Leeds, Radrizzani and 49ers sale: A tale of revenue, reluctance and relegation threat - The Athletic 17/1/23
By Phil Hay and Matt Slater
For a long time now, 49ers Enterprises has been working on
learning the ropes at Leeds United. Employees of the Yorkshire football club
are used to seeing crews from California on the ground at Elland Road, many of
them there to audit departments and operations and make sure Leeds’ US-based
minority shareholder knows the business inside out.
The day was always going to come when 49ers Enterprises —
the investment arm of NFL team the San Francisco 49ers — took control of the
boardroom at Leeds and in anticipation of that, the group wanted to be ready.
Four and a half years on from taking a first investment in the club, many
people are asking if the time for that takeover is finally nigh.
The organisation has never been more committed to its plan
for ownership, or closer to realising it, and the upsides of a transition of
control have never been more apparent either.
Andrea Radrizzani said before Christmas that the equity
partnership between him and 49ers Enterprises was running its course and the
club are looking for the final step — the green light confirming the buy-out is
happening.
The proposed sale by Radrizzani, Leeds’ chairman and
majority shareholder since 2017, to 49ers Enterprises has been telegraphed for
many months, an open secret the 48-year-old Italian has started to speak about
publicly recently.
The Athletic revealed in 2021 that 49ers Enterprises held an
option to acquire the Premier League club in January 2024 — a natural step for
it after a series of investments at Elland Road, but few anticipate that a
takeover is going to wait until this time next year. Figures familiar with the
deal and the discussions around it believe it will proceed by this summer, if
not sooner.
That Leeds, now into their third season back in English
football’s top division, would benefit from a change of ownership is not in
dispute at any level.
It was Radrizzani who said in an interview with Italian
outlet Corriere Della Sera on December 26, that they required “more resources
to reach higher levels and compete with the best clubs in the Premier League”;
and on the pitch, the past 18 months have shown Leeds are some way short of
being able to fight at that level.
Yet in this period of competitive stagnation over the last
year and a half, the movement of shares at boardroom level has been limited,
raising the question of why 49ers Enterprises had not stepped in to buy out
Radrizzani already and take charge of a club it has studied and analysed at
length. As the team stalled in pure footballing terms, the US takeover hovered
in the ether too — remaining a pending purchase despite the sense that a new
direction was necessary.
The first investment of cash by 49ers Enterprises in Leeds,
roughly £10million, came in 2018, and it was another three years before its
involvement became more serious and strategic.
Two large injections of money took the size of the stake in the club that the 49ers owned to more than 40 per cent — a very clear hint about the ambitions from California of full ownership — and in that same year, the option with Radrizzani was negotiated and put in place.
At the time, The Athletic was told the overall price of a
takeover would be £475million ($580m), but that figure was disputed by some
involved in the deal. It is, though, in the region of half a billion pounds,
representing a 10-fold increase on the price Radrizzani paid to acquire the
then-Championship side from countryman Massimo Cellino nearly six years ago.
With that option in the background, there has been no
credible suggestion of control of Leeds passing to anyone other than 49ers
Enterprises.
Media reports last week linked Qatar Sports Investments
(QSI), owners of star-stuffed French champions Paris Saint-Germain, with a
possible purchase of shares at Elland Road but those stories were denied by all
involved, including QSI — whose chairman, Nasser Al-Khelaifi is a close
personal friend of Radrizzani.
Nonetheless, the timing of Radrizzani’s exit was always
unpredictable.
He has not been rushing to walk away from Leeds, and his aim
after delivering the top-flight promotion Leeds had been chasing for 16 years
in 2020 was to relinquish his shares once the club qualified for European
competition again through a high finish in the Premier League. Getting out of
the EFL had been his first target and a return to the UEFA stage was his
second.
Though a European place looks beyond him and his spending
power based on the past two and a half seasons, those around him say that at
points he has shown a reluctance to go — almost a realisation that once he
steps out of Elland Road, that part of his career is over.
Radrizzani has been looking at investing in clubs back in
Italy and would have the finance to do so after selling Leeds but none of the
sides he could feasibly acquire in his homeland have the profile or the global
appeal of Leeds.
That profile was also part of the draw for 49ers
Enterprises, which is set to further increase the number of Premier League
clubs under US majority or full ownership to nine of the current 20.
The group has been deliberately respectful in trying not to
hurry Radrizzani out of the door, even though the close division of shares
between them can make boardroom decisions complicated and cause occasional
tensions.
Even last week, 49ers Enterprises was mooting the idea of
Radrizzani flying to the US to be a guest for the 49ers’ home win over the
Seattle Seahawks in the NFL play-offs on Saturday. A statement from Leeds given
to The Athletic said the relationship between Radrizzani and 49ers Enterprises
“remains strong and positive”.
In raising its stake in Leeds to over 40 per cent, 49ers
Enterprises has already paid a sizeable chunk of the money it would owe
Radrizzani for a full buy-out. The remainder of the funding has been pulled
together via different parties, most of them also based in the States.
