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Who is taking over Newcastle United?
A consortium of PIF, PCP Capital Partners and RB Sports & Media are taking over the Premier League club from the British billionaire Mike Ashley. Saudi Arabia’s Public Investment Fund (PIF) is expected to hold 80% of the shares. The PIF is a sovereign wealth fund that since the early 1970s has taken the bulk of Saudi Arabia’s savings from the sale of oil. It is worth about $430bn (£315bn), underscoring how little the £300m initial cost of its foray into Premier League football will figure on its balance sheet. Yasir Al-Rumayyan, the governor of PIF, becomes nonexecutive chairman of Newcastle United. PCP Capital Partners is a “boutique international private equity firm” founded by the British financier Amanda Staveley, who will have a seat on the Newcastle board. RB Sports & Media is part of Reuben Brothers, a British private equity and property firm owned by billionaire investors. Jamie Reuben, the son of David Reuben, will also sit on the board.
What is a sovereign wealth fund?
Most emerging countries with large fossil fuel exports have a sovereign wealth fund of some kind. Many of them spread the risk of their investments by buying assets in developed countries where legal rules protect them from arbitrary changes to property rights. The Norwegian Bank Investment Fund is the largest of its kind with around $1.3tn of assets, followed by the China Investment Corporation, worth $1.2tn, and the $830bn Abu Dhabi Investment Authority.
What else has PIF invested in?
PIF has also invested in the newly created industrial cities springing up across Saudi Arabia that are at the centre of Vision 2030, the Saudi de facto ruler Crown Prince Mohammed bin Salman’s plan to wean the economy off a dependency on oil. The US is the biggest recipient of PIF funds. During a visit to Saudi Arabia in 2017 by Donald Trump, PIF announced that it would be spending $40bn on infrastructure projects in the US. In 2020, PIF disclosed a stake in Boeing worth more than $700m, a $522m investment in the bank Citigroup and a $522m stake in Facebook, among many other investments in major US corporations.
How was this allowed to happen?
There is nothing in the Premier League’s rules to stop PIF from buying Newcastle. There is, notoriously, no clause in the league’s “owners and directors test” that applies any moral or political focus to a buyer’s suitability. The bid had been rejected because the Premier League believed the Saudi Arabian state to be a major supporter of online piracy of the league’s TV broadcasts and had named Saudi Arabia on a list of pirates submitted to the US government. It also believed that the Saudi state was in control of PIF. It now no longer believes either of these things.
The Premier League says it has “now received legally binding assurances that the Kingdom of Saudi Arabia will not control Newcastle United Football Club”. Just this week legal arbitration over the precise connection between PIF and the Saudi state had been expected in the new year, but those proceedings have now been dropped. The Saudi government this week also agreed to lift a ban on the Qatari broadcaster beIN Sports in their country. BeIN is a major Premier League TV rights holder, last year committing to a reported $500m deal to broadcast matches in the Gulf and north Africa. An online pirate network, BeoutQ, thought to be run by the Saudis, has also stopped operating.
How transformative will this be for Newcastle?
At this stage it is hard to quantify quite how great the change will be, but it is possible to argue Newcastle now have at least the potential to become the biggest club in the world. Already in possession of a large fanbase and a recognisable brand, a takeover by the richest owners in world football make their horizons limitless. The change will be a process, however, in part because of regulations around how much money a club can spend, such as FFP.
What is FFP?
It’s the abbreviation for financial fair play, a set of rules created by European football’s governing body, Uefa, to stop its leading clubs from accruing unsustainable losses. While they apply only to clubs playing in European competitions, such as the Champions League, the Premier League has adopted its own variant to enable their clubs to stay compliant. Known as “profit and sustainability” rules, they set limits on how much money a club can lose over a set period of time.
What are those limits?
Before the pandemic, each Premier League club was allowed to lose a total of £105m over three seasons. Over the last two seasons greater losses have been allowed, with debts generated because of Covid taken off the total. Expenditure on youth development, community and women’s football can also be deducted. Under FFP clubs can lose only £5m each season, but losses of up to £30m over a three-year period are allowed if they are covered by payments by the club’s owner.
Will the new owners be able to sign star players immediately?
Yes, thanks to Mike Ashley. Ironically, the outgoing owner’s reluctance to spend much money meant the club turned a £35m profit between 2018 and 2020, with a loss of £26m in 2019-20 which would actually be a profit of £1m without Covid. Those totals, put together with the next three years of profit and sustainability allowances, mean the club could realistically spend more than £150m in the next year on new stars, hastening the transformation of the club.