Alleged takeover chat

[chinapig]

11 minutes ago, ExiledAjax said:

 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.

Is any of that true of Manchester United for instance?

As I understand it the debt was loaded onto the club and the Glazers have been taking money out for themselves ever since.

Edited January 10, 2023 by chinapig

[Mr Popodopolous]

9 minutes ago, ExiledAjax said:

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.

My concern is that without the cash flow of a PL club, with the current financial models of the Championship. It's alright for Man Utd due to their huge revenue streams.  It's alright for Burnley as they were run fantastically got years and had major cash reserves, PL cash and Parachute Payments. I'd argue that both of these haven't yet gained from it despite the major advantages at time of takeover.

How do you get this return as a regular Championship club that loses cash on both on a cash and usually a profit and loss basis.

Isn't a leveraged buyout basically where a lot of the debt purchase price is loaded onto the club. I think that could wreck a regular Championship club. PL clubs I have more faith in their ability to absorb it 

[Kid in the Riot]

1 hour ago, cidered abroad said:

@GrahamC 

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

Nothing. It's a potential joint venture between investment firm Conygar and Bristol Rovers. Below image taken from the Temple Quarter consultation document, showing potential for a new stadium in character area 2 'South St Philip's Marsh'.

[ExiledAjax]

7 minutes ago, chinapig said:

Is any of that true of Manchester United for instance?

Were they bought by a PE house or by some very rich blokes. There is a subtle difference in that PE houses will have their investors on them, and be accountable to them to deliver returns. Very rich blokes are accountable only to themselves. 

6 minutes ago, Mr Popodopolous said:

My concern is that without the cash flow of a PL club, with the current financial models of the Championship. It's alright for Man Utd due to their huge revenue streams.  It's alright for Burnley as they were run fantastically got years and had major cash reserves, PL cash and Parachute Payments. I'd argue that both of these haven't yet gained from it despite the major advantages at time of takeover.

How do you get this return as a regular Championship club that loses cash on both on a cash and usually a profit and loss basis.

Isn't a leveraged buyout basically where a lot of the debt purchase price is loaded onto the club. I think that could wreck a regular Championship club. PL clubs I have more faith in their ability to absorb it 

Purchase loaded onto the club in terms of it being the club that repays the interest yes. Whether or not that wrecks a Championship club depends on how much that loan is and whether the owner(s) are prepared to pump money into the club in order to service it. I don't think it is inevitable that such a structure wrecks a club.

Edited January 10, 2023 by ExiledAjax

[Mr Popodopolous]

2 minutes ago, ExiledAjax said:

Were they bought by a PE house or by some very rich blokes. There is a subtle difference in that PE houses will have their investors on them, and be accountable to them to deliver returns. Very rich blokes are accountable only to themselves. 

Purchase loaded onto the club in terms of it being the club that repays the interest yes. Whether or not that wrecks a Championship club depends on how much that loan is and whether the owner(s) are prepared to pump money into the club in order to service it. I don't think it is inevitable that such a structure wrecks a club.

Based on the Burnley and Man United leveraged buyouts and factoring in the financial position of the two vs us at times of takeover, the PL revenue gap I would have significant concerns were it to follow that model. Those two gave it a bad name, otoh AC Milan were inherited by Elliott Management, they nursed them back to a healthier position and sold them at a profit I believe.

Chinese owner defaulted in 2018 or 2019?

[ExiledAjax]

7 minutes ago, Mr Popodopolous said:

Based on the Burnley and Man United leveraged buyouts and factoring in the financial position of the two vs us at times of takeover, the PL revenue gap I would have significant concerns were it to follow that model. Those two gave it a bad name, otoh AC Milan were inherited by Elliott Management, they nursed them back to a healthier position and sold them at a profit I believe.

Chinese owner defaulted in 2018 or 2019?

Why would a new owner buy a club using a structure that instantly wrecks it? By all means tell me I am a fool, but I'd trust any buyers, in particular professional US-based PE people, to structure the deal in a way that wouldn't see the club immediately wrecked due to overbearing interest payments.

[REDOXO]

The issue is I can not see SL wanting to sell just the football club. He’s 70, his son seems less interested by the day and we have silence from the club unless you are the manager of the football club or the rugby club who are pushed up in front of the cameras after every crap performance. 
 

The Bears have a get out of jail free card for the Heineken, which is convenient, but Pearson is holding a team together based upon bringing players through from the HPC, not helped by Klose and Martin having hung up their boots prematurely. 
 

