Alleged takeover chat

[ExiledAjax]

3 minutes ago, Negan said:

We’ve lumped ourself in to Bristol sport so whoever wants to buy us would also have to buy the rugby, basketball and women’s team as well.

No they would not. Read my chart above to see that the football club is, in terms of ownership, entirely separate from the rugby, basketball, and Bristol Sport  companies. Even the women's team could be split off and retained by SL if that was wanted.

3 minutes ago, Negan said:

Along with I’m assuming the stadium and the future redevelopment?

Both either could, or could not, be included in any sale. The legal structure means both are optional.

Edited January 10, 2023 by ExiledAjax

[chinapig]

8 minutes ago, Negan said:

I get the feeling we are just pretty much impossible to buy? We’ve lumped ourself in to Bristol sport so whoever wants to buy us would also have to buy the rugby, basketball and women’s team as well.
 

 

@ExiledAjaxhas explained above that this view of the role of Bristol Sport is a common misconception.

Edit: as they've just explained again!

Edited January 10, 2023 by chinapig

[ExiledAjax]

Just now, chinapig said:

@ExiledAjaxhas explained above that this view of the role of Bristol Sport is a common misconception.

And I would add that it is a completely fair and reasonable misconception for a fan to hold. The way it is presented and marketed by the Club(s) and SL I am unsurprised that most fans who are not experts in corporate structures, companies house, and shareholdings think and believe that Bristol Sport owns everything. You do need to look beneath the surface to discover the truth, and that is another fault to be laid at SL's feet.

[mozo]

Surely Esteban Lansdown is the obstacle here, otherwise we'd have found a US buyer by now?!

[Kid in the Riot]

46 minutes ago, ExiledAjax said:

I agree. If I'm an investor or buyer I want the stadium and everything. I don't want to buy a football club and then rent from the old owner. I'd be happy to be a landlord to the old owner's rugby club, but I want control of the main bricks and mortar asset.

Agreed, and maybe more specifically the turnover/income the stadium generates - which is £millions a year. 

The big financial carrot still remains promotion to the Premier League though. That unlocks £100s millions. I assume that is what Steve is trying to sell. Invest X amount at X% of the club and you get your slice of the Premier League pie if/when we get there. The problem is, who is going to be keen on that, given Steve would presumably still have the final say and given his record of football decision-making over the past 20 years?

[TonyTonyTony]

What is a realistic valuation of the club? Including AG and the training centre, which i presume is part of BCFC holdings as well

 

 

[Mr Popodopolous]

Speculation on my part but when we are in a better financial position we'll be an easier sell as the new owners will be able to invest with more freedom in the team.

Valuation is the crux really. What sort of figures would SL deem fair/realistic vs what would a prospective buyer see as fair/realistic.

Edited January 10, 2023 by Mr Popodopolous

[ExiledAjax]

27 minutes ago, Kid in the Riot said:

Agreed, and maybe more specifically the turnover/income the stadium generates - which is £millions a year. 

The big financial carrot still remains promotion to the Premier League though. That unlocks £100s millions. I assume that is what Steve is trying to sell. Invest X amount at X% of the club and you get your slice of the Premier League pie if/when we get there. The problem is, who is going to be keen on that, given Steve would presumably still have the final say and given his record of football decision-making over the past 20 years?

Exactly. In particular, if we are looking at US-based PE houses as the most likely investors. A PE house is ruthless. They will have a 5-10 year exit plan and will target a certain multiple of their investment upon sale/exit. Likely a 4-5x profit is expected. 

In another industry they would aim to achieve that by taking either a controlling stake of the shares - basically 75% in order to allow them to pass both ordinary and special resolutions unopposed - or they might take a minority stake in terms of the quantity of shares, but would have clauses that ensure they have a majority of directors, or they have all the voting shares, and Steve takes shares that only have an economic interest. Ultimately though the PE house would expect to take control of the business so that they can guide it and they can achieve that 4-5x on exit.

If Steve digs his heels in and says "no I want day-to-day control" then that will be a dealbreaker for most PE houses.

24 minutes ago, TonyTonyTony said:

the training centre, which i presume is part of BCFC holdings as well

I have never been able to nail down whether the training centre is under one of the Bristol City Holdings companies. The answer will be on the Land Registry records, and I don't have access to that as it stands. But in the event of a sale yes you would expect the HPC to be part of the deal.

