you say double or treble in value should we be promoted and sustain ourselves in the premier league. imagine if they were to invest £5m in January, we go up, they invest £15-20m in making us into a ‘good’ premier league team, buy the stadium and training ground back and suddenly we’re a very big club again. This is the rosy side. The worry is that they do a portsmouth, invest, leave us with debt/high wage bills and make a huge loss (which wouldn’t bother them given their other larger investments). If what we read about DH being a lifelong fan and believe what Salem Patel says on twitter then it does seem like they have too much love for the club to see that happen. My gut says they know exactly what they’re doing, and the worst case scenario is they sell up a few years down the line no worse off. Fingers crossed.

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