The value of the other clubs connected with Bristol sport is unknown, plus there is permission for construction that will need to be funded and the strange looking stand on what is the open end could really do with rebuilding. 
 

The idea that City could be purchased by anyone and then be beholding to other entities is not a serious option. A lot of upside in owning Bristol Sport INCLUDING BCFC and the HPC, but work needs to be done/significant money needs to be spent over and above the purchase price. 
 

My thought is that this may not be (if something exists) a US based interest group. 
 

 

[Mr Popodopolous]

14 minutes ago, ExiledAjax said:

Why would a new owner buy a club using a structure that instantly wrecks it? By all means tell me I am a fool, but I'd trust any buyers, in particular professional US-based PE people, to structure the deal in a way that wouldn't see the club immediately wrecked due to overbearing interest payments.

Not what I'm saying at all, just that I would hope there wouldn't be some kind of gamble on swift promotion built in. Do people who do leveraged buyouts put in their own cash all that often?

Immediately wrecked no, I'm thinking medium term if we are still down here there could be problems in a range of ways..

If it is only interest to be repaid that's not so bad. Depending of course on how big the debt is and you mentioned 5-10 pct interest wise?

It's a simplistic take but loading debt onto a loss making club in a loss making division doesn't seem a great idea.

Edited January 10, 2023 by Mr Popodopolous

[ExiledAjax]

8 minutes ago, Mr Popodopolous said:

Not what I'm saying at all, just that I would hope there wouldn't be some kind of gamble on swift promotion built in. Do people who do leveraged buyouts put in their own cash all that often?

In PE you'd very rarely see a fully leveraged buyout. Any bank providing a loan would absolutely expect the PE house to put in its own money yes.

Would it be a gamble with a swift promotion built in? Probably. What is "swift". The number one way that any buyer would increase the value of the club is by getting into the Premier League. So yes promotion would absolutely be part of the equation. 

You are right to be wary by the way. I am just trying to explain the way this business works. If you're still wary after that then fair enough and in part I agree with you.

Edited January 10, 2023 by ExiledAjax

[beaverface]

12 minutes ago, REDOXO said:

The issue is I can not see SL wanting to sell just the football club. He’s 70, his son seems less interested by the day and we have silence from the club unless you are the manager of the football club or the rugby club who are pushed up in front of the cameras after every crap performance. 
The Bears have a get out of jail free card for the Heineken, which is convenient, but Pearson is holding a team together based upon bringing players through from the HPC, not helped by Klose and Martin having hung up their boots prematurely. 
The value of the other clubs connected with Bristol sport is unknown, plus there is permission for construction that will need to be funded and the strange looking stand on what is the open end could really do with rebuilding. 
The idea that City could be purchased by anyone and then be beholding to other entities is not a serious option. A lot of upside in owning Bristol Sport INCLUDING BCFC and the HPC, but work needs to be done/significant money needs to be spent over and above the purchase price. 
My thought is that this may not be (if something exists) a US based interest group. 
 

 

The line in bold I find interesting. Unfortunately, from a pessimistic point of view, can we realistically see SL running the club for another 10 years - potentially yes, but realistically no - so at some point I'd expect SL to want to offload everything.

If Jon Lansdown isn't interested in taking over the ownership of any of the clubs owned by SL i.e. City, Rugby, Basketball, Motor racing, then what the hell happens when SL passes on? Somebody needs to action that situation, whether it's a pre-emptive lock stock sell by SL, or a reactive sell by JL (if something unfortunately suddenly happened to SL) - we're still left with a situation that all the clubs owned by the Lansdown will need running by someone.

[fisherrich]

3 minutes ago, beaverface said:

The line in bold I find interesting. Unfortunately, from a pessimistic point of view, can we realistically see SL running the club for another 10 years - potentially yes, but realistically no - so at some point I'd expect SL to want to offload everything.

If Jon Lansdown isn't interested in taking over the ownership of any of the clubs owned by SL i.e. City, Rugby, Basketball, Motor racing, then what the hell happens when SL passes on? Somebody needs to action that situation, whether it's a pre-emptive lock stock sell by SL, or a reactive sell by JL (if something unfortunately suddenly happened to SL) - we're still left with a situation that all the clubs owned by the Lansdown will need running by someone.

Which is why the whole thing will be sold in the next few years one way or another.
Come on, John Lansdown running it -  ha, ha!!

