Margareta Pagano: Going mutual paid off at Spain's top football clubs

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The Independent Online

It's not just the brilliance of the footballers at Real Madrid and Barcelona that British clubs should be looking to for inspiration but the way the Spanish teams are run. Both are mutual organisations, owned by their supporters who are responsible for electing management.

Each club has 100,000 members who pay €80 (£70) a year on top of their tickets. Neither has to worry about paying dividends so all the profit is ploughed back into the business. Nor can either of the clubs be taken over by foreign predators, or domestic ones for that matter, thus giving management security to plan for the longer-term.

It's no accident that these clubs are the richest in the world, as well as being rather good at the beautiful game. Figures out last week show that Real Madrid topped Deloitte's Football Money League survey last season for the fifth year running, with revenues of €400m. No wonder Real could afford to splash out so much buying superb players such as Kaka (€65m) and Ronaldo (€80m). Just to depress his rivals even more, Madrid's president, Florentino Perez, who has just returned for another term, is planning on spending another €400m or so for "on-pitch" performance this year.

At Barcelona, the story is even more stunning. It recorded the most successful season in the club's history last year, pushing revenues up by 18 per cent and beating Manchester United into third place for the first time, partly due to the strength of the euro. Even so, the Catalan club has doubled its revenues over the past five years, the biggest absolute revenue growth of any of the Money League's top 20 teams, and notched up over €100m from each of its three sources of income. Both clubs share another advantage; they take a much bigger slice of their broadcasting rights than their European rivals.

Contrast this with the pitiful state of UK football. Here our clubs are falling over like goalies – Portsmouth is in adminstration; Darlington, Crystal Palace, Cardiff City and many others are in deep financial trouble, while Karren Brady's team at West Ham has enormous debts to pay-off and costs to rip-out before the club can return to profit. Even clubs such as Chelsea, Manchester City and Liverpool are only on side courtesy of wealthy foreign benefactors.

Every manner of ownership has been tried; stock exchange listing doesn't work, while privately funded takeovers, such as the Glazers' purchase of Old Trafford, are fraught with difficulties. Now Man United, which for many years beat both the Spanish clubs in profit as well as prowess, is caught in another unseemly spat between its owners and disgruntled supporters. Behind the latest ding-dong is a Goldman Sachs economist, Jim O'Neill, whose rebel Red Knights argue that the Glazer family has borrowed so much – around £700 m – that it is destroying the business.

He's right, and it's a problem shared by most UK clubs; costs far outweighing revenues, money spent extravagantly – but not always sensibly – on young players while new revenue streams have not been exploited.

You can see how the Spanish model works so well. Having fans and supporters as members provides managers with a loyal base; not having rich rescuers concentrates their minds on the bottom line. The 100,000 Red Devil fans who have signed up to protest the Glazer regime should, even without the Red Knights, be looking to Real and Barca to see how they could take control of the game.

No foundation Nestlé wants L'Oréal – and other made-up tales

Shares in L'Oréal soared on chatter that Nestlé is ready to swoop on the French cosmetics group, which has been underperforming the market for some time. The Swiss food giant already owns 30 per cent of L'Oréal but has an agreement with its principal shareholder, Liliane Bettencourt, that it will not increase its stake or bid until after her death. But all the analysts I spoke to said the rumours that L'Oréal was trying to renegotiate the deal with Bettencourt, daughter of founder Eugene Schueller, to allow it to bid are wishful thinking. Another story says Nestlé could be getting ready to sell its shares next month, also part of the Bettencourt agreement. The shrewd Swiss are unlikely to be doing this either – Nestlé doesn't need the cash and apparently likes the beauty link, even though L'Oréal has focused too much on earnings growth, letting research investment slip. But Nestlé's shareholders would not be happy if it were to splash out; because, they think, L'Oréal is not worth it.

Thiam has much work to do if he's to win over Pru's shocked shareholders

Tidjane Thiam of the Pru doesn't hang around. He's already made history as the first black chief of a FTSE 100 company, and now he's making his second claim to fame by launching one of the UK's biggest corporate deals with his $35bn plan to buy AIG's Asian insurance business, and the country's largest cash-call with a $20bn rights issue.

No wonder the Prudential's shareholders are in a state of shock, sending shares crashing more than 20 per cent since the news, and prompting fears that the bid might make the Pru itself vulnerable to takeover.

Shareholders are criticising the deal for two reasons; some are worried that the Pru is putting too many eggs in one Eastern basket, a market which is notoriously protectionist and which likes to do business by joint venture, while others express fear over the sheer scale of the cash-call. You only have to look back to see how the Chinese, and other Asian governments, can take a tricky attitude towards Western expansion. AIG itself has been at the mercy of China's volatile political regimes before. The insurance agency was started by an American, Cornelius Vander Starr, in 1919 in Shanghai; he was the first Westerner to sell insurance to the Chinese. But he and AIG were forced to flee China in early 1949 as Mao Zedong led the advance of the People's Liberation Army on Shanghai.

China, and AIG's other markets, have a far more open door today, and are unlikely to force another retreat. But I suspect the bigger fear is one of dilution. It's such a long time since shareholders have been asked to stump up so much new capital to fund a deal that they have forgotten how to make such a long-term decision.

Clearly, the onus is on Mr Thiam to persuade them that this deal is in their best interests; even if it takes decades to make real returns, which seems likely. But I'm sure he will; the history books have yet to be written.

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