Leeds United takeover: More questions than answers - Hay

Yorkshire Evening Post 29/9/12
By Phil Hay

The blurb on the website of Gulf Finance House (GFH) has all the watchwords expected of a company’s personal profile: innovative, dynamic, high-value. In every sense that is what a reputable investment bank aspires to be.
Its mention of money is not coy either. According to GFH it has raised and invested some five billion US dollars in schemes in the Gulf region and beyond. The bank says it has a “track record and specialisation in creating new financial institutions and the conception of high value economic infrastructure projects.”
So far so good from the point of view of Leeds United. The organisation behind the only confirmed bid to buy the Elland Road club comes with promises of cash, vision and innovation. But what do others say about it and what is the independent view of this Bahraini banking institution?
Earlier this year, KPMG – the consultancy firm responsible for managing Leeds United’s administration in 2007 – audited GFH’s accounts for the three months up to March 31.
In a letter to the bank’s board of directors, sent on May 14, KPMG said: “As at March 31, 2012, the Group had accumulated losses of US$300.69million and, as of that date, its current contractual obligations exceeded its liquid assets.
“As a result, the ability of the Group to meet its obligations when due depends on its ability to achieve a timely disposal of assets.
“These factors indicate the existence of material uncertainties which may cast significant doubt about the Group’s ability to continue as a going concern.”
Since then, Gulf Finance House, which made losses in excess of £200million in both 2009 and 2010 but is in profit for the past 18 months, has announced a deal to restructure part of its debt and drawn up a plan to restructure more. GFH said recently that it now expects “sustainable profitability in the long term.”
Others are more doubtful. The YEP has seen a document produced this week by a global market investment firm, in which GFH is discussed as a possible investment opportunity. Independent of KPMG’s analysis, the firm declares itself “wary of GFH’s ability to carry on as a going concern given its continued inability to produce cash from its core operations.” The document also says that “we believe GFH is only staying afloat because of its successful debt restructurings and the continued financial support of its shareholders.”
The relevance of this to Leeds United is entirely dependent on the true structure of the bid to buy the Championship club.
That offer was confirmed by GFH on Thursday morning and is being led by GFH Capital Limited, the private equity firm which is based in Dubai and wholly owned by Gulf Finance House. None of those facts will have come as a surprise to anyone who saw members of GFH Capital’s senior management team at Elland Road for last month’s Championship game against Wolverhampton Wanderers and Saturday’s win over Nottingham Forest. GFH’s statement to the Bahraini stock exchange confirmed a badly kept secret.
But neither that announcement nor the statement published by Leeds and Ken Bates last weekend brought us closer to seeing the full picture of the takeover as those on the inside see it. Gulf Finance House said GFH Capital had “signed an exclusive agreement to lead and arrange the acquisition of Leeds City Holdings, the parent company of LUFC.” It did not say on behalf of whom or with whose money.
On the whole, this process is further forward, with two sides out in the open. Salem Patel, one of the directors of GFH Capital Limited who attended Elland Road last weekend, signed onto Twitter on Thursday and acquired almost 3,000 followers in 24 hours, the majority of them Leeds supporters. He was warmly received, as would-be investors in football clubs often are.
But the combined disclosure from Leeds and Gulf Finance House offered precious little detail that was not known or suspected before. There was no confirmation of whether Bates is planning to sell his 72.85 per cent stake in full or whether United’s chairman wants to retain an interest in the club. There was no stated timescale either. GFH’s statement on Thursday talked of an “acquisition”, which sounds like a takeover by a different description, but went no further. It made a point of saying that the commercial terms of the deal were still subject to a confidentiality clause.
The last comment was crucial. It drew a line through all queries about the precise nature of this takeover and the confusion about who precisely is financing the buy-out of Leeds.
For many months, GFH Capital were believed to be the brokers for a consortium of wealthy individual investors. That might prove to be the case but no-one on either side of the negotiating table will say so publicly. The other possibility is that Gulf Finance House is itself putting up the money to buy Leeds, with GFH Capital heading up the deal. GFH did not say as much in Thursday’s statement but they made a great effort to justify their involvement to the stock exchange, listing valid points about United’s large fanbase and the income on offer if Leeds are promoted to the Premier League.
The Championship club have always been an attractive proposition; a club with untapped potential for anyone with the clout to make them grow rapidly
There are people out there who think they can do so and GFH Capital are leading the race. But at a club where the issue of transparent ownership has been so contentious, two questions were untouched by the events of the past seven days: who, ultimately, is masterminding GFH Capital’s offer? And whose is the money?