Swansea City’s owners to make huge profit with sale to US investors• Huw Jenkins among shareholders set to make millions if they sell
• Struggling club bought for £1m in 2002 is now valued at £100m
Swansea City have risen from the depths of the Football League to be an established Premier League Club, which has attracted the attention of American investors.
The owners of Swansea City, whose partnership with the supporters trust has long been hailed as ideal for a British football club, are set to make millions by selling their shares to American investors. The deal, signed in principle by the chairman, Huw Jenkins, values Swansea at around £100m, exactly 100 times more than the £1m paid for the club by the nine shareholders, including the trust, during and after a financial crisis in 2002.
The agreement proposes that the eight shareholders apart from the trust – which owns 21.1% of the club and whose elected director, Huw Cooze, was furious at being kept unaware of the negotiations – sell most of their shares to a consortium led by the US sports team investors Stephen Kaplan and Jason Levien. Intense discussions since have led to suggestions that not all the shareholders will sell, and Levien and Kaplan may buy only 60% of the club, but their valuation, for a Premier League club awaiting the next tranche of vast TV fortunes starting next season, remains around £100m.
So Jenkins’ 13.2% stake, which cost him £125,000 to buy, is now valued at £13.2m. He is understood not to be planning to sell all his shares and is likely to remain chairman if the takeover completes, as he is widely credited with having run the club with great acumen, alongside the other directors. Local hotelier Martin Morgan and his wife Louisa are the largest shareholders with a 23.7% stake, which cost £225,000 to buy; it is now valued by Kaplan and Levien at around £23.7m. Martin Morgan is currently said not to be intending to sell, and Levien may try to have separate discussions with Louisa Morgan, who controls more than half of their stake.
One of the original 2002 investors, South African businessman Brian Katzen, owns 10.5% of the club, as does his business partner, Jeffrey Crevoiserat, stakes which cost each man £100,000 when the Swans were floundering near the bottom of the Football League at a rundown Vetch Field, and are now valued at £10.5m each. Robert Davies, another original investor, also a financial backer of Swansea’s Ospreys rugby union club which shares the Liberty Stadium, has a 10.5% stake too.
Dutch investor John van Zweden, and Leigh Dineen, formerly the trust’s elected director who bought his own shares for £50,000, both have stakes of just over 5%, now valued at £5m.
The millions to be made by the shareholders who do sell follow £4m already paid to them all in dividends over the past four years - £1m, in effect their original stakes repaid, each year from 2012-15 since Swansea have been in the Premier League. Paid proportionately according to their stakes, Jenkins has received more than £500,000; Martin and Louisa Morgan £900,000; Katzen, Crevoiserat and Davies £400,000 each, and Van Zweden and Dineen around £200,000 each.
The trust, for its 21.1%, has been paid more than £800,000, which it has used to buy new shares and for a “rainy day” fund. Established as a mutual, democratic, not-for-profit body during the Swans’ 2001 financial crisis, with the help of fan-ownership initiative Supporters Direct, the trust’s members who have provided contributions for the £200,000 investment cannot cash in personally if the trust ever sells.
Cooze, who has told a trust forum he was “pretty damned hurt” at the secrecy of the negotiations, is now seeking to rebuild bridges with his co-directors and safeguard the trust’s position. Levien’s revised suggestion to buy 60% is intended to show the trust a preparedness to work with them, after supporters’ hostile reaction to the proposed acquisition of 75.1% control. Cooze and the trust’s chairman, Phil Sumbler, say they knew the other shareholders would sell at some point and are sanguine about them making so much money. They mostly want to know whether the sale to Levien and Kaplan, which Jenkins in his official statement said he believed “will help the club progress on and off the field,” will bring actual investment into the club itself.
“There is no point in a deal without money for the club; that would just be a sale for the shareholders’ personal gain,” said Sumbler. He pointed out that supporters’ unpaid work and donations have contributed to the Swans’ remarkable revival over 15 years and massive increase in financial value. “The shareholders are mostly lifelong fans, and we have always believed throughout our partnership with them that they have the best interests of the club at heart.”
Swansea’s old home at Vetch Field, where they were playing when the current owners bought the club for a price of £1m.
Levien, a lawyer, is managing general partner of Washington Major League Soccer team DC United, having previously been involved at three NBA basketball franchises, including the Memphis Grizzlies, to which he introduced Kaplan as an investor. Kaplan, principal of Oaktree Capital investment fund, is thought to be the largest proposed investor in the Swansea acquisition, with several others so far not named, and Levien, who has been assuring people that they have substantial money and are not financing the deal with debt.
In meetings with the shareholders in Swansea last week, Levien is understood to have emphasised that their plan is to develop the club, but has not made firm promises that the US consortium will invest new money of their own for signing players or expanding the stadium. Like other US investors increasingly taking over clubs, Levien and Kaplan are attracted by the Premier League’s success, the huge TV income, expected to be £8bn for the three years from next season, and the prospect of further growth in popularity and earnings, particularly in America, over the next 10-15 years.
The US culture of sports team ownership is much more avowedly commercial than British football’s traditional local “benefactor” shareholders, who have mostly sold out in the Premier League years. Investors in American sports seek to make money by growing their franchises commercially and therefore increasing their value, and that of their own stakes. Levien and Kaplan’s plan is to do the same at Swansea, and promoting the club in the US is thought to be a key feature of the proposed deal.
All of which is a world away from the crumbling, loss-making club that the shareholders, galvanised by the trust and wider supporter efforts, bought for £20,000 in January 2002, putting the rest of the money in to pay off debt. Chronicles of the Swans’ spectacular upward flight since occasionally miss out two key boosts: a company voluntary arrangement (CVA), by which creditors settled for only 5p in every pound, and the great gift of the £27m Liberty Stadium, which is still owned by the local council.
Now, as thousands of jobs locally are threatened in the Port Talbot steelworks, the Swansea City shareholders’ proposed windfall gains highlight again modern football’s stand-out riches, in increasingly post-industrial cities where the clubs evolved more than a century ago.
Jenkins and Dineen declined to comment on the proposed sale, citing confidentiality agreements. Katzen said of his original motivation that he was keen on football and the challenge, and said they were all determined to make progress and run the club as a business, but never envisaged the success they have had, and these exponential profits.
“It has been 15 years, a lot of work; it’s not a quick buck,” Katzen said. “Nobody expected to get anything out of the club at the beginning.”
Guardian
