Leeds fansWriting in the Sunday Times this weekend, Duncan Castles claims Leeds United are about to be taken over again, barely two months since current owners GFH Capital bought the club.

The claims follow speculation that Adam Pearson (backed by Saudi Arabian money) is interested in the club. Castles extends on this, claiming that agreements have already been drawn up and the club could change hands as soon as this week.

“The transaction for a majority shareholding could be completed this week. Pearson, who plans to take day-to-day control after any takeover, will buy a percentage of the shares himself, but principal funding comes from a Saudi Arabian investor.”

However, all these claims appear contrary to what GFH Capital are saying. Taking time to respond to questions from most media outlets last week, GFH admitted they’d be interested in investment – no big shock, considering they’re an investment bank – but denied any ambition to “flip” the club quickly. Perhaps most revealing was Salem Patel’s response to a question from David Conn, where the Leeds United director stated GFH were looking towards a Premier League pay day.

The key news item for me was recently published accounts which showed GFH to be in a stronger position following the acquisition of Leeds United. I’m no accounting expert, but I don’t think this means they’ve drained money from the club (mostly because there’s none there to take), instead, what I think it suggests is they bought the club for less than what they now value it at – eg. they bought the club for £20m cash, but it shows as a £30m asset on their books, thus improving their bottom line.

If that is the case, then clearly there’s a quick profit to be made here and Castles’ claims aren’t without logic. However, if GFH were to sell now, they’d be missing out on a huge increase in the value of that very same asset if/when Leeds United are promoted to the Premier League. It’s such a huge jump in value (possibly 3 or 4 times what the club is worth now), that it’s difficult to believe any investment bank wouldn’t be planning a path towards promotion before considering a resale.

GFH selling up completely then doesn’t seem in the least bit likely, but perhaps they are willing to take a position as minority shareholders. If they are willing to sell a 51+ percent share in the club, it’d have to be someone with considerable resources behind them else there’d be little point in GFH not going it alone.

For what it’s worth, I don’t expect to see the club changing hands again any time soon, but if it does, then any new majority shareholder would have to have the means to hasten Leeds United’s return to Premier League football and GFH’s return on investment, so if we do get confirmation of TOMA round 2, it might be worth getting excited.

Update: Leeds United fan and Real Estate Investor George Dyer has attempted to further clarify GFH’s accounts in a post you can read here. 

43 Responses

  1. MG

    TSS, you have looked at this too simplistically, the “paper” profit GFH take from “buying” the club is based on Sell-On value, and is positioned in the accounts to imply a profit that will be realised soon. Put simply GFH will sell the club to realise that profit within the next 12 months. No actions by Haigh or Patel show a company intent on making profits through trading activity, if that was the case they would have overhauled the management, they are just flipping. I’ll put beer on it. As an aside the “ownership” issue is not the issue it used to be, once Bates is perceived to be out (and GFH-C’s lauding of him allows some scope for believing he is still messing around LUFC somewhere) then the difference between having GFH and whoever they sell to (Parkin/Pearson/et al) is marginal, basically just the level of delusion, till some Billy Big Pockets comes along and allows us to compete. That won’t be soon.

  2. philyew

    Investment banks are committed to their bottom line value above all else.

    A real $30m offer today is worth infinitely more than the possibility of an EPL payout in 2014 at the earliest – particularly when it is clear they will have to risk further funds in transfer acquisitions in order to get themselves into a position to win promotion.

    In terms of football club funding, ownership by an investment bank is probably only marginally better than public listing. Although both are obviously likely to be better than old school private ownership where the owner lacks the funds for any real ambition, both are driven by a hard financial consideration which lacks sentiment or the patience to build over several seasons.

    As long-suffering fans, we want success just as urgently, but the reality is that there aren’t enough Abromovitch-type owners to go round, It’s probably just as well because, eventually, that level of spending will end up killing the game as we know it.

    • Irving08

      GFHC could turn their lack of funds into an advantage.They have an opportunity to build a new kind of football club here at Leeds. It would succeed by mobilising the power of trust, as opposed to big bucks. It would have a set of publicly proclaimed values, shared by players, employees and fans alike, as well as shareholders, and a board of trustees, representing the constituent parts of the club, which monitored the club’s performance in the light of these values. To prevent short-termism, GFHC could accord long-term shareholders privileged voting rights. Some such agenda, I surmise, might appeal to an Islamic finance house.

  3. mrbigwheels

    Thank you for the immediate response David. I’ll give detailed thought to your view but in the meantime I’m thinking ‘if Carlsburg wrote a blog on LUFC then TSS would be it’. Ta.

  4. Max

    Interesting that they are claiming to have had enough money out of the club to count a net profit. It may be that by making the investment they put enough money under investment to charge a chunky fee to their investors.

    They quote two numbers – “profit before provision” = net profit before making allowance for bad debts (this is the $13m figure – that means this is counting money as coming in which they may not get). The bad debt position is I’m guessing from the Middle Eastern property market. The smaller number is their actual (unaudited) profit. $2.5m.

