Billionaires betting on football
What is it about family business leaders and football? They love the sport and are also prepared to lose millions on the game.
Football in the UK attracts investment from prominent figures, many of them linked to family businesses including steel magnate Lakshmi Mittal and Abu Dhabi’s Sheikh Mansour. In Italy families back some of the largest clubs; the Agnellis finance Juventas and the Moratti family are behind Inter to name just a few.
But despite their business success at their chosen field, they find owning a sports team a far greater challenge than they could have imagined. Crippling interest rates, fan dissatisfaction and player wage requests are some of the issues they face. And, while investing in sports teams is rarely about profits and almost always about passion, few can be prepared for just how difficult a job it can be.
Take for example Champions League finalists Manchester United. The Glazer family have owned the club since 2005 when they bought it using mostly debt. Fan hostility towards the family peaked last year when analysts estimated the club’s debts to be around £699 million, and fans staged very public displays of their dissatisfaction with the owners. Some of the hostility has since quietened, which may have something to do with Manchester United’s success this season – but the club’s debt level is still shrouded in secrecy and it is estimated the family have already paid over £20 million on interest on their loans and may owe much more.
Tom Hicks and George Gillett, both family business heads and former Liverpool co-owners, also lost out on their investment in the Premier League club. The pair bought the club in 2007 for £219 million in a highly leveraged deal. During their time in control the club’s debt increased until they were eventually forced to sell in October 2010 in a deal that virtually eradicated the club’s debt but left its former owners losing over £100 million from the sale. Hicks and Gillett are still fighting for compensation over the deal and are trying to launch a multimillion-dollar claim for damages.
While billionaires like Sheikh Mansour have deep enough pockets to fund the losses their teams make yearly, others are not so fortunate. Italy’s Sensi family was forced to sell its majority share in AS Roma earlier this year in an attempt to decrease debts at the family-held business Italpetroli.
But maybe, just maybe, the financial stupidity of owning a football team is beginning to get through to family business leaders. The Mittals, who own a 33% share of Championship side Queens Park Rangers, seem reluctant to take a bigger stake. QPR secured promotion to top-fight football – the English Premiership – last week, or so they thought.
But their ascension could be hampered by allegations the club did not follow the rules regarding registering players, and could result in a fine, or worse a points deduction.
For the club’s owners, including Bernie Ecclestone who owns 62% alongside Mittal’s 33%, the Premier League is much more lucrative in terms of broadcasting income and sponsorship opportunities than the Championship. Yet the uncertainty prior to the decision is hampering celebrations.
And it seems even with the club’s success, Mittal is unwilling to invest further in QPR. Earlier this year the club announced it was in the early stages of discussions over an offer from an unnamed party to buy a majority share in the club. Insiders speculated at the time that the offer was an attempt to see if the Mittal family would invest further in the club, but so far they have not.
The Mittals might be seeing sense when it comes to getting deeply involved in football clubs, but that doesn’t mean there isn’t a queue of other billionaires waiting to take their place. After all, football is still the beautiful game.