A precise valuation is a finger in the air job really. Looking at recent similar clubs though you've got Derby who were a Championship club in name only and were in distress but effectively went for about £17m (@Mr Popodopolous is that correct?). Millwall are currently touting a £80m valuation I hear. Sheff Utd are valued at £80-90m by Kieran Maguire (https://www.examinerlive.co.uk/sport/football/news/sheffield-united-takeover-abdullah-offer-25805657). Realistically it's anything between £50m and £100m I would say. Bournemouth were valued at £120m last month - higher division, but much worse facilities.

Edited January 10, 2023 by ExiledAjax

[Mr Popodopolous]

10 minutes ago, Kid in the Riot said:

Agreed, and maybe more specifically the turnover/income the stadium generates - which is £millions a year. 

The big financial carrot still remains promotion to the Premier League though. That unlocks £100s millions. I assume that is what Steve is trying to sell. Invest X amount at X% of the club and you get your slice of the Premier League pie if/when we get there. The problem is, who is going to be keen on that, given Steve would presumably still have the final say and given his record of football decision-making over the past 20 years?

AGL still runs at a slight loss surprisingly although whether that is cash or profit and loss I haven't checked for a while- I'd be surprised if it doesn't turn a cash profit and promotion to the PL would increase revenue streams significantly for club and AGL.

Edited January 10, 2023 by Mr Popodopolous

[TonyTonyTony]

Thanks @ExiledAjax.

On the assumption that the club is worth 50 Million, how much of a return is that to SL, if indeed there is one? Ive not tracked his investment over the years

[Kid in the Riot]

3 minutes ago, TonyTonyTony said:

Thanks @ExiledAjax.

On the assumption that the club is worth 50 Million, how much of a return is that to SL, if indeed there is one? Ive not tracked his investment over the years

Personally I'd imagine Steve's valuation is closer to £100m than £50m. It's estimated he's invested about £200m over the years.

[sh1t_ref_again]

4 minutes ago, TonyTonyTony said:

Thanks @ExiledAjax.

On the assumption that the club is worth 50 Million, how much of a return is that to SL, if indeed there is one? Ive not tracked his investment over the years

Someone may correct me, but thought a figure of 200m had be mentioned before, 

although some say he is just in it to make money and will get all his money back when a few houses are built 

[ExiledAjax]

10 minutes ago, TonyTonyTony said:

Thanks @ExiledAjax.

On the assumption that the club is worth 50 Million, how much of a return is that to SL, if indeed there is one? Ive not tracked his investment over the years

I mean in recent years he's basically put £13m - £15m in every year. He's also bankrolled a £45m redevelopment of a stadium, plus the HPC...so I don't think £50m would see much return. However if the stadium, sporting quarter and HPC are included I think a proper valuation is nearer £100m than £50m. 

To an investor what's the potential uplift? Well West Ham took investment recently that valued them at about £500m and as said, Bournemouth were at £120m in the autumn of last year. So if you're investing in City at a valuation of, well let's say £80m, then to get your 4-5x return you need to sell with us at something like £320 - £400m valuation. That probably means securing at least sporadic European football, plus a well-established presence in the Premier League, and the high profile (and highly paid) player contracts that come with that. You're probably targeting that happening by 2030. Is this likely? No. Is it cheap? No. Is it easy? No.

PS> I'm deliberately not mentioning the likes of Liverpool, Man Utd and Chelsea as if we ever reach their levels of valuation (£4bn approx) then this whole conversation has moved to an entirely different room.

Edited January 10, 2023 by ExiledAjax

[TonyTonyTony]

9 minutes ago, Kid in the Riot said:

Personally I'd imagine Steve's valuation is closer to £100m than £50m. It's estimated he's invested about £200m over the years.

 

3 minutes ago, ExiledAjax said:

I mean in recent years he's basically put £13m - £15m in every year. He's also bankrolled a £45m redevelopment of a stadium, plus the HPC...so I don't think £50m would see much return. However if the stadium, sporting quarter and HPC are included I think a proper valuation is nearer £100m than £50m. 

To an investor what's the potential uplift? Well West Ham took investment recently that valued them at about £500m and as said, Bournemouth were at £120m in the autumn of last year. So if you're investing in City at a valuation of, well let's say £80m, then to get your 4-5x return you need to sell with us at something like £320 - £400m valuation. That probably means securing at least sporadic European football, plus a well-established presence in the Premier League, and the high profile (and highly paid) player contracts that come with that. You're probably targeting that happening by 2030. Is this likely? No. Is it cheap? No. Is it easy? No.

