04 November 2008

Newcastle United and "Greater Fool Theory"

Two Americans want to buy Newcastle United from Mike Ashley, from The Political Economy of Football:


Two US-based investors are left in the race to buy Newcastle United off Mike Ashley. Both of them are believed to already be involved in the management of sports franchises. Seymour Pierce who are acting as advisers on the sale of the club have confirmed that the original field of seven potential bidders has been whittled down to two. It is believed that Mike Ashley has scaled down his expectations of what he can get from the sale following recent financial turmoil. Having invested £250m in the club, including paying off its debts, he now accepts that at best he could make only a small profit from the sale. It is understood that he would not necessarily take the highest offer available, but agree a sale to an investor with the better financial credentials. It is thought that any sale is likely to go through before the January transfer window in which any new owner would like to be involved.

The fact that the two main bidders are American is a development that has a significance beyond Newcastle United. I had thought that recent financial developments made it likely that we would see fewer American investors, also bearing in mind the difficulties have occurred in raising funds for stadium development at Liverpool. What I had perhaps underestimated was that the fall of the pound against dollar would make investment in sterling assets better value for those holding dollars. The one concern I have about American owners is that sport in the United States is organised on a rather different basis. 'Franchises' can be moved across the country and promotion and relegation does not form part of major American sporting competitions including soccer's MSL. However, although Liverpool offers an unhappy example of American ownership, and Manchester United a contested one, a Villa fan told me recently how pleased he was with Randy Lerner's stewardship at Villa. In his view, the combination of Lerner as owner and O'Neill as manager was a match made in heaven. Let's hope that passionate Geordie fans can get a similar result. "

Brad Evans