Tuesday, February 9, 2010

Liverpool on Indian Radar

Indian billionaire Mukesh Ambani sets sights on buying Liverpool from Hicks and Gillett.

Liverpool emerged as a takeover target for the seventh-richest man in the world last night as the pressure mounted on Tom Hicks and George Gillett Jr to cut a deal to sell Anfield.

Mukesh Ambani, the wealthiest man in India, is one of two tycoons from the sub-continent competing to buy a stake in the Merseyside club.

The Sahara Group’s chairman, Subrata Roy, and Ambani’s Reliance Industries have each tendered similar bids to pay off Liverpool’s £237 million debt in return for a 51 per cent stake in the club.

Last night Christian Purslow, the Liverpool chief executive, denied any knowledge of either bid, but The Times understands that approaches began as early as November and that some preliminary talks have taken place.

Each deal requires that the present owners make a commitment to take no dividends or expenses out of Anfield for three years to allow the club to resume a secure financial basis. One of the potential owners has also indicated a willingness to allow supporters to take a 10 per cent stake in Liverpool.

A source close to Hicks and Gillett said that the duo would reject on principle any bid that left them with less than 50 per cent of the club’s shares unless it involved either of them selling out entirely. A sale of more than half of the total stake would mean they would lose control of the club.

It is understood that Liverpool’s banker, the state-backed Royal Bank of Scotland, is pressing Hicks and Gillett to cut their asking price.

The bank declined to comment last night, but a source close to RBS said that there has been plenty of interest in Liverpool from investors. However, the source added, the owners are blocking all deals on the table because they refuse to budge on price.

The source said the bank’s stipulation that the pair must pay off £100 million of the debt and inject tens of millions of pounds into the club was intended to push them into an agreement with a new investor that would permanently stabilise Liverpool’s finances.

A number of other potential bidders include a Saudi Arabian consortium and a United States-based buyer, who is prepared to pay the £100 million required by the lenders in exchange for 40 per cent of the club.

Roy, whose interest appears more serious, has been linked with ownership of one of the next IPL franchises, possibly to be based in the north Indian city of Lucknow, where the Sahara Group, of which he is chairman, is based.

Roy, 62, founded the company, which deals in property, media and tourism, in 1978. Its four-year sponsorship deal with the India cricket team, worth £55 million, expires this year and Roy could be looking for a new project. Sahara was linked with shirt sponsorship of Manchester United last February, a deal that fell through.

Ambani, 52, is said to be worth $19.5 billion (about £12.5 billion) — more than the combined worth of Sheikh Mansour and Roman Abramovich — from his investment in Reliance Industries, a petrochemicals giant, according to Forbes business magazine.

His father, Dhirubhai, turned a small textiles company into one of Asia’s largest conglomerates, but after Ambani Sr’s death in 2002, Mukesh and his younger brother, Anil, had a bitter feud over the company’s direction, eventually splitting the assets.

Mukesh Ambani is already a big player in sport. In 2008 he created the Mumbai Indians, one of the eight teams in the Indian Premier League (IPL), having paid £70 million to buy the franchise. Anil Ambani has been linked with a bid for one of two new franchises in the IPL that will be put up for auction at the end of the month, with a starting price of £140 million.

Gillett and Hicks took over at Anfield three years ago in a leveraged buyout costing nearly £300 million, including £70 million for a stadium that remains unbuilt. Despite promises to the contrary, they loaded the debt on to the club via a £350 million loan with RBS and have struggled to service the debt since the credit crunch began 18 months ago.

Before the economic climate changed for the worse, the American duo turned down an offer from Dubai worth almost £500 million — a deal that would have allowed each of the owners to walk away with a clear profit in the region of £125 million.

The Americans are unpopular with the supporters and the hostility at Anfield has increased as it has become clear that there is no money available to strengthen the team.

Purslow, whose background is in private equity, joined the club last summer with a brief to bring in investment but, despite repeated briefings that an influx of cash in close at hand, there has been little to suggest investors are keen to take a minority stake in the club.

While these latest offers will almost certainly be rejected, it marks the beginning of a period of jockeying for position in the ownership battle. It is a battle that, ultimately, RBS may have to resolve.

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