I remember this article from the Financial Times just a year ago. I believe it's worth posting again, so that we can at least remind ourselves why we are still in this mess and why I for one think we are in it a good deal longer.
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Feathers fly in Anfield power struggleBy Roger Blitz
Published: April 11 2008 21:51
Even by the standards of the absurd power struggle that has raged at Liverpool Football Club for the past nine months, this week was pretty tumultuous.
A spectacularly successful night in the Champions League at its Anfield home on Tuesday was followed two days later by Tom Hicks, one of its co-owners, sending a three-page letter to chief executive Rick Parry ordering him to resign.
Mr Parry refused, describing the idea as “offensive” and bemoaning “more dirty linen being washed in public”.
Then, George Gillett, the other co-owner, hit back at his business partner. “Any decision to remove [Mr Parry] would need the approval of the full Liverpool board,” Mr Gillett told the Liverpool Echo on Friday. “Rick retains our full support.”
Meanwhile, Sameer al-Ansari, chief executive of Dubai International Capital, which has been stalking the club for some time, this week gave an interview in which he suggested it had pulled out of buying Liverpool, though DIC insiders have since told the Financial Times it had done no such thing. It is simply waiting in the wings until the Hicks/Gillett battle is settled.
The Liverpool saga has resembled a badly-written soap opera for the whole of its erratic season on the pitch. Mr Hicks and Mr Gillett, the US sports franchise owners who bought the club from under DIC’s nose in February 2007 for £219m, have long since given up talking to each other after a series of increasingly public disputes over management style, strategy and future ownership.
There have been instances of farce, too. Tom Hicks jr, Mr Hicks’s son and a fellow board member at the club, was drummed out of a Liverpool pub after making an ill-advised attempt to win over disenchanted Liverpool fans to his father’s stewardship.
It is a far cry from the early days of the Hicks/Gillett partnership, when the duo were hailed on Merseyside as custodians of a new era for Britain’s most successful club.
Liverpool continued to achieve success during the tail end of the club’s 50-year ownership by the Moores family, well known on Merseyside for its Littlewoods pools empire.
But when the family decided to sell, DIC and Mr Ansari – a dedicated Liverpool fan who on his occasional visits to Anfield still sits in the legendary Kop enclosure with his two sons and his daughter – thought their time had come. In December 2006, DIC was made preferred bidder. But according to one person close to the situation, Rabih Koury, then chief executive of its emerging markets division, appeared unable to close the deal. Mr Koury left the company “by mutual consent” last month.
Out from the shadows stepped Mr Gillett, owner of the Montreal Canadiens ice-hockey club, who Liverpool had been talking to for some months. Though unable to purchase the club single-handedly, he brought into the frame Mr Hicks, whom he knew from previous business ventures. Mr Hicks was co-founder of the investment firm, Hicks, Muse, Tate & Furst, whose Hicks Holdings empire owns the Dallas Stars ice-hockey team and the Texas Rangers baseball team, previously owned by George W. Bush.
Crucially, Mr Hicks brought with him substantial experience in sports stadia development, the next phase in Liverpool’s history. They agreed a 50-50 partnership and quickly persuaded the Liverpool board that they were a better prospect than DIC.
“The board always liked [Gillett], he was good to deal with, had a passion, wanted to get things done and seemed to get the issues around the club’s history.
“A strong offer came, the price seemed about right, and the relationship appeared very healthy.”
According to one close observer of the saga, the Moores family was given assurances from the US duo that they were “going to come in with a truckload of cash”.
The US duo took hold of the existing stadium design plans and redrafted them, spending up to an additional £20m, according to one observer. “They wasted serious cash,” the observer said.
The relationship began to fracture around autumn of last year. Mr Gillett is a private and discreet man, according to those who know him. He became alarmed at his partner’s frequent public indiscretions. For example, Mr Hicks let it be known he had made an approach for Jürgen Klinsmann, the former German international and coach, to replace the incumbent Rafael Benitez as Liverpool manager. It was part of a running feud between the manager and Mr Hicks, which also involved public clashes over the size of the budget for player transfers.
