Big Italian match is off

Hopes fade for continental football clubs aiming to float on the London Stock Exchange

Prospects of all but a minority of Italian football clubs listing their shares on the London Stock Exchange are seen as increasingly remote by bankers and investors watching the rapid developments of the past fortnight.

Commercial and legal obstacles may also stop moves by some top British clubs if they want to create ties with the continental elite by taking cross-shareholdings in each other.

Prospects for Lazio, the Rome club, obtaining a listing may have been permanently derailed last week when Consob, the Italian stock market watchdog, launched an investigation into the club.

Fiorentina, of Florence, and Juventus, one of the powerhouses of Italian football, are also said to be seeking a London quotation.

Consob has prepared a list of 22 questions for Lazio, asking if some minority shareholders were at a disadvantage when the club was sold in an intra-company transaction two weeks ago by Cragnotti & Partners, the London-based investment boutique, to Cirio, a canned food concern. The deal was worth 85.9bn lire (pounds 33m) for an 89.7 per cent stake in the club.

Christian Purslow, head of European media practice at the US investment bank Salomon Brothers, questioned the likelihood of any more than a handful of top European football clubs listing in London.

"Overseas clubs should only contemplate listing in London if they are of a sufficient scale to justify the additional difficulties of going down that route, rather than using their domestic market."

It is believed Salomon has been awarded the mandate to prepare Juventus for flotation. The club is controlled by the wealthy Agnelli family, which owns the Fiat car company.

One of the main difficulties is that football offers in the UK have shown the vital impact of retail demand - much of it from the fans - in creating a successful offer. It would, said Mr Purslow, be hard for an Italian listing in London to tap into its natural fan base in Italy, for a deal in sterling.

The interest from Italian clubs has been driven by two factors. First, companies wishing to float in Italy must show an unbroken record of profits for the past three years. However, a report from McKinsey, the US management consultant, shows that none of the Italian clubs have achieved this. AC Milan, one of the top Italian clubs, has produced some unimpressive financial results. Losses in 1994-95 were L32bn, falling to L21bn last year.

Nor is Italy reaping the financial benefits from subscription TV, which has boosted the Premier League clubs' income from their deal with BSkyB by pounds 670m over the next four years, from the start of the 1997 season.

Italian clubs have seen subscription rights for live Serie A fixtures sold to Telepiu for a mere $73m, over four years. The service has 800,000 subscribers.

The second motivation is the desire to be in a group of internationally ranked football clubs, whose shares are all traded in London. The City is the only stock market in the world where soccer shares are traded, and could become home to a super league of quoted clubs. The investment expertise for rating different clubs already exists, and two football investment funds have been launched to capitalise on the recent excitement. Paris St Germain, the French club owned by TV channel Canal +, has even had telephone calls from London fund managers asking it to float.

However, the prospect for cross-shareholdings may have to remain a gleam in the eye of corporate financiers.

"It is one of those beguilingly logical ideas that doesn't stack up," said Mr Purslow. He added that UK clubs already have their hands full managing day-to-day affairs, and only Manchester United may have the professional expertise to consider a European tie-up.

q Heart of Midlothian is the latest club to seek a Stock Exchange listing. It is placing pounds 5m to pounds 6m of new shares. The funds will be used in part to build a new 3,500-seater Gorgie Road End stand which will be ready for the start of the 1997-98 season, increasing the Tynecastle stadium's capacity to around 18,500. Hearts also intends to install undersoil heating, but the board says it does not intend to use any of the proceeds to acquire players.