GFH Capital Limited, the Dubai-based firm behind the planned takeover of Leeds United, has tabled its bid without the backing of a consortium of private investors.
A company source spoken to at length by the YEP said GFH Capital would itself be funding the deal to buy Leeds, countering long-standing suggestions that the private equity firm was brokering a takeover on behalf of wealthy individuals.
“GFH Capital is leading this transaction with the aim of acquiring the club,” said the source. “There’s been talk about a Middle Eastern consortium behind the deal but that’s not the case.”
The YEP has also been told that:
The proposal put forward by GFH Capital is a 100 per cent buy-out of Leeds City Holdings Limited, the parent company which owns Leeds United. Club chairman and owner Ken Bates would sever all ties with the club if the sale proceeds.
●GFH Capital’s offer will saddle Leeds United with no external debt. “This is a 100 per cent cash purchase,” said the source. “There’ll be no debt for the club to service.”
●The position of chairman at Elland Road is likely to be taken up by David Haigh or one of the other individuals fronting GFH Capital’s offer.
Protracted negotiations between Leeds and GFH Capital are about to enter their fifth month but the deal has become increasingly public in the last fortnight following sudden disclosure from both sides. A statement issued by Bates on Saturday, September 22 was following by two published on behalf of GFH Capital, including one sent to the Bahraini Stock Exchange.
GFH Capital’s involvement in talks has been an open secret since Haigh, its deputy chief executive, and one of the firm’s directors, Salem Patel, sat alongside Bates in the directors’ box at Elland Road for Leeds’ first game of the Championship season. They and another GFH Capital board member, Hisham Alrayes, also attended last month’s win over Nottingham Forest.
The firm was originally thought to be acting for a group of private investors but it now appears that GFH Capital is the buyer in the deal. Confirmation of its involvement in the past seven days has raised questions about the firm’s ability to finance the cost of purchasing Leeds – said to be £52million – and the financial state of GFH Capital’s parent company, Gulf Finance House.
GFH Capital – founded as Injazat Capital in 2001 and wholly-owned by Gulf Finance House – is a private firm whose annual balance sheets, submitted to the Dubai International Finance Centre, are not publicly available.
Accounts for Gulf Finance House, a Bahraini investment bank which has been floated on several stock exchanges, reveal heavy losses made in 2009 and 2010 and only £3million in readily available cash. Doubts about the bank’s future as a going concern were raised in May by auditors KPMG.
Sources at GFH Capital have been at pains to stress the distinction between the Dubai-based company and Gulf Finance House. One said the firms were “distinct from each another” with “separate balance sheets, separate investments and separate projects.” “There’s a lot weight behind GFH Capital,” he said.
As recently as the end of July, GFH Capital struck a deal to acquire the Turkish bank Adabank in a deal costing around £45million. The purchase was funded in partnership with Gurmen Group, a conglomerate based in Turkey.
GFH Capital also points to past funding given to it by the Dubai Islamic Bank, the World Bank and the Islamic Development Bank, and its website states that Gulf Finance House is one of its “regional investors.”
The company has not commented on where or how it has sourced the funds to buy Bates’ 72.85 per cent stake in Leeds, though the YEP’s source denied claims that GFH Capital was planning a ‘leveraged buy-out’ – a deal using a combination of equity and debt which would ultimately be loaded onto the club.
Back in June, United expressed confidence in the deal proposed by GFH Capital, saying: “Our discussions with them have left us very comfortable that they have the financial resources to support the club and that they will have no issues in satisfying the requirements of the Football League’s Owners and Directors Test, unlike many of the previous approaches we have had to endure.”
Talks aimed at finalising a sale are still to reach a conclusion, however, more than four months after they first began. Alrayes said last week that GFH Capital was pushing for an agreement “as soon as possible.”
In the past seven days, the YEP has spoken to two former employees of Gulf Finance House, both of whom worked at senior management level and have knowledge of the Bahraini bank and GFH Capital.
Both questioned the ability of either firm to buy Bates’ stake without the backing of wealthy investors. One suggested that GFH Capital could attempt to “flip” Leeds – to acquire United from Bates with the intention of selling the club at a profit in the near future.
“It’s hard to see either Gulf Finance House or GFH Capital being the long-term owner,” he said.
“Gulf Finance House has hundreds of millions of dollars worth of assets but most of them are tied up. In reality those assets aren’t liquid.
“It recently went through a process of recapitalisation (financial restructuring) and it suffered badly during the global market crash. It’s got a track record in investment but that’s pre 2009 when things were going well.
“With regards to GFH Capital, the obvious questions would be how much money does it have and where is the money coming from?”
In a statement issued by GFH Capital last Friday, explaining its reasons for buying Leeds, Alrayes commented on Gulf Finance House’s situation saying: “Our parent company GFH has successfully steered through tough economic times and we find ourselves in a position of strength and in an enviable market position to lead on fantastic deals such as this.”
Patel, meanwhile, appeared to dismiss the possibility of GFH Capital “flipping” Leeds. “We are keen on waking this sleeping giant, building on and forging a sustainable long-term future for the club – both on and off the pitch,” he said in the same statement. “We also hope to take back ownership of Elland Road eventually.”
The cost of repurchasing Elland Road under the buy-back clause agreed when the ground was sold in 2004 is presently around £15million. Patel’s mention of the stadium is as far as GFH Capital have gone to outlining the full extent of a deal which is still subject to a confidentiality clause.
Speaking to Sport 360 newspaper in the Middle East on Tuesday, Haigh said: “It’s frustrating that we can’t be open about the deal due to the confidentiality agreement that’s in place. There have been a lot of stories about funding and debt and so on that we’d love to answer but we’re just not in a position to do so.”