    GFH’s position, repeated here, that they don’t want to miss out on a premiership payday, only holds water if they’re capable of investing enough money to ensure such a payday. It’s a bit like someone saying “I’ll hold onto my shares in Peterborough to ensure a premiership payday”. What they said in the Guardian interview is that they’d like someone else to come in and fund it, and then they’d like some of that, please.

    Other reports indicate that Bates sold forward 3 years of season tickets. That is I think about a third of LUFC revenue for each of 3 years. Current average attendance is 21,000 (not all of which are season ticket holders, but let’s use that as a measure of current earnings potential). That is #8 in the division. But missing a third of the revenue, on a crude extrapolation to a crowd of 14,000, we are 8th from bottom. It doesn’t feel that the club are likely to get out without investment, if only to cover the money channeled into building investment over the last couple of years.

    GFH isn’t a big company – they lost $4m in 2011 and made $10m profit in 2012. They quote costs as $43m (which they had to cut by a third, so if they had retained the same costs as in 2011 they would have made $10m loss). So actually $5m (say) on a flip is a relatively big deal for them, and may be better than having Leeds sit around in the Championship for a few years continuing to decline in value. If they can still hang on to 20% as well, they should be very happy.

    • David Wilson

      Have to agree with you. If GFH don’t have enough money to invest to get us to the premier league then they’re not going to have that big pay day. If an investor does have that cash then surely they will want the benefits of getting leeds into the premier league for themselves. I would say your idea that they (GFH) would be happy to hold onto 20% and get a pretty decent profit out of their investment makes sense.

  5. Ted Jarvis

    Agree with most of what you have said here, one thing to note GFH and GFH-C are two different distinct entities. They (Patel and Haigh) have been very clever in the way they have described certain elements of the deal.

  6. Ozzie Pete (LUFC)

    Bates didn’t sell 3 years of season ticket revenue!!! The 2 years SECURITY of season tickets revenues were only used as COLLATERAL for a loan, hence the cash going out is only the loan repayment itself….not the total sales! same as your repayment on a car loan which in that case the car is the collateral.

  7. iamaleedsfan

    if we dont win against Milwall on saturday and promotion is unattainable this season i believe GFH will sell us before the season is finished .

    • Soluble Tablet

      But the reverse could also be true. If United begin to look like genuine promotion contenders (which I accept is unlikely) then the value of the business as a saleable asset is likely to increase. If GFH are considering a quick flip then I’m sure that they would prefer this scenario. They’re unlikely to sell when the potential value of the club stands at an unattractively cheap level. It’s like selling your recently acquired property or shares at the bottom of the market.

  8. Matthew

    At the end of the day, this season is pretty much done. Whatever happens from now till the end of the season, as long as the club ends up in a healthy condition with no debt, and in a position to invest for the next transfer window, with or without GFH, I couldn’t care less who buys us.

    • mrbigwheels

      Warnock is close on getting a winger in Henri… Couldn’t have one last week but he can this… Heads or tails, definitely tails. He will tell us what’s flipping going on.

  9. Andy

    “Duncan Castles claims”

    Sums it up. The man’s full of shit, but knows that mentioning Leeds guarantees that his invented ramblings will be read.

  10. Nige Heathcote

    I don’t know what to believe gfh stated at take over press con that full transparency would take place I don’t see this and I don’t see investment into the squad to get us in the prem div I just feel we are a average side that should be better as 5th biggest city one city club and struggling

  11. little cho

    I’m a Harrogate taxi driver, and I took Adam Pearson home yesterday. The deal fell through yesterday morning! Bates/GFH wanted too much. Our Saudi friend will not deal with Bates, Bates is desperate for him to buy, he won’t. LUFC will be back in Bates’ hands within 2 months!!!! GFH haven’t a dime, they are down to the bone!

  12. markman

    GFH from day one have made it clear they are here for the long run
    and from day one they also said they would welcome outside investment.
    obviously if someone offered them mega bucks that would change.

    also,surely having given Byram and Lees longer contracts they have increased their values.

  13. Grim Reaper

    Too much speculation. We need Bates and GFH out now! I hope that Pearson gets back on the case and sorts them. If not, supporters should stop attending all games until the club goes to hte wall. We don’t have to support owners who we dont want in the club. There is no duty to support their business adventures. Someone else will buy the debt then and we will have new owners. The new owner won’t be Bates, because he will go with it!!!

    • philyew

      “Until the club goes to the wall”….as in financial insolvency, administration, points deductions, relegation? Really?

      Things don’t look good right now, but they are still preferable to that route.

  14. LU4LIFE

    It’s what GFH do, they invest in businesses to sell on at profit. I’m
    deeply suspicious that Bates is still involved and I think he’s still a
    cog in this machine and part of this future whole sale albeit a sleeping

    GFH are a group of companies of one which is investment banking, they do
    publishing too which isn’t turning over a significant profit.