Great info both and thanks, but also rather sobering. However you look at it we are a bit hamstrung. Either with an owner who is hanging on to the promise and wealth of the PL to get some decent ROI, yet at the same time not a very attractive proposition to potential buyers.

 

[GrahamC]

3 hours ago, CyderInACan said:

Who on earth would want to buy a championship football club!?

An American bought Gillingham last month, they are bottom of the entire football league at present.

We are by no means the least attractive club out there, I think SL’s inability to relinquish all control is more of an issue than finding a buyer.

If the Fruit Market bit is true that’s disgraceful, but sadly no surprise.

3 hours ago, CyderInACan said:

Edited January 10, 2023 by GrahamC

[Hxj]

2 hours ago, ExiledAjax said:

So any sale or investment of/in the football club or stadium doesn't directly involve that company or the development that it is doing. The stadium and sporting quarter are, I bleieve, on different titles at the land registry. Therefore, so long as SL was comfortable that he would have the correct access easements and contractual relationships with Bristol Sport or Bristol City football Club then as I understand things it doesn't affect it at all really.

Alternatively yes they could include Esteban Investments or the Sporting Quarter as part of the sale - and yes that would increase the valuation again.

There are many different registered titles for various bits.  Personally I doubt that anyone would really be interested in acquiring anything at this point in time.  The inter-relationships between the club/stadium/sporting quarter/Ashton Vale are too complex at the moment, complexity increases risk which reduces prices.

 

  

Edited January 10, 2023 by Hxj

[Hxj]

20 minutes ago, ExiledAjax said:

I have never been able to nail down whether the training centre is under one of the Bristol City Holdings companies.

It's owned by the Football Club, see 2021 accounts for details.

[Kid in the Riot]

8 minutes ago, sh1t_ref_again said:

although some say he is just in it to make money and will get all his money back when a few houses are built 

Longmoor village. The site where the new stadium was to be built.

500 new homes 30% of which are affordable/social. 

Difficult to know what profit he'll make as I don't know how much he paid for the land, however given it was former landfill and green belt, probably not a massive amount.

In terms of its land value now. Let's subtract the social housing, so we're down to 350 homes. Let's say £100k a plot = £35m.

@Pedrowe will have a better idea! But suffice to say, he'll be walking off with a very nice profit; and the key detail here is that he would not have got this permission if it wasn't for Bristol City FC and trade offs with the sporting quarter.

[ExiledAjax]

18 minutes ago, TonyTonyTony said:

Great info both and thanks, but also rather sobering. However you look at it we are a bit hamstrung. Either with an owner who is hanging on to the promise and wealth of the PL to get some decent ROI, yet at the same time not a very attractive proposition to potential buyers.

I've wondered whether he might go for a sale with what's known as an "earn-out" provision. This is a way of structuring the payment he receives as two lumps. One is paid upfront, and the other is "earned" based on the future performance of the business. It's normally used where an owner-manger wants to realise some of the wealth tied up in his company, but also bets that the company will grow, and he wants a slice of that as well.

The snag is that the second future performance based payment is risky. In our case if we never got promoted then SL wouldn't get it, and so he'd end up having sold us for not very much. It also still generally requires you to relinquish full control of the business to the new owner, and as we're discussing, this seems to be something SL is against.

17 minutes ago, Hxj said:

There are many different registered titles for various bits.  Personally I doubt that anyone would really be interested in acquiring anything at this point in time.  The inter-relationships between the club/stadium/sporting quarter/Ashton Vale are too complex at the moment, complexity increases risk which reduces prices.

Contractually tricky, but legally possible. Agree it would be expensive to properly structure the deal. Lawyers would be the only happy people. It should be possible though, although as I say, 99% of potential buyers would much prefer just taking the whole lot.

Edited January 10, 2023 by ExiledAjax

[Kid in the Riot]

8 minutes ago, Hxj said:

There are many different registered titles for various bits.  Personally I doubt that anyone would really be interested in acquiring anything at this point in time.  The inter-relationships between the club/stadium/sporting quarter/Ashton Vale are too complex at the moment, complexity increases risk which reduces prices.

The planning permissions for the sporting quarter and Longmoor village are separate and permissions run with the land, not the owner/applicant. It can all be divvied up however one wishes. If the money and will is there then a sale could happen.

