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The Great Foreign Takeover

English Premier League Changing Hands

By Michael Wulzinger

The English Premier League, the most glamorous league in the world, is changing hands. Wealthy investors from Russia, the Middle East, America and Scandinavia are pouring hundreds of millions into the sport. But what are their true motives?

They met in the lobby of the Dorchester Hotel on London's Park Lane -- a sheikh from the United Arab Emirates and a middleman from FC Liverpool. The middleman was seeking a buyer for the Premiership club; the sheikh was looking for a gift for his brother.

The deal will ultimately be worth about 200 million pounds Sterling, or roughly €300 million, not including the cost of building a new stadium, estimated at €270 million. But FC Liverpool isn't just any old present -- say a cashmere coat from luxury department store Harrods in Knightsbridge. FC Liverpool is a unique product, the kind of product that will go to the highest bidder.

Take industrialist John Fredriksen who, with his collection of business ventures that includes ships, drilling platforms and salmon farms, has made himself into the richest man in Norway. Then there are two other parties interested in investing their millions in English football but who, like the Arab sheikh, prefer to remain anonymous for the time being.

One thing seems clear, though, and that is that the club is bound to change hands. Majority shareholder David Moores wants to divest himself of the bulk of his stake.

Whose bid will ultimately be accepted does not just depend on Moores -- the corporate consulting firm PricewaterhouseCoopers on the banks of the River Mersey in downtown Liverpool will also have a say. The club's owners have hired PricewaterhouseCoopers, which specializes in takeovers, to review all bids and provide them with its recommendation.

Magnates from Scandinavia and the Middle East

When Thai Prime Minister Thaksin Shinawatra, who has since been driven out of office in a military coup, offered to buy the club two years ago, FC Liverpool's owners turned him down, partly because the deal would have been difficult to sell to the English public.

English football these days has gold fever, and globalization's adventurers are doing everything within their power to force their way into its executive suites. They include oligarchs from Russia, magnates from Scandinavia and the Middle East, self-made millionaires from the United States, bigwig politicians from Southeast Asia and London mutual fund managers managing billions in assets.

All are following the same instincts. No other football league is as profitable or comes with quite the glamour factor as the Premiership. With its stars and clubs, the league has a worldwide presence and sells the kinds of dreams one would normally find only in Hollywood -- the dramatic tales of heroes and the humiliated. Indeed, football clubs are packed with the kinds of sexy and exciting stories one would otherwise expect to find only in a good movie.

Since 1983, when Tottenham Hotspur became Europe's first publicly traded football club, English professional clubs have been targets of speculation and the subjects of wild fantasies of profitability. But for years it was only the British business elites who were buying the major share packages, including racehorse owners, the heirs of fortunes, construction magnates, theater impresarios and diamond dealers. Some of these original shareholders have since sold off their football assets, and have done so at substantial profits. Even some of the staunchest financial backers of English football, such as wealthy businessman John Madejski, owner of Premiership rising star FC Reading and a respected supporter of London's Victoria and Albert Museum, see the end of an era approaching. "Sooner or later I'll have to go," says Madejski. "Within the next 10 or 20 years, foreigners will own most of the clubs in the Premiership. Why should that be different in Reading?"

The new owners are investing to make money, and even if their investments fail to pan out, which happens often enough, the clubs still serve as trophies for the ultra-rich. "They used to shoot Indian tigers in the jungle," says one industry insider, "and today they hunt clubs in the Premier League."

Several takeover battles are currently underway. Iranian businessman Kia Joorabchian, 35, is struggling to take control over West Ham United, a slightly aging traditional club from East London. To get the negotiations going, the former car dealer managed to secure West Ham's signing of Argentine national players Carlos Tevez and Javier Mascherano for a combined transfer fee of about 30 million pounds Sterling. With the help of questionable investors, Joorabchian had managed to assume control over their former Brazilian employer, Corinthians in São Paulo, a little less than two years ago.

