Newcastle Takeover: Will Saudi beIN or be out?

It is common knowledge that the Gulf States are investing in high-value sports. From Qatar being awarded the rights to host the 2022 FiFA World Cup, to the hundreds of millions of dollars Abu Dhabi and Doha have spent transforming the Manchester City and Paris Saint-Germain football clubs. The money spent by these autocratic regimes is huge, and ultimately is changing the landscape of the sporting industry.

This trend has led to strong opposition from campaigners and activists, such as Amnesty International, accusing these repressive regimes of using sports brands to blur the reality of their poor human rights records. Issues involve the beheading of a journalist, the torturing of political prisoners, and the causation of a humanitarian catastrophe in Yemen by Saudi Arabia.

Newcastle Takeover

The news on April 14th that an investor group led by Saudi Arabia’s sovereign wealth fund, steered by Crown Prince Mohammed bin Salman, has reignited tensions in the Gulf. Saudi Arabia’s Public Investment Fund is putting up approximately 80 percent of the £300m purchase price, with the deal being structured through a vehicle created by Amanda Staveley, who’s PCP Capital Partners will put in the remaining 20 per cent consideration.

A report from the Financial Times on April 14th noted that ‘the deal is subject to approval from the Premier League, which may take as long as several weeks.’ Well, as of July 3rd (months later), no deal is in sight, with many realising that the deal is most likely hit a barrier that Mike Ashley (current Newcastle United owner), Ms Staveley, and the Saudi Prince will not be able to navigate their way through.

Reasons for Foreign Investment in Football.

Firstly, the English Premier League is the richest league in the world. The Premier League’s 20 clubs recorded revenues of £4.827bn in the 2017-2018 season, almost £1bn more than Spain’s La Liga and the German Bundesliga. With figures like this, it is clear to see the attraction.

Secondly, breaking into the Top 6 positions in the league brings even greater financial opportunities. If foreign investors can overtake the likes of Tottenham and Arsenal, they stand to make £100m’s more per year. The disparity between the top and bottom is seen by Manchester United’s revenues of £590m in 2017-18 compared to Huddersfield and West Brom’s £125m.

Two good examples of recent success due to foreign investment are Manchester City and Paris Saint Germain, relatively small clubs on the European stage, who are now vying for UEFA Champions League titles each season – the most elite football competition in Europe. The extent of investment is shown by the recent Financial Fair Play (FFP) ruling, banning Man city from the Champions League for two years, due to not adhering to FFP rules. But the revenues brought in by the clubs through sponsorships, ticket sales, and prize money far outweighs any negatives.

Thirdly, there is competition between the Gulf States. When Qatar wins the rights to host an Olympics, or buys a club, Saudi Arabia and the UAE have to follow suit. The issues that I will come onto with the Newcastle deal highlight this.

From these three points, it is pretty clear why Saudi Arabia want to acquire Newcastle. The revenues from Premier League football clubs are high, so if they invest successfully, they could make significant profits. In addition, Prince Mohammed wants to compete against his Gulf State rivals who own the likes of Manchester City. Of course, Newcastle United is also a big name in the sporting world – 50,000 people attend games every week, they have taken part in European tournaments on many occasions, and they are associated with past legends of the game, including Alan Shearer, David Ginola and Rafa Benitez! In short, they are a huge historic club.

Why is there a problem with the Newcastle takeover?

Alongside Saudi Arabia’s human rights record, there is also a demand from Qatar’s beIN sports broadcasting network for the Premier League to block the Saudi takeover - the reason being the kingdom’s involvement in television piracy.

BeIN is the Premier League’s biggest overseas broadcaster and has paid £1.3bn for the screen rights of the Premier League since 2015. They argue that beoutQ (a piracy pay television broadcaster in Saudi Arabia) was streaming content owned by beIN Sports. This complicates things, as, according to a recent WTO judgment, beoutQ was promoted by Saudi government officials, and the network was also transmitted through satellites owned by a state-backed communications company, Arabsat.

The Premier League has the English Football Association’s “Owners and Directors’ Test” which prevents individuals owning clubs if they have committed an act in a foreign jurisdiction that would be considered a criminal offence in the U.K. Qatar’s winning of the WTO intellectual property case gives the Premier League a tough decision to make on whether the Newcastle United takeover can occur.

As Sophie Jordan, general counsel at beIN Media Group, has stated, “These are not allegations. This is a decision from one of the most important international tribunals.”

The real question is: Does it matter who owns Premier League clubs? I would argue a strong ‘yes,’ - in today’s society, top-level football has a host of role models for the younger generation. Therefore, instead of allowing power-hungry autocratic leaders into the Premier League, clubs should be attracting more admirable ones, such as Liverpool’s Fenway Sports Group - especially when Saudi Arabia are pirating our own football matches, that supporters in the U.K. cannot watch ourselves!

Thoughts to Consider

With Arsenal vs Tottenham being replaced with Qatar vs Saudi Arabia through lockdown, the Premier League circus has definitely continued. Like others, I do believe that this particular takeover bid will fail due to the “Owners and Directors’ Test” (which has seen more action than Arsenal’s trophy cabinet in recent years). However, I am sure that Ms Staveley and Prince Mohammed will not let this deter them. We should expect a new bid using a vehicle that cannot directly associate the Gulf State with the takeover and expect Newcastle United to rise the ranks of the Premier League in the not-too-distant future.

The current financial conditions of many clubs will certainly lead to a depressed transfer market. So, if the takeover does eventually go through, it would not be unheard of for a quick-fire sale, by which Newcastle can snap up attractive players for cheap – maybe even a striker to replace Andy Carroll?!

Finally, from a personal viewpoint, if any Gulf State leaders are reading this, Arsenal is a very, very attractive club to invest in!