I don't accept that purchasing Bristol City should be anymore difficult than purchasing Newcastle United (off Mike Ashley no less!), Bournemouth or Gillingham for that matter. Land deals/asset purchases of this scale are complicated, but far from impossible.

[cidered abroad]

22 minutes ago, GrahamC said:

An American bought Gillingham last month, they are bottom of the entire football league at present.

We are by no means the least attractive club out there, I think SL’s inability to relinquish all control is more of an issue than finding a buyer.

If the Fruit Market bit is true that’s disgraceful, but sadly no surprise.

@GrahamC 

Please clarify / advise what does the Fruit Market have to do with SL or City

[Mr Popodopolous]

1 hour ago, ExiledAjax said:

Exactly. In particular, if we are looking at US-based PE houses as the most likely investors. A PE house is ruthless. They will have a 5-10 year exit plan and will target a certain multiple of their investment upon sale/exit. Likely a 4-5x profit is expected. 

In another industry they would aim to achieve that by taking either a controlling stake of the shares - basically 75% in order to allow them to pass both ordinary and special resolutions unopposed - or they might take a minority stake in terms of the quantity of shares, but would have clauses that ensure they have a majority of directors, or they have all the voting shares, and Steve takes shares that only have an economic interest. Ultimately though the PE house would expect to take control of the business so that they can guide it and they can achieve that 4-5x on exit.

If Steve digs his heels in and says "no I want day-to-day control" then that will be a dealbreaker for most PE houses.

I have never been able to nail down whether the training centre is under one of the Bristol City Holdings companies. The answer will be on the Land Registry records, and I don't have access to that as it stands. But in the event of a sale yes you would expect the HPC to be part of the deal.

A precise valuation is a finger in the air job really. Looking at recent similar clubs though you've got Derby who were a Championship club in name only and were in distress but effectively went for about £17m (@Mr Popodopolous is that correct?). Millwall are currently touting a £80m valuation I hear. Sheff Utd are valued at £80-90m by Kieran Maguire (https://www.examinerlive.co.uk/sport/football/news/sheffield-united-takeover-abdullah-offer-25805657). Realistically it's anything between £50m and £100m I would say. Bournemouth were valued at £120m last month - higher division, but much worse facilities.

The PE house thing, here is my problem or concern.

No two takeovers or business transactions are identical I think this is common ground. Obvious too.

However from what I can gather, are they or are they not keen on transactions such as leveraged buyouts and similar? It's business I get it, but for a Championship club like us it feels like a significant risk potentially.

The other bit you mention is 5-10 years for their ROI. At what point do they get itchy feet, start having their loans repaid ie loan x, repaid y and is a net reduction in loan debt. Allam family last few years until sale and Chansiri from 2019-20 has to made a start.

Derby. Was £17-18m for the club, MSD we another £20-25m which was paying Morris to pay MSD basically and obviously legal fees that MSD racked up £1-2m was possibly an additional cost too. They mentioned creditors again Football creditors but they're surely paid over term of contract.

On the PE aspect, year 3 or 4 we are still Championship they have thrown a lot at it. Still Championship and FFP has been breached. How does a PE house looking for a return react to that situation.

Edited January 10, 2023 by Mr Popodopolous

[Hxj]

31 minutes ago, Kid in the Riot said:

The planning permissions for the sporting quarter and Longmoor village are separate

My recollection was that the Longmoor village permission was given on the condition that the surplus from that development was used exclusively to fund the 'development deficit' on the Sporting Quarter.  I agree that permissions go with the land, but there is a more than casual link here.

Of course you can sell nearly anything at a price, may be I should have said, that the complexities will reduce the price to one below that which is economically sensible for the Lansdown interests to accept.

 

[Kid in the Riot]

9 minutes ago, Hxj said:

My recollection was that the Longmoor village permission was given on the condition that the surplus from that development was used exclusively to fund the 'development deficit' on the Sporting Quarter.  I agree that permissions go with the land, but there is a more than casual link here.

You could well be right and there may be a legal agreement tying the two sites together. Again though, planning legal agreements can be varied, or there could be an overarching legal agreement between buyer/seller. 

Added complexity to the conveyancing but I'm not seeing anything that would be too off-putting to a determined buyer, or significantly impact the value of the football club. These prospective projects could add value, if anything.

[NickJ]

1 hour ago, Kid in the Riot said:

Longmoor village. The site where the new stadium was to be built.

500 new homes 30% of which are affordable/social. 

Difficult to know what profit he'll make as I don't know how much he paid for the land, however given it was former landfill and green belt, probably not a massive amount.