[Mr Popodopolous]

11 minutes ago, ExiledAjax said:

In PE you'd very rarely see a fully leveraged buyout. Any bank providing a loan would absolutely expect the PE house to put in its own money yes.

Would it be a gamble with a swift promotion built in? Probably. What is "swift". The number one way that any buyer would increase the value of the club is by getting into the Premier League. So yes promotion would absolutely be part of the equation. 

You are right to be wary by the way. I am just trying to explain the way this business works. If you're still wary after that then fair enough and in part I agree with you.

Thanks for making a few things clearer. Aspects of it do get a bad name but aspects of it seem problematic for a Championship side losing money.

Quick? 2-3 years. Thereafter maybe PE company House begin to get concerned. Plus if they want a quick promotion maybe they would seek to play fast and loose with FFP which if it fails can bring further issues.

Agree the main way of a return is promotion to the PL.

I'd be interested to know what percentage Pace at Burnley and the Glazers at Man United put in. Still think these two clubs much better placed to absorb at time of takeover. A lot I guess depends on how the deal is structured, the mindset of prospective  new owners etc. I suppose they would look to hire the best that the club could afford in all areas in order to increase chances of success and their return.

[REDOXO]

13 minutes ago, beaverface said:

The line in bold I find interesting. Unfortunately, from a pessimistic point of view, can we realistically see SL running the club for another 10 years - potentially yes, but realistically no - so at some point I'd expect SL to want to offload everything.

If Jon Lansdown isn't interested in taking over the ownership of any of the clubs owned by SL i.e. City, Rugby, Basketball, Motor racing, then what the hell happens when SL passes on? Somebody needs to action that situation, whether it's a pre-emptive lock stock sell by SL, or a reactive sell by JL (if something unfortunately suddenly happened to SL) - we're still left with a situation that all the clubs owned by the Lansdown will need running by someone.

Exactly. At the moment there is no discernible head of anything. The obvious silence within the management of all groups leads me to believe there is something in the offing, but who knows what. However the only thing that makes sense from my perspective is a full sale, the structure is tricky, but really isn’t that complicated from an asset purchase perspective. 
 

The issue is returns and to whom they go. For example anyone thinks MBS gives a flyer regarding money generation at Newcastle is nuts. Saudi Arabia just wants an image wash. There are many reasons to buy sports clubs. 
 

 

Edited January 10, 2023 by REDOXO

[Hxj]

1 hour ago, Kid in the Riot said:

It's a potential joint venture between investment firm Conygar and Bristol Rovers.

Are Conygar still involved?  I know they had a period of exclusivity arranged with the owners of the site, but it has all gone quiet.

[BigTone]

Not City related but watched the Gillingham vs Leicester game the other day. Gillingham's new American owner was interviewed and extolled his notion that he had bought a "sleeping giant".  Since when do giant Lemons go to sleep ? 

Think he had his pants pulled down and bum well slapped.

Edited January 10, 2023 by BigTone

[GrahamC]

3 hours ago, cidered abroad said:

@GrahamC 

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

Absolutely nothing.

[Mr Popodopolous]

26 minutes ago, BigTone said:

Not City related but watched the Gillingham vs Leicester game the other day. Gillingham's new American owner was interviewed and extolled his notion that he had bought a "sleeping giant".  Since when do giant Lemons go to sleep ? 

Think he had his pants pulled down and bum well slapped.

Kent in part is a fairly rich area..in theory if Gillingham really got something going, one League club in the county could they grow significantly? In theory.

In practice absolutely not hut a team representing Kent. A lot of PL fans there but if they could turn it round quickly who knows. If they could get excitement, capitalise then a bit of luck. Sleeping giant is fanciful but Kent had a population of nearly 2m so you tap into that, but still a rather long shot yes.

[pongo88]

7 hours ago, CyderInACan said:

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

Why indeed? But, there are strange things that happen in the football world. Ryan Reynolds and Rob McElhenney, Canadian /  American actors, bought Wrexham. The cost is obviously a factor, but perhaps someone from the forum could send a begging letter to George Clooney or Scarlett Johansson

4 hours 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 

Some people do say he’s in it to make money, but if his objective was to make money from property, he could have done it without getting involved in Bristol City. I’m sure his intentions were good, it’s just the execution of his intentions that have been off key 

[exAtyeoMax]

36 minutes ago, GrahamC said:

Absolutely nothing.

Sorry, can you expand on your comment about it being disgraceful? I don't know anything about what's going on. Thanks

[sh1t_ref_again]

4 hours 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.

