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Must Read: What price will Mike Ashley sell Newcastle United for?

3 years ago
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There is a train of thought that says Mike Ashley wants to sell Newcastle United simply because he’s had enough.

That he accepts he’s taken it as far as he can.  That the enmity of supporters has ground him down and he’s tired of protest, ingratitude or abuse.  He’ll even accept less than his preferred asking price to escape the nightmare.

Who knew Mike Ashley was so thin skinned?  After ten years of plodding from one catastrophe to the next disaster he’s finally arrived at the conclusion he should sell, nine years after everyone else.

I don’t buy it for a second.  Cash rules everything around Mike and it’s only in the profit margins that you’ll find whether it makes financial sense for Ashley to stick or twist.

How does Mike Ashley and his main business, the shop, profit from his ownership of Newcastle United?

First, Newcastle United are one of his store’s biggest customers averaging almost £2m of purchases every season.  In the last 4 sets of accounts (from July 2011 to the month after being relegated for the second time) Newcastle paid a total of £7.1m for their goods or services.

That’s only the declared sums too.  Reports showing the entire Newcastle merchandising website is just a front end feeding into the owner’s retail site make stark long unanswered questions about how close the Newcastle retail setup is to the one Rangers had. Accounting smoke and mirrors deciphered by Rangers supporters showed that they failed to even achieve the 4p-5p in the pound that had already been perceived as an outrageous profit grab by Ashley, Llambias and Rangers Retail.

Second, as we all know, the massive global exposure that Ashley’s brands enjoy off the back of Newcastle United continues to be provided completely free of charge, despite a distant promise that the club would start to be compensated for it.

Third, Ashley’s Property Development company faced no competition whatsoever when it came to the club selling off the lease on land behind the gallowgate end.  Having paid the club £5m for the land, a £60m+ property development has now had the green light.  The profit Ashley realises on this deal is yet to come to fruition, but it will clearly be significant.

Fourth, the growth in Premier league TV revenues mean that the club has doubled in value.  Without improving the club’s matchday or commercial performance, while actually worsening both, the huge TV income mean he can now ask for £400m for a club he paid £134m for with £70m of debt.  This growth has not stopped, and the asking price for the club will only grow, even if the low standards Ashley has set this past decade are maintained.

Finally, the personal expense of maintaining the club is minimal.  Even with a relegation to the championship in 2015/2016, Ashley’s loans to the club to keep it ticking over since 2011 come to just £4million net.

Football has been very good to Mike Ashley.  Ownership of Newcastle United has been very good for him and his shop.  So why would he take what Amanda Staveley is willing to pay and just throw that money into his pool to swim around in Scrooge McDuck style?  Why cut income streams and a ballooning asset he can afford to maintain?

Staveley would have to make it worth his while and pay over the market value. She is rumoured to have plans for a £300m bid lined.  With the £134m purchase price and further £144m of loans Mike Ashley has put in since, that would be a £22m profit on his total £278m investment. I assume he’d keep Strawberry place too.  Most of us would see that as good value.  But for all of the reasons outlined above, Ashley has a personal premium that would have to be satisfied before he would go.  The question is how much?

I would say it’s as much as Ashley would have to pay to get everything he has at Newcastle from another club.  That’s his reason for saying he’s willing to sell.  He has a £278m gap in his bank balance returning everything above.  If he could get all of that AND plug that gap, then he’d be profiting at no personal cost whatsoever. That would be something he would have to consider.  So how much would, say, Aston Villa cost him to buy?  How much for Leeds United, Sunderland or Sheffield Wednesday?  How much for any good size club with a history and a stadium to go with it that is available to buy.  Add that cost to his £278m outlay at our club and you have the price he would be willing to sell for.

Whether Staveley or anyone else would value the club as highly is another matter.

You can follow the author on Twitter @bigchrisholt
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