Football Economics Latest
Manchester City Takeover Imminent?
Manchester City has informed the Stock Exchange that it is negotiating with four different parties, one from the United States, to take over the club. The Americans are understood to be the favourites. However, a complicating factor is the financial circumstances of majority shareholders John Wardle and David Makin. City chairman Wardle, and Makin, a former business partner with whom he founded retail giant JD Sports, are owed about £23m in loans by the club. With their loans repaid and 29.95 per cent shareholding worth about £5.4m, the pair stand to make as much as £30m from any takeover. However, any investor must strike two deals, one that satisfies Wardle and Makin for payment of their loans and one acceptable to all shareholders. The American bid is leveraged and could result in the club, which already has debts of over £50, falling deeper into the red. This would not please supporters who fear the club being saddled with a debt in much the same way Manchester United were when the Glazer family took over the club.
This factor could favour the British bid. It is fronted by former City footballer Ray Ranson who lost out in the summer to Randy Lerner in the battle for control of Aston Villa. Ranson does not rely on a player's pension and the after dinner speaker circuit for funds as he has made his own fortune in the insurance and sport finance fields.
Arsenal Running At A Loss
Arsenal lost £6.2m in the six months ending on 30 November. Their pre-tax profits rose from £14.3m in the same period in 2005 to £19.6m last year, but the loss was caused by one-off costs of £21.4m relating to the refinancing of their debt which stands at £260m and is being repaid over 25 years. The move to the Emirates Stadium has dramatically increased turnover. Match day income leapt from £15.6m to £38m with each game bringing £2.8m in ticket revenue. However, player wages rose by £12.3m.
Chelsea cut their losses by £60m in the financial year to June 2006, but they still lost £80.2m. However, they still think they are on course to achieve their target of breaking even by 2009/10. Costs have been cut by 42.9 per cent, although players' wages by just 2 per cent, turnover was up and football activities increased income by 6.6 per cent. Public affairs director Simon Greenberg indicated that the days of big spending on players may well be over, with an increasing reliance on the club's academy. Possibly responding to criticism of the cost of watching live football, the club announced that they are freezing prices on all non-corporate tickets for Premiership matches next season, including both season tickets and match day tickets. Tickets for the group stage of the Champions League may be reduced. Chelsea continues to move towards a more self-sustaining financial model that is less reliant on the benefactions of Roman Abramovich, although rumours that he is thinking of walking away from the club clearly have little or no basis in fact.