The Boston Red Sox and Liverpool Football Club appeared ready for merger under the roof of the current Red Sox ownership New England Sports Ventures (NESV) after the Liverpool board of directors voted unanimously 3-2 to sell the English Premier League club for the bargain basement purchasing fee of £300 million (just over $476 million U.S.).
Last Friday, step two was completed as the Premier League approved the sale to NESV headed by financier John Henry.
There is, however, the small issue of current owners Tom Hicks and George Gillett’s lawsuit to block the impending sale, which if completed would render the duo with £144 in losses put into the team since their purchase in 2007 and without any semblance of a profit from the sale – the biggest two sticking points for why the club had not been previously sold.
In fact Dubai International Capital (think Dubai Bank) -- Chinese investor Kenny Huang with backing from the Chinese government and Syrian businessman Yahya Kirdi -- had all made previous inquiries into purchasing the club after the current American owners announced their intention in April to sell Liverpool and appointed British Airways chairman Martin Broughton as Liverpool chairman in charge of overseeing the formal sale.
Each proposed buyer later withdrew their interest – codeword for scared off – thanks to Hicks and Gillett’s lofty price tag for buying Liverpool (having valued the club at around $800 mill) coupled with the amount of debt that would have to be paid off (the Royal Bank of Scotland is owed £237 mill or $455 mill) as well as investing in a new stadium and new players seemed to be a package deal no potential buyer was interested in being bullied into.
The driving force behind the current deal is the ticking clock with the looming date of October 15th as a pressure point fast tracking this potential sale to NESV. On that date the Royal Bank of Scotland can call in Hicks’ and Gillett’s debt (£237 mill) from the bank loans and penalty charges assumed over the previous three years.
According to reports, Hicks and Gillett are essentially tapped in terms of their capability to draw further credit to pay down their debt, meaning if the sale failed to go through and Hicks and Gillett could refinance their liabilities or move them to another company, Royal Bank of Scotland would have the power to assume control of Liverpool. That would mean the club’s holding company – Kop Football – would be forced into administration, a form of bankruptcy protection.
Under Premier League rule, what that would mean for the team is it would face a nine-point deduction off of whatever final tally Liverpool had at the end of the year, or quite simply eliminating three wins off the team’s record for the year and devastating any chances the Reds would have at qualifying for European action next year. Last year Portsmouth underwent administration and were relegated from the Premier League to the Championship – essentially England’s Triple-A of soccer. Now Portsmouth reside just one position above the relegation zone in the Championship and could face dropping into League One – you guessed it - the Double-A for English soccer.
(Editor's Note: A report on Saturday from the Associated Press suggested the possible takeover of Liverpool by NESV would not go ahead if the club does go into bankruptcy protection.)
Broughton along with managing director Ian Purslow and commercial director Ian Ayre comprise the three board members trying to force through the current sale that levied the three votes necessary to outvote Hicks and Gillett. Interestingly enough none of the three hold any share in the club, and Hicks and Gillett claim they replaced Purslow and Ayre on the board with Hicks’ son Mack and the financial controller to Hicks Holding (Hicks’ company) Lori Kay McCutcheon – two individuals that would side with the current American owners trying to reject the sale of the club.
The civil war for the battle of Liverpool should take place in the courtroom early next week, and legal experts are mixed as to what the current outcome might be, but with next Friday’s foreclosure date creeping oh so close it’s likely the whole of England and many stateside will do everything within their power to get the situation resolved as quickly as possible.
In my opinion, there is a distinct model behind Henry and NESV’s thinking. Nine years ago the New York Yankees and Manchester United secured a marketing partnership to package both teams as a bundle to sponsors, broadcasters, and merchandisers.
Manchester United were and still are the number one name in soccer world wide – the world’s biggest sport. The New York Yankees were and continue to be the number one name in baseball – a sport that continues to grow in popularity.
And although the two organizations do not reside under the same ownership in any capacity for each franchise the partnership clearly was for the better as each team has continued to grow in value. Forbes recently ranked Manchester United as the world’s richest sports franchise at $1.83 billion and the Yankees at the No. 3 spot on the list at $1.6 billion.
Liverpool FC is a world-renown brand, more so than the Red Sox, who are beginning to be world-renown brand. Interestingly enough though, it’s the Red Sox that rank slightly higher than Liverpool on that same Forbes list of the top 50 wealthiest sports teams in the world, 35 to 41 respectively with the Red Sox franchise valued at $870 mill and Liverpool FC at $822 mill.
That could drastically change for Liverpool should the sale fail and the team be foreclosed on, but for the time being let’s assume Henry and NESV get their team, the marketing possibilities for both teams would be enormous. This Red Sox ownership has shown incredible creative thinking in terms of branding their product, buying real estate around Fenway, purchasing NASCAR teams, using Fenway as attraction not just for the Red Sox but for concerts and other events like this past winter’s Winter classic and this summer’s showcase soccer match between Celtic (Scottish League) and Sporting Lisbon (Portuguese League).
I am quite sure that the possibility of getting Liverpool to America on a showcase tour headlined by some sort of epic match in Fenway Park is a mouth watering dream not only for the current Red Sox ownership, but to soccer fans worldwide. And I’m also quite sure as baseball continues to try to figure out ways to expand its brand to new markets that the idea of sending the Red Sox over to England perhaps for some sort of preseason or regular season opening series like they did in Japan several years back is another idea that is being tossed about.
But let’s look past how NESV will look to continue to lines its pockets because the parallels between Liverpool and the Red Sox run much deeper than monetary values alone.
