Leeds United takeover: Who are GFH Capital Limited and Gulf Finance House?
By Phil Hay
GFH Capital Limited, the Dubai-based company with designs on the ownership of Leeds United, is developing a healthy record at Elland Road.
Three games, three wins – the latest an improbable League Cup victory over Everton. Several of GFH Capital’s management team were at the stadium for Saturday’s defeat of Nottingham Forest and David Haigh, its deputy chief executive, attended Elland Road again on Tuesday evening. Later that night he tweeted a photograph taken from the directors’ box in the East Stand.
The involvement of GFH Capital in takeover negotiations has been common knowledge since Haigh and Salem Patel, a director of the firm, were seen sitting with United owner Ken Bates during Leeds’ first game of the Championship season. But the way in which they and United have broken cover in the past week revealed an underlying confidence about the prospect of GFH Capital – or its parent company, Gulf Finance House – assuming control of the club.
GFH Capital are a private equity firm, specialising in investing money in what its website calls “growth companies”. It is a subsidiary of Gulf Finance House, the Bahraini investment bank which Bates alluded to without naming in the statement issued by him on Saturday. While representatives of GFH Capital have been at the forefront of takeover discussions spanning more than four months, it is likely that Gulf Finance House will play its part in the proposed buy-out of part or all of Bates’ 72.85 per cent stake.
Bates said on Saturday that the prospective purchasers were “a banking institution and a public company” with “interests across the Gulf, Asia, and Africa.” Gulf Finance House’s declared strategy is “identifying and delivering investment opportunities in the Islamic financial services and infrastructure sectors of the Middle East, The Levant, North Africa and Asia.”
Its shares are listed on the stock exchanges of Bahrain, Kuwait and Dubai, and Haigh and Patel attended Saturday’s game against Forest with Hisham Alrayes, a board member at GFH Capital but also the acting chief executive officer for Gulf Finance House. Speculation continues to set the cost of the deal to buy Leeds at around £52million.
The history of Gulf Finance House stretches back to its incorporation in Manama in 1999 and shows a recent shift from heavy annual losses to six and seven-figure profits. The firm has no record of involvement with professional football clubs but Haigh is a declared Leeds United supporter with family from Leeds, and both Patel and Esam Yousif Janahi – Gulf Finance House’s chairman – were educated in England.
In 2009 and 2010, Gulf Finance House recorded losses of around £450m and £215m respectively. According to accounts for the year leading up to December 2011, published on the company’s website, the losses for 2010 were due in large part to “impairment allowances” – in simple terms, a reduction in the value of certain assets. During that year, the bank underwent what it called “radical restructuring” in an attempt to adjust to the worsening financial climate and ensure it was “well positioned to lead the region’s Islamic banks as growth returns to the Gulf financial markets in 2012.”
Gulf Finance House’s turnover in 2011 was close to £43m, yielding a profit of £235,000. In the six months leading up to July 2012, an income of almost £20m produced a financial gain in excess £3.5million. There is no outline yet of exactly how a takeover of Leeds or subsequent investment in the club would be funded but Gulf Finance House is in the picture at a time of profitability. It recently announced agreements to restructure outstanding debt.
Commenting last month on the firm’s latest results, Alrayes said: “The surge in the bank’s net profits for the first half of this year is a result of the successful restructuring of some of our facilities and income earned from management fees. “The restructuring was extremely positive as it allowed us a greater degree of financial flexibility as we continue to focus on accelerating our business growth with the aim of returning to long-term profitable growth, as well as significantly bolstering our asset liability profile.”
The repeated appearance of Haigh and his colleagues at Elland Road has left little doubt about their commitment to continuing negotiations with Bates. The question is whether GFH Capital and Gulf Finance House are the only show in town or whether rival bidders are now positioning themselves in the background.
Several sources claimed last week that an alternative offer had arrived from the Middle East, backed by money from Saudi Arabia and involving individuals who were previously considering supporting the GFH approach. Bates dismissed the suggestion in his programme notes on Tuesday, calling it “total rubbish”, but tentative Saudi interest was apparent as far back as May when Leeds first announced that talks with investors had begun. At the time a source close to the group said they were “miles off” constructing a concrete offer.
During the same period, prospective investors from North America were shown around Elland Road and Thorp Arch with a view to putting cash into Leeds. The possibility came to nothing but there was an American presence in the directors box at Elland Road for last week’s Championship game against Hull City. Described as “men with money”, their identity and their intentions are not clear but one report over the weekend claimed that a bid from the States was anticipated.
American interest in Leeds is no surprise. The YEP has learned that shortly after the end of last season the British arm of Wasserman Media Group – the global agency founded by US businessman Casey Wasserman – was approached by a third party with a view to finding investors for United from across the Atlantic. Speaking in May, Marc Edelman, a professor at Barry University School of Law in Miami and an expert in sports business, outlined the appeal of English football clubs to American buyers, saying: “If (Leeds) were valued at even $100million, that’s a tenth of what you’d expect to pay to purchase a professional (basketball, baseball or American Football) club in the United States. The difference is telling.”
Nevertheless, the men associated with GFH Capital and Gulf Finance House seem optimistic about their chances. And speaking over the weekend, Bates said: “The potential investors are looking to conclude things as soon as possible. Both parties regret missing the August transfer deadline but we are planning for the January transfer window.”