Real estate speculation with West Ham

It is not yet clear who is behind the bid for West Ham. Insiders in London speculate that Joorabchian is playing "errand boy" for Russian oligarch Boris Beresovsky, who lives in exile in London. Others believe that the deal has already been arranged with the owner of FC Chelsea, Roman Abramovich, who they say wants to establish a second team in addition to his all-star Stamford Bridge in the Premiership. Joorabchian has vehemently denied the rumor.

Another potential buyer is wealthy Israeli businessman Eli Papouchado, nicknamed "Papo" -- a man who, according to an associate, doesn't know the difference between West Ham and West Bromwich and, in fact, probably has no idea how many players there are on a football team.

Papouchado admits that his interest lies in other facets of West Ham's balance sheet. He apparently speculates that East London, parts of which seem practically abandoned today, will receive a facelift ahead of the 2012 Summer Olympics. This, of course, would boost real estate prices on Green Street, where West Ham United's stadium is located.

Similar plans are apparently on the minds of the managers at Belgravia Group, a behind-the-scenes investment company that surprised the football world when it announced an interest in northern English Premiership club Newcastle United. The company, which is headquartered on Jersey in the Channel Islands and manages assets of about a billion pounds Sterling, has not been involved in football in the past.

Foreign investors have already gained control over two other clubs in recent months. American businessman Randy Lerner, who already owns the Cleveland Browns, a professional American Football team, invested €93 million for a share of Aston Villa. A 30-year-old Russian is now running the show at southern English club FC Portsmouth. Alexandre Gaydamak, a businessman who was raised in France, acquired all shares in the club for €70 million.

Given that many of the deals originate behind the scenes, there are few that have a comprehensive overview of the business. Dan Jones, who heads the Sports Business Group at Deloitte, a corporate consulting firm in Manchester, is one of them.

"Miles ahead of everyone else in Europe"

The Premiership, says Jones -- a sharp dresser and eloquent speaker -- has done an "outstanding job" in marketing itself worldwide since 1992. "What we are now experiencing is the next stage of globalization, and the English clubs are, once again, miles ahead of everyone else in Europe."

Jones and his group have spent the last decade and a half analyzing economic fortunes in European league football, and have published their results in a report they issue annually. The latest issue of their "Annual Review of Football Finance" is 68 pages long and sells for almost €600. And yet, as a barometer of commercialization, it is considered indispensable in the industry.

From the vantage point of Jones' office in downtown Manchester, the German football scene seems puny by comparison. Indeed, the Premiership comes out on top by almost all measures. "Let me give you two examples," he says, referring to page 15 of his report, which documents the TV revenues of Europe's four largest football leagues. Beginning next season, the Premiership's clubs will collect €842 in annual fees from pay TV stations, which is almost four times as much as Germany's Bundesliga clubs. And when the Premiership League sells its television broadcasting rights abroad, for an estimated €250 million, it will be making almost 12 times as much as the Bundesliga collects from Bwin, the company charged with marketing German football's foreign broadcasting rights.

Nevertheless, financial expert Jones, an acknowledged fan of Manchester United, and his analysts come to a remarkable conclusion in their report: "Although additional investments from abroad are possible, we generally expect that they will more likely be prompted by the temptations of glamour and the prestige of the sport than the opportunity to turn a profit."

Is the Premiership turning into a playing ground for celebrity-seeking billionaires after all? Since Roman Abramovich began pumping ridiculous sums into football (he has injected more than €500 million into FC Chelsea in the last three years), officials and politicians in England and elsewhere have expressed concerns that the sheer power of money could destroy the sport. How can competition survive when an oligarch like Abramovich is able to wave off a loss of €204 million in a single season, almost as if he were paying yet another hotel bill?

And who can guarantee that the Premier League won't mutate into a giant money-laundering machine, one capable of not only laundering ill-gotten millions but also of glossing over the sometimes questionable reputations of its major investors?

Worries of money laundering

At the moment, London's financial district is practically overflowing with money in need of investment opportunities. From their offices in Mayfair, investment firms deal in sums on a daily basis that surpass the gross domestic products of countries like Cameroon. One of the more disconcerting reasons behind London's current appeal as a financial investment center is that the money-laundering laws in the United States were drastically tightened after the attacks of Sept. 11, 2001.

