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Liverpool Takeover Plan: All You Need To Know About £120m “Rhone Group”

COS Contributor Michael Fish gives you the ins and outs concerning potential Anfield investors.

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Liverpool Fans 2009/10

According to various reports Liverpool is on the verge of sealing a 120 million pound investment from the “Rhone group” for 40% control of the club. Approximately 100 million will be invested to decrease our 237 million pound debt and 25 million will be made available to Rafael Benitez in the transfer market.

Rhone Group

Rhone Group was formed in 1996 and is owned and managed by the millionaire financiers Robert Agostinelli and Steven Langman, and is a mid-market private equity firm. Very little information is available to do a proper research of their company as a visitation to their website is only accessible with a “partnership login”.

Club control

If this deal is to go through, which looks pretty imminent at the moment, as various reports are suggesting that Christian Purslow has already held meetings with Rafael Benitez and indispensable first team players like Steven Gerrard, Jamie Carragher and Fernando Torres. It would leave George Gillett and Thomas Hicks with 30% shares each and Rhone Group with 40%. To many who believe that this would mean that Rhone Group have the final say on club matters, you couldn’t be more wrong.
This would only mean that if Rhone Group try to force through an idea and 1 of the two American owners(Hicks or Gillett) disagrees, that their vote is void. But if it was to come down to investing money into the squad or to free up funds for the stadium and both Gillett and Hicks disagree than it doesn’t happen.

Advantages

· George Gillett and Thomas Hicks’ disagreements would no longer be an issue as they would have to come to a mutual agreement to stop the Rhone Group from making changes.

· Debt reduced by 50%.

· Initial 25 million pounds made available to the Manager.

· Security of holding on to players like Mascherano and Torres for at least 1 more year

Disadvantages

· Any changes to the structure of the football club would have to go through a voting process – and we all know how long that can take with just 2 Americans, one has to wonder how long it would take with 3.

· Short term strategy in place, but still no long term strategy which still means uncertain times off the pitch.

· Still no sole controlling body.

Debt reduction

With current debt set at 237 million pounds, a reduction of 50% is ideal. What has to be mentioned though is that this still isn’t “debt-free” and still no stadium. Liverpool football club have an annual profit of approx. 10 million pounds – to reduce future debts we would have to decrease the current debt to 0 and then take out a loan(mortgage) to finance the new stadium. New stadium would increase revenue by 50 million pounds ensuring a profit of around 20-30 million depending on the cost of maintenance required for the new stadium. At present loan costs for a 237 million pound debt is set at around 40 million pounds annually – this of course has to do with interest rates that are set up because of “short-term” borrowing.

Long-term loans come with a lower interest rate, financing a stadium would prove no stumbling block for Liverpool football club. However, with “Personal” loans still burdened on the club which inevitably come with high interest rates, the future still looks bleak.

If the stadium costs for example 400 million pounds than the annual interest rate would be approx. 4-5% APR depending on various variables including (deposit, Club-Bank relations, etc) 400 million pound mortgage over a period of 20 years means annually between 29-30 million pounds. If we take into account that we already operate at a profit of 10 million pounds per year with the current stadium then we can calculate the following: 10 million + 25 million from new stadium revenue = 35 million pounds in profit if we subtract the loans necessary to purchase the new stadium it leaves us with approx. 5-10 million pounds profit. But, this is a calculation of what could happen if the club was “debt-free” if we was to add on the 15-20 million that would now be required to be paid because of personal loans than we will still be increasing debt.

Conclusion

Anything to decrease George Gillett and Thomas Hicks’ power over our club will always get the green light from me. But, somehow this deal seems to me like “not the right” way to go. Liverpool need a single owner, who understands the corporate culture of a football club, including how things are supposed to be run at this historical club. I think what most of these foreign owners do not understand is how to properly conduct themselves as a leader of a culture. American’s always seem to mess it up more than their fellow counterparts from other countries. And the only conclusion I can sum up for this kind of attitude is how business and sports is conducted on the other side of the Atlantic Ocean. When they takeover a club in the States they use their Emotional Intelligence to deceive their club supporters into believing every single word that comes out of their mouth. In England and the rest of the world, this is just considered “Bull”.

Rhone Group do not seem to me like the financial backing that we need. Firstly, private equity firms are generally “long-term” investors. But, I am not fooled by this tag, as I understand what is considered a “long-term” investor in the business world – anything above 3 years. From the research I have gathered, Rhone Group usually hold on to their investment for an average of 7 years, which in football terms is short-term – and – not what Liverpool football club are looking for.

Also, what is a no-go for me in this deal is the description of the investor – private equity firm – some might be saying right now “what is wrong with that?”. Well I just don’t like the idea that my football club who I support through good and bad times is being bought up by people who have the only intention of making a quick buck. An owner of a football club for me is someone who wants to increase the sporting activity and in that process gaining financially.

All in all, I am happy that it has come to a point where Hicks and Gillett’s time is over. But, I am not jumping up and down just yet with the alternative. Christian Purslow should be awarded a medal for what he has done for our club. But, I am not sure about this one.

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