THE future of Newcastle United is hanging in the balance with a consortium propped up by Saudi Arabia’s Sovereign Wealth Fund ready to table a £340m bid to buy the club.
Mike Ashley was returning to England from overseas business yesterday, and while neither the Newcastle owner nor club officials have made a public comment on the latest takeover talks, a decision over the Magpies’ future is expected soon.
So, what does all this mean – and what might happen next at Newcastle?
IS THE INTEREST GENUINE?
In a word, yes. That doesn’t mean a deal will be completed, indeed it doesn’t even mean a final offer will be tabled for Mike Ashley to reject or accept. But whereas previous takeover rumours were little more than flights of fancy, designed to thrust an individual or business group into the spotlight, this is a serious consortium with genuine hopes of taking over at St James’ Park.
While Newcastle have not made any public comments on this weekend’s developments, senior sources have privately confirmed that discussions have taken place with a number of different groups over the last couple of months. Ashley might have been frustrated at the way this weekend’s news leaked out – but its subject will not have come as a surprise.
WHO IS INVOLVED?
Amanda Staveley is at the heart of the latest takeover attempts, just as she was when her PCP Capital Partners group mounted a failed buyout effort in the autumn of 2017. However, the key difference this time is that the North Yorkshire financier has secured the backing of the Saudi Arabian authorities via the Middle Eastern nation’s Public Investment Fund (PFI).
With the support of Crown Prince Mohammed bin Salman, the Saudi regime has embarked on ‘Vision 2030’, an attempt to secure international influence and exposure by investing overseas.
Staveley is understood to have raised the possibility of buying Newcastle when she met senior PFI figures at Saudi Arabia’s ‘Davos in the Desert’ event in October. Subsequently, the Saudis have agreed to an 80 per cent stake in ‘Project Zebra’, the codename for the takeover attempt.
Staveley is believed to be financing ten per cent of the project, with the remaining ten per cent coming courtesy of David and Simon Reuben, brothers who topped the Sunday Times’ Rich List in 2016 and who already have a strong footprint in Newcastle thanks to their background in property development.
WHY DO THE SAUDIS NEED STAVELEY AND THE REUBENS INVOLVED?
This has been one of the most commonly-asked questions in the last few days. Saudi Arabia’s Sovereign Wealth Fund is the largest sovereign wealth fund in the world, with total estimated assets of around $320bn. Why don’t they simply buy Newcastle outright?
The answer is that it is not unusual for the Saudi regime to structure deals with minority partners if they feel such a tie-up enables them to tap into expertise or contacts they would not otherwise have.
The Saudi elite do not need Staveley for her money, but they will value her previous experience of brokering high-level takeover deals in English football and her knowledge of how Ashley operates. They will also place a high value on her English contacts book.
The involvement of the Reuben brothers is interesting as it suggests the Saudi backers could be looking at a wider regeneration of St James’ Park and other parts of Newcastle. Abu Dhabi has been praised for the way in which its ownership of Manchester City has led to a wider regeneration of a previously underdeveloped part of Manchester. Might Saudi Arabia see a similar approach in Newcastle as a long-term strategic aim?
WHO IS CONDUCTING THE DISCUSSIONS?
Given the importance of his ownership of Newcastle United, both in financial and strategic terms, it can be assumed that Ashley will adopt a hands-on role in the final stages of any takeover proceedings. However, up to now, his negotiating has primarily been in the hands of Justin Barnes, a long-term confidante who has been involved in the running of Newcastle for the last four or five years.
The ‘Project Zebra’ group’s negotiations are being spearheaded by former Newcastle chairman Chris Mort, a lawyer with London-based law firm Freshfields Bruckhaus Deringer. Mort is understood to have held a number of discussions with Barnes, with the ‘Project Zebra’ group offering around £340m for sole ownership of Newcastle.
WILL ASHLEY SELL?
That is the £340m question. The simple answer is that no one knows. Ashley’s entire business model has been built around unpredictability and confounding expectations, so assuming a formal bid is eventually placed on the table, the Sports Direct boss will be left with a simple choice. Deal or no deal.
He has always said he wants to sell if the price is right, and while £350m has been touted as his preferred sale price, the indications at the moment are that the ‘Project Zebra’ group will come close to meeting that requirement. They clearly have the financial capital to take the club forward, something Ashley has also previously cited as a pre-requisite for a sale.
Does the sportwear magnate really want to sell up though? Plenty of supporters have suggested Ashley is an unwilling seller, deeply reluctant to give up a football club that has acted as a global billboard for his core retail businesses in the past. Is that the case? If so, will he add so many clauses to the sale agreement that Staveley’s Saudi Arabian backers are eventually forced to walk away?
WHAT WOULD A SUCCESSFUL TAKEOVER MEAN IN PRACTICE?
In footballing terms, it would almost certainly lead to a major investment in both the playing squad and the facilities at both St James’ Park and Newcastle’s Little Benton training ground. There have been suggestions that £200m has been earmarked for post-sale investment, a potentially transformative sum, although not quite on the scale of the money pumped into Chelsea and Manchester City in recent years.
Off the field, however, a takeover involving the Saudi Arabian Royal family would lead to some difficult questions about human rights abuses and the use of football to ‘sportswash’ a much-criticised regime. Amnesty International says Saudi Arabia has “an appalling record on LGBT rights, women’s rights, extra-judicial killings, beheadings, the murder of journalist Jamal Kashoggi, and their involvement in the ongoing conflict in Yemen.”
However, Newcastle would not be the first English club to come under Saudi control as Saudi Prince Abdullah bin Mosaad bin Abdulaziz Al Saud took full control of Sheffield United from former owner Kevin McCabe last year.
WOULD RAFA RETURN?
Quite possibly. Rafael Benitez is known to be close to Staveley and was kept fully abreast of the failed takeover negotiations involving PCP Capital Partners. Had they resulted in a completed deal, Benitez would almost certainly still be in place at St James’ Park.
The former Newcastle boss insists he is fully committed to his current role as head coach of Chinese side Dalian Yifang, but those close to him feel he would jump at the chance of a return to Tyneside provided Ashley is no longer in control.
That would be extremely harsh on Steve Bruce, who has done well in trying circumstances since being appointed as Benitez’s successor last summer. However, Staveley might feel reappointing Benitez is a sure-fire way to get Newcastle’s supporters onside in the wake of a successful buyout.
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