Liverpool Football Club's Anfield Stadium is seen on the day that the club's possible sale has been announced, Liverpool, England, Wednesday Oct. 6, 2010.
There was a time when Liverpool Football Club set the standard for soccer success in Europe. During the 1970s and '80s, barely a season went by without the storied club from the Beatles' home town adding another piece of silverware to its hoard. Today the club languishes third from bottom of the English Premier League table — a position that, at season's end, would see it relegated to the obscurity of a lower league — after its worst start to a season in a half-century. The club still command headlines, however, although these days they're focused on an battle between rival American sports moguls to own Liverpool FC .
Club Chairman Martin Broughton was "delighted" to announce on Oct. 6 that Liverpool's board had agreed the sale of the club for $475 million to John Henry's New England Sports Ventures (NESV) — owners of the Boston Red Sox. But there was, Broughton admitted, one snag: "I am only disappointed," he said in a statement, "that the owners have tried everything to prevent the deal from happening."
Those owners would be Tom Hicks, erstwhile owner of the Texas Rangers baseball franchise, and George Gillett. And they're not done trying to stop Liverpool's sale to the Red Sox group. Hicks and Gillett borrowed heavily to buy Liverpool in 2007, but the global financial crisis left them unable to invest in rebuilding the club as a competitor to far-better endowed English and European teams. After a tumultuous three years in charge they put Liverpool FC up for sale in April — although they still expected to make a handsome profit, and set a price at which there were no takers.
Under pressure from their creditors, they appointed Broughton, chairman of British Airways, to oversee the sale process. Now, Gillett and Hicks are consulting lawyers in an effort to stymie the deal approved by Broughton and a majority of the board. They say the Red Sox deal undervalues a club for which they paid $430 million, but their primary concern may be to avoid a sale that would result in their having to write off around $230 million of their original investment. Gillett and Hicks have been vainly holding out for buyer willing to pay around twice what Henry's group has offered.
Time, though, is not on Gillett and Hicks' side: The $445 million in debt with which they saddled the club when they acquired it must be settled before a bank-imposed deadline of October 15. Were a takeover not finalized by then, lenders — principally the Royal Bank of Scotland — could place the club into administration, before selling anyway to NESV. Accepting the deal, Broughton suggested in an interview with the BBC Oct. 6, was the current owners' "last opportunity to be the good guys."
It's not clear whether Hicks and Gillett have legal recourse to scupper the takeover. Broughton had earlier obtained written assurance from Gillett and Hicks that they wouldn't block any reasonable deal. A spokesperson for Hicks, meanwhile, has said no such undertakings were given. With the fight now heading towards the courts, "the smart money," says Joe McLean, a partner at consultants Grant Thornton, "has to be on [Broughton]."
Should the deal pass, it'll certainly lift the mood both within the club and among its millions of fans worldwide. NESV has pledged to lift Liverpool's crippling debt burden, and committed to expanding its stadium capacity (either through renovations or building a new stadium) to boost its revenue through ticket sales. But the fans, whose open rebellion against Gillett and Hicks was visible during the demonstrations at home games, remain cautious about the sale. After all, those two had also promised to build a new stadium and spend on the players needed to make the club a contender again. "We have been in this business for years," Hicks told TIME shortly after buying Liverpool. "All team owners go through a learning curve at how to be a good owner," he added. "We both have done that."
Gillett and Hicks' failure to deliver a new arena denied the club a critical expansion of revenue at a moment when it was saddled with painful interest payments on Gillett and Hicks' acquisition loans, and an annual wage bill that for the season ending in 2009 totaled $135 million. The difference in stadium capacity alone means that arch-rival Manchester United pocketed $1.5 million more than Liverpool from matchday sales for every home game. Liverpool FC's losses rose 34% to $87 million in the year to August 2009.
Gillett and Hicks lost the support of the fans when they clashed publicly with the team's former head coach, and they even managed to fall out with each other. Fans, a well organized cadre at Liverpool, began to doubt the owners' motives, and when one activist fan emailed Tom Hicks Jr, then a director of the club, the co-owner's son fired back abusive messages. Hicks Jr apologized and resigned his position, but the incident "showed how little they knew about football," suggests Simon Chadwick, professor of sport business strategy and marketing at Coventry University.
And it's a curious thing, English soccer. The Premier League's revenue streams are increasingly channeled from Asia, these days. A club's income can vary greatly from year to year — failure to qualify for the current season's European Champions League, Europe's top club competition in which the top four teams in the English league participate at the same time as playing their domestic season, cost Liverpool a $50 million share of TV revenues. Playing rosters, meanwhile, require constant reinvestment to remain competitive. Signing a top-drawer striker like the club's Fernando Torres, today, would cost at least $50 million simply to acquire his contract, and then an annual salary of around $8 million. A football club is hardly a conventional business enterprise, but Hicks and Gillett "decided to buy Liverpool as entrepreneurs," says Chadwick, "expecting a commercial return."
For the club's prospective new owners, there's a virtue, for now, in not being Hicks and Gillett. "The problem with the current owners is not that they're American," says John Williams, a specialist in football sociology at Leicester University and author of Red Men, a new history of the club, "but that they're bad owners. Supporters just want to escape [from] where they are." That would be 18th place in a 20-team league for a club that just two seasons ago were just four points short of winning the title.