Wednesday 7 December 2016

Anfield demands answers

Ian Herbert

Published 06/08/2010 | 05:00

Liverpool manager Roy Hodgson is left with little choice but to plan his summer spending without factoring in a penny of the £150m transfer fund promised within the Chinese bid to take ownership of the club.

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The Anfield board yesterday sought categoric confirmation of the finances behind the proposed buy-out headed by Kenny Huang -- which the club's investment bankers maintain is a credible offer -- after the sovereign wealth fund linked to the deal was reported to have denied any link to or knowledge of Huang and the bid for Liverpool.

A spokesman for the state-owned Chinese Investment Corporation (CIC) was reported to say there was "no way" the fund would be involved in such a risky deal, adding: "Next they'll say CIC is going to buy 'Playboy'."

Barclays Capital (BarCap), however, which is overseeing the sale of the club, does believe Huang's bid is credible. Both BarCap and Liverpool are still awaiting definitive proof from Huang that he has CIC's backing.

The Chinese Government, which does not like a high public profile, may be unsettled by the enormous profile afforded them already by the story and may be seeking to take a step back while negotiations continue. It is worth noting that no regulatory bodies would be able to take action against the CIC in this instance if the statement from China later turns out to be misleading.

Huang -- who has now transferred his public relations office on the subject from London back to Hong Kong -- has been put forward as the public face of the bid.

The picture is rendered more complicated by a message, sent from Huang's own mobile telephone on Tuesday to a journalist at the respected Chinese publication 'Titan Sport', stating that "Mr Huang would also like to deny that there is any involvement of mainland China state-owned enterprises in his business dealings."

Development

The statement also said that "if there is any related development, he will make a further announcement".

As of last night this statement, circulating in the Chinese media, had not yet been released by Huang's PR agents, Hill and Knowlton, who claimed no knowledge of it and could not confirm CIC's support for Huang's bid. Huang was said to be travelling by air yesterday, preventing further inquiries.

Whatever the answer to such developments, Liverpool supporters certainly face a tense period as the club's board await definitive proof of Huang's bid. Hodgson, who last night oversaw his first game at Anfield, was continuing his £8m pursuit of Juventus midfielder Christian Poulsen.

It is unclear, meanwhile, whether CIC, the $300bn sovereign wealth fund which is the name attached to Huang's bid, would take well to the high-profile nature of football club ownership.

CIC does have a record of investing in enterprises which have interests in China -- and Liverpool certainly has its eye on the huge Chinese enthusiasm for football. The club's interest in becoming a major name in China is also illustrated by its new £80m sponsorship deal with Standard Chartered, whose business interests are heavily concentrated in Asia and China.

CIC has been keen to diversify away from the dollar and out of US bonds. It is heavily profit-driven -- recording only six days ago an 11.7pc profit on $58bn dollars invested overseas last year -- but operates in line with the Chinese culture of long-term finance thinking, where profit is not expected immediately.

That would fit with Anfield. As would the Chinese taste for buying into premium Western brands.

But a number of sports finance analysts in China view the idea of investment in Liverpool as highly implausible -- most of all because the turbulent ride experienced by the Abu Dhabis at Manchester City is something the Chinese would find even more distasteful.

The secretive nature of CIC, whose disclosures on their own investments do not go beyond the minimum statutory requirement, also seems like an odd fit with a very public club like Liverpool. In 2009, the CIC fund held shares worth a total of $9.6bn in dozens of US-listed companies including Coca-Cola, Citigroup and Morgan Stanley. Liverpool would be something completely different.

Analysts in China are not reading any significance into CIC's decision to divest $558m of its Morgan Stanley holdings over the last few weeks -- a figure equal to Liverpool's worth. CIC's vast funds under management do not demand the same sell-to-buy culture which has characterised the football club's transfer market policy.