This has also given rise to concerns at the political level. British Minister of Sport Richard Caborn launched a Europe-wide investigation into such sensitive issues as transparency in the context of club acquisitions. The results of his 165-page report are sobering. The investigators found that football runs the risk of falling into criminal hands, and that the ownership of clubs has become less than transparent. The report, which former Portuguese government minister José Luís Arnaut presented in late May, explicitly mentions the dangers of money-laundering. Arnaut, who declined to name names, also recommended enacting legislation at the European level that would make it difficult for questionable businesspeople to buy their way into football clubs.

But executives at the Premier League reject these proposals as unacceptable efforts on the part of politicians to become overly involved in the sport. One of the basic elements behind their economic success, argues Premier League CEO Richard Scudamore, is that the clubs have been so willing to open their doors to the capital markets -- unlike Germany's Bundesliga, where investors can only acquire minority stakes in a club, and unlike the Spanish system, where major clubs like Real Madrid and FC Barcelona are owned by their "socios," or members.

Zuma Restaurant in London's Knightsbridge neighborhood is one of the centers of power in this new world of football. The place has become a hot spot for many who earn millions as players or investors in the Premiership. Zuma is packed to the gills every evening with a noisy crowd of the impossibly rich and impossibly beautiful, patrons who wouldn't bat an eyelash at dropping 200 pounds on a few morsels of tuna tartar with wasabi marinade, sashimi of sea bass or a Wagyu steak.

Promoters, consultants and even FC Liverpool's middleman lounge at Zuma, sipping cold glasses of Chablis while keeping a watchful eye on their Blackberrys, waiting for that critical call from a North American bank that could help finance the takeover of a club.

Is Arsenal next?

Fredrik Ljungberg, one of the top midfielders in the Premiership, sits at a table surrounded by a bevy of women who look as though they had just stepped out of a glossy fashion magazine. A former Swedish national player, Ljungberg embodies the transformation of football in England more than almost any other player, especially since he became an international sex symbol after posing in Calvin Klein underwear ads.

Ljungberg's club, FC Arsenal, is yet another pearl in the Premier League. Emirates Stadium, where the club began playing this season, has a capacity of 60,000 and is considered one of the league's state-of-the-art venues. The cost of renting two red leather armchairs in the stadium's Diamond Club, just above the directors' box, comes to 100,000 pounds for three years. All 168 seats are sold out until the summer of 2009.

Businessmen Danny Fiszman and David Dein have owned almost half of the shares in Arsenal for years. French trainer Arsène Wenger, who has left his mark on the club for the past decade, considers continuity among its shareholders essential. "The owners," says Wenger, "are people who represent the values of a club. English football is something very special to me. The owners set the standards, and the managers and trainers follow their examples."

Fiszman and Dein have denied any talk that the club might be up for sale. Nevertheless, Arsenal, which, together with Chelsea and Manchester United, is one of the big three in English football, is considered the most attractive takeover candidate in the Premiership. There have been persistent rumors that Russian oligarch Oleg Deripaska, 38, with an estimated net worth of €6 billion, plans to acquire a stake in the club -- a move that would be seen as a declaration of war against Abramovich.

Yet another shakeup in the football market became palpable recently when more than 700 Arsenal shares changed hands within a week. The shares, which go for about 5,000 pounds apiece and have more than tripled in value in the last two years, are normally traded individually.

Which of the club's shareholders sold the package has not been disclosed. But Arsenal fans have been concerned about one of the club's shareholders for some time: Lansdowne Partners, a London-based hedge fund. A quote from French revolutionary Saint-Just is etched into the stone façade above the hedge fund's offices at No. 16 Davies Street in Mayfair: "Too many laws, too few examples."

Three years ago Lansdowne's investors revealed their investment strategy when they sold a portion of their shares in Manchester United to Malcolm Glazer. As it happened, the American billionaire was preparing his hostile takeover of the club at the time.

Translated from the German by Christopher Sultan