I think that the answer to that question is: probably nobody at the moment. No sensible investor would be prepared to pay what Mike Ashley would expect for the club. For the same reason, there is unlikely to be a billionaire White Knight on the horizon either.
We are victims of a unique set of circumstances. Due to the value of the ‘free’ Sports Direct stadium advertising, NUFC is worth far more to MA than it would be to any other investor.
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MA and Sports Direct are uniquely in a position to benefit from this, and it is difficult to imagine any other retailer that could gain so much advantage.
How much is that extra value worth to MA? How much extra would an investor have to pay to buy NUFC, over and above the real value of the club?
By investor I mean an entity or person who is buying the club with the intention of making a return on their investment.
There are a number of ways to value a company.
One method is to consider its average pre-tax profit over a period of time, and then multiply that figure by an appropriate factor. That factor varies depending upon the nature of the company, and the state of the market in which it operates. For substantial football clubs the factor is currently something between 5 and 6.
That same factor can be used to calculate the ‘extra value’ that MA uniquely receives from the club.
Various writers have attempted to calculate the financial value to the MA regime of the Sports Direct stadium advertising, and the profit on shirts and other merchandise. There are two parts to the calculation.
Firstly, there is the real profit from merchandise that is currently diverted away from the club into the Sports Direct coffers. The second part is the money that Sports Direct should be paying to NUFC for their stadium advertising. Sports Direct currently pay nothing. The conservative total when both figures are added together appears to be about £20m pa.
We need to bear in mind that the sale price of the club today would be calculated on the assumption that the stadium advertising revenue would return immediately to the club, once MA was out of the picture.
The club is therefore worth far more than the current balance sheet would suggest. Let us call that higher figure the ‘real’ figure.
In order to calculate MA’s ‘compensation’ for losing his annual £20m benefit, we initially use the same factor of 5 or 6 that we use to value the whole company. With an annual benefit of £20m, that equates to about £120m.
A discount would be applied to that figure because MA is receiving this money up front, rather than over a period of time. With a discount applied, the figure is probably closer to £100m.
That £100m is the sum that an investor would have to pay to MA in addition to paying the ‘real’ figure to buy the club.
Another way to look at it is this. If MA sold the club today for its real value, but he wanted to continue to advertise at the same level, MA would have to pay somebody else £20m pa for that advertising for a number of years. That is why MA would expect the extra £100m.
It is that extra sum of £100m that would kill the deal for any investor.
The stadium advertising represents genuine value to MA; but giving Sports Direct free advertising is of no value to anyone else. The £100m is money that would simply have to be written off.
No investor that wants a return on its investment, even in the very long-term, could afford to write off £100m.
The same problem applies to our billionaire White Knight that some fans hope will appear one day. Even billionaires would baulk at the prospect of immediately writing-off £100m. There are probably only a handful of people in the world that would be prepared to do that.
Unless Mike Ashley changes his business model, it is difficult to see from where salvation might come.