Liverpool goal is wide open for DIC

 

In finance, as in football, it is all about timing. If your star striker regularly gets in the box at the right time, the result is a goal for your team. But if he gets it wrong on a consistent basis, the result is usually defeat.

It’s the same in high finance, though the result is not always so immediate. American sports financiers Tom Hicks and George Gillett must have thought they timed their run to perfection last year when they nipped in at the last minute to beat Dubai International Capital to ownership of Liverpool football club in Britain. The Americans offered just a little more than DIC to the controlling shareholders, David Moores and Rick Parry, and got instant agreement for a deal worth around Dh2.5 billion.  Goal.

DIC, led by Liverpool fan Sameer Al Ansari, reacted stoically and sensibly. The Americans were paying too much anyway, DIC said rightly, and were borrowing too much of the total to make financial sense. Ansari’s desire for the deal and commitment to Liverpool were never in doubt, but the best thing for DIC to do was walk away and let events take their course.

How shrewd that decision looks today, in the changed environment of the post-subprime world. It emerged today that the Americans were having some trouble meeting the repayment terms of the loan they negotiated with Royal Bank of Scotland, and if they failed to come up the cash the bank would end up owning Liverpool.

How embarrassing for the Americans. Before the global credit crunch, it probably seemed a good idea to load up with debt to pay a lot of money to the greedy owners of Liverpool, take on the club’s considerable debt of GDP45 million (Dh323m) and then splash out on some new players and a new stadium. Now, it looks like the height of folly.

The DIC always looked the better offer, even before the credit crunch. Dubai has deeper pockets than the American entrepreneurs, and was willing to offer financial backing for the new stadium, which could cost as much as GDP400 million. A project of that size needs rigorous assessment and planning long from the outset if it is to avoid the pitfalls of other large sports infrastructure investments, which always seem to over-run both budget and deadlines.

If DIC does get control this time, Ansari would also probably want his own management team in charge, which raises the possibility of Jose Maurinho replacing the current manager Rafael Benitez. That would be an exciting prospect for all Liverpool fans.

It would also make sense for RBS. Banks take on some pretty crazy assets as collateral especially in troubled times like these, but a football club like Liverpool, with its unreliable cash flow and results-dependent finances, would probably be the craziest of them all. RBS has much more serious things to worry about in the US, and does not need the distraction.

All this puts DIC very much in control of the situation. It is said the Americans would want a total of GDP500 million (Dh3.6 billion)  for Liverpool, but this is a ridiculous valuation. It is impossible to see what has added GDP150m to the club’s value in the past 12 months, and DIC should disregard this price-tag as a hopelessly wild opening shot.

Ansari has the ball at his feet and the goal looming large. One accurate shot on target, and Liverpool football club is all his.

 

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