 

4 hours 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.

Perhaps I am missing your point of where the nice little profit comes from? you previously posted he had invested over 200m and that the clubs valuation might be 100m, and then the land that SL has been stashing away will be worth 35m, by my math that is still a significant loss, thats if as been pointed out the land profits may be tied into making up the shortfall in development costs of the sporting quarter.

If SL wanted profit he could have just kept the 200m what it would be worth in general investment or left as shares in HL as he has sold off shares to invest in City. 

We can all try to guess XYZ, but have not got a clue in reality, but it does seem as ungrateful when we try to belittle SL's investment and support for the club, by making statements like he'll be walking off with a very nice profit with no basis. I think we are local to have a local businessman willing to invest his hard cash in BCFC, whatever his perceived short falls.

[Mr Popodopolous]

There are ways he could walk away wirh a profit, would debt to equity conversion be included in a sale price I wonder. That aside to turn a profit on our current position vs what he has sunk in it would be difficult IMO.

The £200m figure, is it net or is it gross? ie is this before or after interest on his loans or for a brief period, rent on Ashton Gate. There are for sure much easier ways that he could have turned a profit however.

[Major Isewater]

8 hours ago, CyderInACan said:

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

To become a Premier club. 

[Mr Popodopolous]

3 minutes ago, Major Isewater said:

To become a Premier club. 

Of course, problem is if you are ambitious and aiming for the stars and don't get it with a few years...do you keep going or do you lose interest and the club withers. Let alone potential FFP penalties if you gamble, bet big- but lose.

Edited January 10, 2023 by Mr Popodopolous

[1960maaan]

7 minutes ago, Mr Popodopolous said:

There are ways he could walk away wirh a profit, would debt to equity conversion be included in a sale price I wonder. That aside to turn a profit on our current position vs what he has sunk in it would be difficult IMO.

The £200m figure, is it net or is it gross? ie is this before or after interest on his loans or for a brief period, rent on Ashton Gate. There are for sure much easier ways that he could have turned a profit however.

I was told very early on that the Stadium  (at the time there was no chatter of the extras ) was to be Steve's Legacy. I really don't think he went in looking for a profit, I mean how much money do you need ? 

[pongo88]

8 hours ago, CyderInACan said:

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

 

6 minutes ago, Major Isewater said:

To become a Premier club. 

How do you make a small fortune getting Championship Bristol City into the Premier League? 
 

Start with a large fortune 

[chalkeyred]

4 minutes ago, Major Isewater said:

To become a Premier club. 

Agreed, but a huge punt.

A CFO who has worked with Premier League and Championship sides once told me that 'unless you are happy to burn £15m per annum of your own money, stay away from Championship clubs'... 

Seems reasonable....

[fisherrich]

14 minutes ago, Major Isewater said:

To become a Premier club. 

Premiership football at City is a pipe dream - for some years to come.
Div 1 is looking more likely than Prem football currently.

[Mr Popodopolous]

55 minutes ago, chalkeyred said:

Agreed, but a huge punt.

A CFO who has worked with Premier League and Championship sides once told me that 'unless you are happy to burn £15m per annum of your own money, stay away from Championship clubs'... 

Seems reasonable....

That sounds about right. Some will be higher, some lower but I suspect we are somewhere around the average for cash losses/equity. £15-20m maybe a better range though maybe this drops a bit post Covid.

Edited January 10, 2023 by Mr Popodopolous

[BigTone]

1 hour ago, Mr Popodopolous said:

Kent in part is a fairly rich area..in theory if Gillingham really got something going, one League club in the county could they grow significantly? In theory.

In practice absolutely not hut a team representing Kent. A lot of PL fans there but if they could turn it round quickly who knows. If they could get excitement, capitalise then a bit of luck. Sleeping giant is fanciful but Kent had a population of nearly 2m so you tap into that, but still a rather long shot yes.

Long shot me thinks 

[Hxj]

46 minutes ago, chalkeyred said:

'unless you are happy to burn £15m per annum of your own money, stay away from Championship clubs'

That would be cheap-skating it.

£13 million - to qualify for £13 million FFP allowance

£3 million - Academy/Youth football

£1 million - Women's team

£1 million - Community work

That's £18 million.  Then you have to fund the transfer fees up front - another few million a year at least 

Then capital expenditure.  Depending where you are in the ground/training centre development process anywhere from another couple of million on capital expenditure a year to say £75 million on a new stadium and training centre.