Flipping Leeds United makes little sense for GFH TSS February 25, 2013 Leeds United 43 Comments Writing 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.