After six months of work and a seven-figure investment, GFH Capital believes its buy-out of Leeds United is all but immune to external competition.
But if recent rumours are correct, tomorrow (Nov 15) marks the end of the exclusivity clause agreed when the roots of this takeover first began to grow.
The Dubai-based firm has not confirmed when its solitary right to discuss and finalise the purchase of Leeds officially expires but nor has it contested the date of November 15 suggested as a deadline last week. Five months to the day after GFH Capital and United first negotiated the clause, the would-be buyers might now be forced to press on without it.
GFH Capital made a payment of £2million to Leeds when exclusivity was agreed on June 15, little over a month after preliminary talks about a takeover began. Writing his programme notes before United’s game at home to Charlton Athletic on October 23, Leeds chairman Ken Bates said: “Our discussions with GFH commenced in May, the club signed an exclusivity agreement on June 15 and received an upfront payment of £2m.”
The clause allowed GFH Capital to perform due diligence on United’s accounts and lay the groundwork for a takeover which, if successful, will see the private equity firm complete a 100 per cent buy-out of Leeds and repurchase the club’s Elland Road stadium and Thorp Arch training ground.
As a result of exclusivity, it was able to pick through the bones of a complex business without fear of Bates opting to sell the club or his majority stake to a third party.
Rival investors were always likely to hover in the wings and at least two still are, one from the United States and the other based in Saudi Arabia.
But though GFH Capital’s takeover is yet to be ratified, the company feels confident that the process has “gone too far” for the deal to collapse inside or outside the period of exclusivity,
A GFH Capital source told the YEP: “The deal’s moved forward in GFH Capital’s favour and the exclusivity agreement is almost irrelevant now. It’s really gone too far for that to be an issue.
“We’re at the stage where both sides are moving towards a final agreement and working towards signing the last piece of paper.”
The length of time taken by GFH Capital to seal the purchase of Bates’ 72.85 per cent shareholding begged the question of whether other groups interested in investing in Leeds would see an opportunity to disrupt a protracted process.
An answer came over the weekend when American millionaire Preston Haskell emerged as a last-minute rival to the GFH Capital offer, backed by the clout of a personal fortune estimated to be worth at least £150million.
Haskell is thought to be the prospective US investor who came to Elland Road and sat in the directors’ box for the Championship game between Leeds and Hull City on September 18. Having initially been interested in buying a smaller shareholding than GFH Capital, he is now said to be pursuing a full takeover.
Interest from a wealthy Saudi Arabian party is also becoming more serious having lain dormant for a number of months. That group are ready to approach United towards the end of this month if GFH Capital’s bid for ownership fails to proceed before then.
A source in involved with that potential bid said it was a “very credible alternative” backed by “more than enough the money to buy Leeds.”
Both the Saudis’ intentions and those of Haskell will be of no consequence if GFH Capital puts the finishing touches to its own £52million takeover.
The private equity firm has appeared increasingly optimistic of sealing its buy-out since company director Salem Patel and deputy chief executive David Haigh met Bates for talks in Monaco at the end of last month.
GFH Capital was quietly hopeful of finalising the sale this week, though the company was still refusing to declare a more definite timescale last night. Work on its takeover continued today as the suggested date of November 15 for the end of exclusivity rapidly approached.
A legal expert in corporate law who spoke to the YEP on condition of anonymity said: “In simple terms the end of exclusivity means the sellers are free to talk to other interested parties.
“The bigger question is how much of a problem that is for the buyers. A lot depends on the progress that’s been made and the spirit of negotiations. If the seller feels that it’s almost done and worth sticking with then the end of exclusivity needn’t be an issue. It might be that a small extension is granted to cover the remaining work.
“But for as long as exclusivity is in place the seller can’t negotiate with other bidders or provide them with sensitive information. When that period ends, other bidders are free to put forward offers. The end of exclusivity is probably most relevant to them – though strictly speaking the precise date should be confidential.
“Third parties can actively attempt to persuade the seller that they’re a better bet. But saying that and proving it are two completely different things and the risk is that your advanced offer falls through, leaving you with nothing.
“In these situations there’s always an element of the bird in the hand being worth two in the bush. When it comes to it the biggest factor will probably be how advanced this process is – and, to be blunt, how confident the sellers are about a deal materialising.”
The exclusivity clause struck by Leeds and GFH Capital in June ended briefly at the beginning of the August, at a time when the company’s proposed takeover appeared to stand on the verge of collapse.
United announced in a statement on August 9 that the exclusive period had finished, saying: “The club remain happy to continue discussions but not on an exclusive basis so as not to prevent other options passing.”
A request from GFH Capital to extend the agreement is believed to have been rejected by Leeds initially, prior to the two sides reaching a compromise and re-instating the clause.
Bates said very little about the proposed takeover in his programme column on Saturday, writing: “Negotiations are continuing and are now in the hands of lawyers.
“Hopefully sooner rather than later the matter will be resolved one way or the other and then we can move forward.”