In terms of its land value now. Let's subtract the social housing, so we're down to 350 homes. Let's say £100k a plot = £35m.

@Pedrowe will have a better idea! But suffice to say, he'll be walking off with a very nice profit; and the key detail here is that he would not have got this permission if it wasn't for Bristol City FC and trade offs with the sporting quarter.

Precisely.

[Mr Popodopolous]

There are actually complicating factors to us vs Newcastle, Bournemouth and tbh I know next to nothing about the Gillingham scenario.

Newcastle PL at time of takeover. If worst should happen 3 years of Parachute Payments and  huge inbuilt advantage for at least two, if not three of the years. Plenty of scope to invest in the playing side due to FFP rules and how Mike Ashley ran the club. He loved FFP I reckon.

Bournemouth PL and Parachute if the worst happens, 2 years and a middling position to invest in new players.

Gillingham, as above. Who knows.

Edited January 10, 2023 by Mr Popodopolous

[Davefevs]

1 hour ago, Mr Popodopolous said:

AGL still runs at a slight loss surprisingly although whether that is cash or profit and loss I haven't checked for a while- I'd be surprised if it doesn't turn a cash profit and promotion to the PL would increase revenue streams significantly for club and AGL.

It has made a loss last 2 years (at least)!

 

[Mr Popodopolous]

15 minutes ago, Davefevs said:

It has made a loss last 2 years (at least)!

 

Yeah thanks, figured maybe the case.

No cash flow statement, unsurprising I guess but slightly disappointing also. It'll be included and buried away in the BCH accounts.

[ExiledAjax]

34 minutes ago, Mr Popodopolous said:

However from what I can gather, are they or are they not keen on transactions such as leveraged buyouts and similar? It's business I get it, but for a Championship club like us it feels like a significant risk potentially.

Leveraged buy-outs get a bad rep in football, but they're pretty common elsewhere. I just bought a house before Christmas. I borrowed from a bank to do so and gave them a mortgage over the property in order to secure that lending. If I fail to pay the mortgage then the bank take ownership of the house. That's a kind of leveraged buyout.

In football the buyer borrows from the bank, and in order to secure the money the bank takes a mortgage over either the shares that are being bought or possibly over an asset - ie the stadium. In general PE terms it would most likely be over the shares. The bank lends at an interest rate - normally 5-10% as I understand it in football - and the PE house bets that when it sells it sells for more like 400-500%, and so comfortably makes a profit despite paying the bank the interest. If the PE house fails to pay the loan back then the bank takes control of the mortgaged shares, and so takes the company. All well and good, and it works in many many industries.

But, in football, if the bank takes the shares then it becomes owner of the club. The club is, so far as the bank is concerned, a ******* car crash of a company that is hemorrhaging money on a galactic scale. They'd put it into administration immediately and try and recover whatever they could. If there's an institution more ruthless than a PE house it's a bank. So the leveraged buyout is fine until it goes tits up.

I don't really have an issue with us being bought by a PE house using a leveraged structure. It has potential drawbacks, and it feels very "cold", but it should bring a high degree of professionalism to the club, it should deliver excellent governance, and it should bring a very focussed and driven and motivated management team in at board level. We may lose a little bit of "soul", but in the modern world that's where the game is. Now if we could get just one small golden share in place as well with some protections over dealings with assets then I think you could end up with a decent compromise structure where the PE house gets its returns, fans get some comfort that the club isn't going change too much, and we get a future that involves a better standard of football.

[REDOXO]

A lot of talk of Private Equity and Leveraged buyouts. 
 

In the USA equity (most have it in their heads this is likely to be an American person or group) Tend to be backing known entities. 
 

For example say a known business group with a track record perhaps wants to buy a business or group of business, they would approach an equity house they already have a relationship with. 
 

So group/individual goes to say a company , let’s call them Mass Equity (these groups tend to have 500m to 100b under management) look at the industry take a look at the risk and make a calculation of predicted returns. If it fits the model it’s a goer. A letter of intent will then be issued. This could take up to a year in due diligence and if there is a deal in the offing there will be individuals representing the buying group taking a look at the organization being bought internally at some stage. 
 

The big sports deal here was the buy out of the LA Dodgers which was financed by Guggenheim and put the bloke who is now at the top at Chelsea as one of the ones in control there. (4.5b)
 

If anyone seriously thinks something is close keep an eye out for people at the club and HPC who are not typically there!