    Leeds may as well be sold to someone who can actually get out of the Championship, it’s not going to happen with this lot.

  15. josh

    If fellow supporters of Leeds think that Leeds will get into the EPL with GFH then their living in cloud cuckoo land without a large investment in the playing staff Leeds will be going nowhere in the near future. If their idea is to wait until they have 11 home grown players who are good enough for the EPL then they will have a very long wait and that is dependent on Leeds keepinghold of their best youngsters. I’m sorry to say that if GFH do not sell then it the Championship for use at best. It’s also no good speculating on who the new manager will be if he doesn’t get money to buy players where going nowhere.

  16. mrbigwheels

    Pearson has now distanced himself from Leeds having brought up his potential desire to be associated with the Club, (article quoted on the BBC sports website two weeks ago).

    Someone made made a full takeover bid for Leeds and possibly a second offer… rejected by the GFHC…

    Pearson quotes he hadn’t spoken to any of the press,but did not quote, “I haven’t spoken to the present Leeds owners”… Looks like he’s walked away and that’s that.

    Whose going to represent the Saudi now?.

    • Irving08

      Harvey ‘Nicks and the Porsche outlet may be disappointed, but will anyone else ?

  17. PMH

    The interesting point here is that the cash value of Leeds United is directly correlated with the wealth of the owner. With an impoverished tightwad (write name here) the club is worth nothing. With a really wealthy investor, suddenly, Premiership looks likely and value shoots up. GFH is in the middle. They seem to be on the path of making Leeds a reasonable promotion candidate, for next season. In that case, I don’t think big pockets will show up until Leeds are closer to realizing their ambition. Right now, Leeds in the Premier League is a bit of a pipe dream and the smart money will stay away.

  18. Chareose

    I think Its time for the fans to look at atleast a partial buy out of the club….. Portsmouth Fans raised 2.5 million so im sure we could raise way more than that and then we would have democratic representation at Leeds United and a handle in the way its run….
    Otherwise we are going to be stuck in this stagnated state for years to come !

    • Chareose

      One other point, its obvious there ARE wealthy Leeds fans… Dont you think if the Fans put together a bid for partial control of leeds united that it would be attractive to wealthy fans and safer ?? Its a trust thing, most fans know whats wrong with the club and can be trusted to look out for the best interests of the club and not their own pockets unlike Bates and GFH

      • Irivng08

        The Trust Club – I like it. The biggest problem would be the players, but I think that is surmountable.

      • Matthew

        Shouldn’t the most obvious question be, why aren’t billionaires lining up to buy us? Or at the very most people with hundreds of millions in the bank.

        All you would really need is about 5-10 million quid to add to this squad to draw talent from various leagues, and of course upping the wage cap to get these guys in. Not exactly breaking the bank and when you get promotion you get the TV money and various moneys for being promoted, which would more than cover investment in the squad + Buying back Elland Road and Thorpe Arch.

        No one seems to want to drop the funds to build a promotion capable squad, we’re under achieving this season sure, but what position would we be in, if we had an owner that injected say 10 million into the side with a few quality players? I would say top 6.

      • mrbigwheels

        I truly think one or two “big pockets”, (as PMH below calls them), actually are lining up for Leeds but not as an investment partner. It makes sense for GFHC not to sell out a majority share at the moment but there is definitely something that would steady any investment from others, for example, ‘The Trust Club’ idea. I’d surely want to know who I was getting in bed with if we were handing over quite a few mill’. Any views on this?.

      • mrbigwheels

        Great idea but how do you define ‘partial control’ and what level of investment would be required by the Fans as in the collective sense?.

  19. mikelufc

    This once excellent site has become a pile of shit, from the articles to most of the posts and if that is not enough it seems David is only interested in making a quid out of it filling it with absolute shite ads.

    It’s gone the same way as the rest of his creations.
    dont give up the day job david.

    • Matthew

      You’re quite the complainer aren’t you? I don’t see you filling the comments section with fantastic ontopic posts. I don’t see you contributing to TSS, infact he has actively asked if people want to contribute to the site and you haven’t stepped forward.

      So what if his website has ads? They’re not intrusive, they don’t prevent people from posting.

      If anything has turned into a pile of shit, it would be your post complaining about something that isn’t even an issue.

      You’re just some random idiot causing shit for no reason.

  20. Old Goat

    All pie in the sky, I know, but it’s been a quiet day and in the absence of anything credible from Bates and/or GFH your imagination works overtime ………….
    Sports Direct has just bought Leeds-based Republic Clothing out of administration.
    Meanwhile Mike Ashley very recently sold part of his shareholding in Sports Direct for a reported 100 million quid, which one assumes he is still sitting on.
    He’s still SD’s majority shareholder so would have been instrumental in the decision to buy Republic. The buyout may have been driven by business considerations rather than any desire to be seen as a saviour of jobs and boost commerce in the Leeds area.
    Furthermore he’s not allowed to own two football clubs. However you can’t help but wonder if there might be a connection……………..


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