Historically speaking Liverpool and the Red Sox are held within the highest stature in each of their respective leagues because of each team’s rich legacy.
The story lines are eerily similar.
Liverpool was founded in 1892, the Red Sox were founded in 1901.
Fenway Park – opened in 1912 – is often referred to as “America’s most beloved ballpark,” while Anfield – opened in 1884 – is just as historical and well thought of in England. Both stadiums are cozy and considered small in their respective leagues with Fenway holding a capacity of 37,402 fans and Anfield holding a capacity of 45,276 fans.
Five times Liverpool have been crowned champions of Europe and another 18 times the Reds have won the English Premier League, yet they own an inferiority complex to Manchester United (considered the Yankees of Europe). Seven times the Red Sox have been crowned World Series champions, while owning 12 American League pennants. And with things like “the curse of the Bambino,” and “the evil empire,” being spewed about until the team’s recent triumphs – Red Sox fans know all about inferiority complexes.
Understand that there is a huge and growing faction of English Premier League supporters that hate American owners – mostly fans of Manchester United where the Glazier family (who also own the Tampa Bay Buccaneers) and fans of Liverpool where Hicks and Gillett have owned the club since 2007.
The biggest reason these fans protest against and abhor their ownership is over the vast debt the owners put their respective clubs in after buying their respective teams.
At Liverpool Hicks and Gillett made all kinds of flamboyant promises about not putting the club into debt, pouring money into buying new players for the team, and putting aside money for a brand new state of the art stadium.
Of course virtually none of those promises was kept, the biggest reason why the fans turned on the American pair with signs like “Liverpool FC, built by shanks broke by yanks” and “thanks but no yanks” adorning around the stadium at home matches.
It would seem really any ownership that could get the team out of debt and reinvest in the team would be welcome buyers by the Kopiters, but only time will tell.
What Henry and his ownership group must realize is that soccer is a different animal than baseball or NASCAR, it is religion in England – a sport the fans are violently passionate about (see the movie “Green Street Hooligans” and you will get a better idea about the fan bases across the country).
What could make this a great purchase is that NESV are only essentially having to pay off the debt accumulated by the previous owners and will end up buying Liverpool for a little over half what he club is actually worth, according to Forbes’ value of the club.
However, there still lie several huge financial issues.
Liverpool is either in need of a new stadium – and there has been talking of building one in Stanley Park for a rough cost of a little over £200 mill – or refurbishing Anfield to add new seats and luxury boxes bringing the stadium closer to modern times. The problem is Liverpool fans seem divided on the issue with the majority likely leaning towards a brand new facility.
Looking at Henry’s track record with the Red Sox where they decided to make several renovations over the course of several years to improve and add seats in the ballpark at a much lesser cost, it would seem likely NESV would opt or prefer to go with that same line of thinking, which could upset the masses.
The Scousers and Kopiters of Liverpool also demand trophies like Red Sox nation demands World Series titles and American League pennants, and the Reds of Liverpool are in as about as bad a shape as the Red Sox were when Henry’s group bought the Red Sox.
If you remember back to 2001 the Red Sox were in complete turmoil with players like Dante Bichette and Mike Lansing revolting in the clubhouse due to lack of playing time, general manager Dan Duquette firing manager Jimy Williams mid season and simultaneously replacing him with pitching coach Joe Kerrigan, and the team ultimately collapsed down the stretch finishing 82-79 to miss the playoffs.
That seems like a long time ago in a galaxy far far away after ending an 86-year drought with two World Series titles, but it took a monumental effort to find all the right pieces to fit together.
Henry and company will be faced with that task once again. Liverpool replaced manager Rafa Benitez in the offseason with former Fulham boss Roy Hodgson. Yet, the team sits currently third from bottom in one of the deadly three automatic relegation places with just seven points from six matches. If the season ended today Liverpool would be relegated from the Premier League to the minor league Championship.
The question becomes how committed will NESV be to turning around this team. Liverpool fans expect at a minimum to be a top-four team in the EPL to earn one of the automatic qualification spots for the Champions League – a vast moneymaker for the club, but more importantly the league where all the best teams from Europe compete.
Soccer operates in a completely different forum than baseball. Players are developed at a young age through various clubs throughout the world, but rarely do they end up staying with that one team if they are good enough to move on to bigger and better things. The best players are bought and sold through the transfer market for fixed prices generally without any exchange of players or any sort of trade. For example two years ago Manchester United sold off the world’s best player (Cristiano Ronaldo) to Spanish club Real Madrid for the hefty price of 80 million Euros, a world record fee.
If you look closer at that summer where Ronaldo was sold, Real Madrid as a club spent well in excess of 200 million Euros on players to turn around its club – and that was just for the fees to buy those players -- and that did not include those players’ annual wages.
Most of the top teams across Europe operate at some sort of a loss each year, something Henry has shown he is not willing to do stateside. In 1999 Henry purchased the Florida Marlins only to sell off the team three years later because they were turning the sort of profit margins he was looking for, and so that he could subsequently buy the Red Sox.
Additionally from the perspective of a Red Sox fan, it has become apparent the team is not willing to go the extra mile to always sign the best players available during free agency. Take a look at two winters ago when the Sox and Yanks went down to the wire with Mark Teixeira, who the Sox ultimately did not sign and allowed to go to the Yankees where he helped New York win a World Series last year.
Should NESV assume ownership those types of cost-benefit moves will not be accepted by Liverpool fans, who will turn just as quickly on these new Americans as Hicks and Gillett if promises are not kept.