Though the venture-capital fund is an extension of the 49ers
and controlled by the York family, who run the NFL team, 49ers Enterprises is
not the NFL team itself. It is more akin to a consortium in which investors are
coming together to finance the complete purchase of Leeds.
Paraag Marathe, already a board member at Elland Road, is the face of 49ers Enterprises. He is also executive vice-president of football operations for the 49ers team.
Others to have openly declared their involvement include
Peter Lowy, the Australian businessman who is co-CEO of the Westfield chain of
shopping malls, YouTube co-founder Chad Hurley and English-born Zappos.com
retail entrepreneur Nick Swinmurn.
Expressions of interest in contributing to the takeover are
said to have been numerous, to the point of 49ers Enterprises being
oversubscribed. One of them has come from the US political scene.
At this stage, 49ers Enterprises has the necessary cash in
place. One of the first questions when the deal with Radrizzani goes through
will be about where, precisely, the money is coming from and who will now have
influence in the running of Leeds.
With 18 of this season’s 38 league games played, Leeds are
in a position where retaining Premier League status for 2023-24 is far from
guaranteed — they are in 14th, only two points clear of the relegation zone,
but have a game in hand on the six teams below them.
Relegation is a threat and would significantly change the
lie of the land, though 49ers Enterprises has not ruled out taking on the club
even if they did go down. The option held by the group to purchase Leeds by
next January, however, does not include a different price to be applied in the
event that the club are no longer in the Premier League. As it stands, there is
no agreement on what would happen in that scenario or how their valuation would
change. The original deal would be contingent on Leeds staying up.
The absence of certainty about remaining in the top flight
has not aided the takeover process and in the meantime, the financial landscape
at Leeds is ever-changing. 49ers Enterprises is conscious of monitoring future
costs, and changes to the accounts prompt conversations about possible
adjustments to the overall purchase price.
The club have a sizeable turnover, with the largest
percentage of that money coming from central Premier League distributions.
Returning to the division for the 2020-21 season took their
annual revenues from £54million to £171million, and the huge gap between those
two numbers would have been greater without the impact of the COVID-19
pandemic.
That promotion triumph helped Leeds swing from a pre-tax
loss of more than £60m in 2020 to a profit of £25m the following year, with the
club’s coffers receiving £133m of Premier League media income (they made only
£9m from that source in the 2019-20 Championship season).
Their earnings for their second season back in the domestic
elite, 2021-22, will not be known until those figures are posted at Companies
House later this year but if they follow the standard pattern for promoted
sides in year two in the top flight, the cost of competing in the Premier
League will have erased most or all of that profit.
The bottom line is they are reliant on shareholders for
transfer funds — as they were when signing Georginio Rutter for a record fee
from German club Hoffenheim on Saturday. Rutter could cost £35million if all
incentives in the deal are met but Leeds invariably stagger payments for their
new arrivals, paying transfer fees over the course of the player’s contract (in
Rutter’s case, he has been signed until the summer of 2028).
The reality is that if 49ers Enterprises buys the club in
the next six months, it will fall to it to meet most of the cost of the
20-year-old French forward’s transfer.
Increasingly, the transfer deals Leeds do require that
conversation — who in the boardroom is responsible for financing what, and how
that expenditure alters the takeover agreement.
In this respect, the numbers are a constantly moveable
feast. At one stage, Leeds considered taking Rutter on an initial loan and
putting in place an obligation to take him permanently in the summer but the
willingness of 49ers Enterprises to back a full transfer in this January window
and accept future liabilities was a sign of its commitment to taking charge at
Elland Road. The value of Rutter as a long-term asset outweighed any concerns
about the price or the structure of the deal.
After it was announced, a photo emerged of director of
football Victor Orta wearing a San Francisco 49ers hoodie as he presented the
newcomer with a framed Leeds shirt.
What is being said more and more is that Leeds can only
operate in these circumstances for so long.
The presence of two major shareholders in the boardroom is
almost the equivalent of having two owners rather than one definitive voice.
The setup can complicate recruitment and it is plain that development of Elland
Road itself, the plans to raise the stadium’s capacity to around 60,000, will
not move forward until 49ers Enterprises’ takeover is complete.
The group is keenly involved in major decision-making and
has been for some time but, as long as it’s still a minority shareholder, it
lacks the authority to make the club its own. Leeds, in effect, are in a
holding pattern, waiting for this sale to be signed off.
Radrizzani’s ambition has long been to bow out of Leeds with
a positive legacy, and people around him are telling him he can have it.
As their owner, he returned a meandering Championship side
to the Premier League after a near-two-decade absence and for all that the past
18 months have been extremely challenging, selling to the 49ers outright would
secure meaningful follow-up investment — in principle, a transition of
ownership that gives Leeds a chance of consolidating in the top flight and moving
to the next level in terms of competing for trophies and European
qualification.
It is, realistically, a deal that has to happen and has to
happen soon.