All this might have been overlooked if the underlying business plan for Liverpool was sound. The main initial hurdle appeared to be convincing the Moores family and fans that they would not do “a Glazer” and load debt on to the club in a deal similar to the 2005 takeover of Manchester United by Malcolm Glazer, owner of the Tampa Bay Buccaneers American football team.
The problem, according to one insider, was that the long-term planning was non-existent. Their due diligence of Liverpool, the insider said, took only a few days. Their deal was covered by a short-term bridging loan of about £185m. Their interest in Liverpool, the insider added, had more to do with using the club as collateral against their sports franchise assets in the US where there are limits on the amount of debt owners can raise to bankroll their teams. Hicks Holdings denies this.
In January, less than a year after buying the club, the US duo were having to refinance their purchase in a stalled debt market. The £350m deal they arrived at involved huge personal guarantees equivalent to £90m apiece. Their Kop Holdings investment vehicle took on £245m of the refinancing, the remaining £105m debt falling on the football club.
Servicing the £245m debt involves an inter-company loan of £60m paid by the club to Kop Holdings over three years. The promise not to ape Manchester United appears to have been broken.
According to DIC insiders, the refinancing – which lasts only 18 months – was only agreed by Royal Bank of Scotland and Wachovia, the US bank, because the lenders knew there was a willing buyer waiting in the wings.
Despite his sense of pique back in 2007, after being pipped to the Liverpool deal, Mr Ansari never walked away. DIC kept up lines of communication with the co-owners individually. At one point last year, Mr Hicks dangled a 15 per cent stake in front of Amanda Staveley, whose PCP Capital Partners advisory company is fronting DIC’s attempt to buy Liverpool. DIC concluded that the offer amounted to a valuation of the club of £1bn, and said no.
Mr Gillett appears to have been more genuinely eager to sell, having concluded last autumn that his partnership with Mr Hicks was fractured beyond repair. Mr Gillett was willing to sell his stake to DIC in a deal that would see him make £80m from his original investment. But under a clause in their purchasing deal, neither co-owner can sell his stake without agreement from the other. Mr Hicks told Mr Gillett he could not sell.
DIC, which had made clear it was not interested in partial stakes, now entertained the idea of allowing Mr Hicks to take a small portion of his partner’s holding, leaving him with 51 per cent and DIC 49 per cent. But when Mr Hicks insisted on full managerial control, DIC abandoned that idea.
The animosity peaked on Thursday with Mr Hicks calling for Mr Parry’s resignation. He accused the chief executive of commercial shortcomings and missed opportunities in the transfer market.
Mr Gillett’s response on Friday, giving Mr Parry “our” full support, suggests he and DIC are now more convinced than ever that they are nearing the conclusion of the row.
One person close to the situation said DIC and Mr Gillett have already come to an in-principle agreement about a future transfer of ownership. This effectively means that DIC already wields substantial influence over Mr Gillett’s interest, another reason for Mr Hicks’s ire.
One denouement now suggested by some people in the anti-Hicks camp is that bankers could pull the rug from under his Liverpool investment.
There are suggestions that loans Mr Hicks holds against other investments are due in a few weeks’ time, though Hicks Holdings says there are no loans on any other assets.
Meanwhile, Mr Hicks has been in talks with Merrill Lynch about raising more money with a view to buying out his partner, though Mr Gillett has made clear he will not sell to Mr Hicks.
As Liverpool looks forward to another heady night of Champions League football at Anfield later this month in a semi-final showdown with Chelsea, it is hard to tell whether this almighty saga is heading into an impasse or an endgame.
http://www.ft.com/cms/s/0/5b619cf4-07fd-11dd-a922-0000779fd2ac.html?nclick_check=1