Liverpool's non-executive chairman Martin Broughton, who is leading the hunt for a buyer, was certainly confident enough in that mission earlier this week to declare that he wanted the club's sale concluded by the end of this month. (© Independent News Service)

What next for Liverpool

1 What is the China Investment Corporation?

The China Investment Corporation is an investment fund set up in 2007 for managing some of the near two trillion dollars of currency reserves of China, a country which has amassed them by exporting far more products than it imports. It set out with $200bn under its own management and has sought to make profits by investing in natural resources and energy companies in Asia, Africa and the United States, as well as US-listed companies including Coca-Cola, Citigroup and Morgan Stanley. But nothing like a football club.

2 Why would they want to own a football club?

Here is one of the mysteries currently surrounding their link to a bid for Liverpool, given the Chinese business world's dislike of a high profile. When Abu Dhabi invested in Manchester City it was with the express desire to enhance the image of the emiracy. China would not go into business for reasons like that.

But the need for Tom Hicks and George Gillett to get rid of Liverpool in a hurry makes the process effectively a fire sale, so maybe CIC feels there's a quick private equity profit there -- unpalatable though that may be to Liverpool fans.

A huge investment is needed -- perhaps £1bn by the time the £237m debt is paid off, a new stadium built and the manager equipped with a stronger squad. But China likes to be associated with the biggest and the best products and for that reason association with a reinvigorated Liverpool FC might just appeal.

3 Would Kenny Huang pass the 'fit and proper persons' test?

If he can demonstrate that CIC is backing him then almost certainly yes. The new 'owners and directors test' prevents 'persons barred from other sporting organisations competitions and professional bodies' from being proprietors -- and Huang actually seems to have been an altruistic part of the China sports scene.

Key, though, is the 'means and abilities test' by which he must provide future financial information to show the projected financial position of the club and 'proof of funds' to show he can sustain the club for the year ahead.

4 Should we believe yesterday's reports of CIC denying they are behind the bid?

It might not be all it seems. After all, Liverpool executive chairman Martin Broughton said he would separate the "wheat from the chaff" among bidders in July and Huang has made it through.

The level of noise associated with Huang in the past four days has clearly unsettled those Chinese associated with him, enough for him to instruct those speaking for him in London to stop doing so. In the same way that Sulaiman al-Fahim's profile caused the Abu Dhabi's embarrassment at Manchester City -- they quickly dropped him -- the Chinese may be involved, but now seeking a different approach.

Huang yesterday denied the involvement of "mainland China" in his bid which suggests it may be presented as one centred on Hong Kong, his own base. That would deflect from the idea of the Chinese nation's funds being tied up in a football club's fortunes, which may not go down well in that country. If the denial is real Huang has managed to get to the serious bidding process on a fairy story.

5 What are the other bids on the table at Anfield?

The prospective bids believed to be under most serious consideration are those from China and the New York based Rhone Group, run by the billionaires Robert Agostinelli and Steven Langman.

Rhone put forward a proposal offering Liverpool £100m for a 25pc stake in March as the club engaged in an ultimately fruitless attempt to raise equity.

Rhone made no secret that it would continue to monitor the club's situation and it is believed to be ready to resurrect that offer, while it remains hopeful of attracting a majority partner to buy the remainder of the club.

Both Barclays Capital and Liverpool's bankers Royal Bank of Scotland are thought to prefer a complete sale to just one party. Keith Harris, chairman of investment bank Seymour Pierce which has conducted the purchase of several Premier League clubs, has said he represents a party "very serious" about buying Liverpool but has not said who. The Syrian former international footballer Yahya Kirdi, who says his funds come from Sharjah, is not considered a serious bidder.

6 Who has the last say on which bid is successful?

Broughton seems to feel that a three-man majority on the five-strong Liverpool board would be enough to hold sway and sources suggest that he took up Hicks and Gillett's request to lead the search for a buyer on such conditions.

The concern among some in the financial community with Liverpool affinities is that if the Chinese bid falls through, then Royal Bank of Scotland's desire to have its £237m debt paid down could see the club sold to a buyer who would line the Americans' pockets, but not leave any money for the future develop-ment of the club, including players and the vitally needed new stadium.

But RBS is the banker to Liverpool, handling all its transfer and commercial business and insists that the club's successful future is as much in its own interests as a resolution to the present messy situation. (© Independent News Service)

Irish Independent

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