Newcastle United looks to score pounds 50m from float

Newcastle United asked the City to pay for its pounds 50m five-year spending spree yesterday, announcing a stock market flotation that will value the football club at between pounds 172m and pounds 193m. The float, which will raise pounds 47.4m of new funds for the club, at least 10 per cent from the private investors who are currently flocking to invest in football clubs, has already been a bonanza for the company's directors.

Newcastle's prospectus showed the company's two joint chief executives and its finance director have shared more than pounds 1m in one-off payments "in recognition of the part they have played in the recent development of Newcastle United".

Freddie Fletcher, the former commercial director of Glasgow Rangers and chief executive for the past five years, received pounds 750,000 from Newcastle's major shareholder, North-east property magnate Sir John Hall.

Mark Corbridge, the 33-year-old former Rothschild banker who is now joint chief executive, pocketed pounds 300,000 despite being with the club for less than a year. Jo Dixon, finance director, was paid pounds 100,000.

The directors are also to be paid guaranteed bonuses regardless of the performance of the club or company. Both chief executives will be paid basic salaries of pounds 160,000, but have a bonus worth between 50 and 100 per cent of that figure written into their contracts.

Sir Terence Harrison, the former Rolls-Royce chief executive who was named as Newcastle's non-executive chairman yesterday, said the proceeds of the float would be used to pay off pounds 21m of debt. A further pounds 12m has been set aside to fund future instalments on players already acquired and pounds 10m to set up a youth academy.

Since 1991, when by the company's own admission the club was in "dire straits both on and off the park", it has spent heavily on rebuilding the North-east's sleeping giant, most famously last year with the pounds 15m acquisition of Alan Shearer, the England striker. From beneath the spectre of relegation to the old Third Division, Newcastle's recovery, funded out of the deep pockets of Sir John, brought it within a whisker of winning the Premiership last season.

The company said yesterday the funds would not be used for a proposed new stadium, for which it is seeking planning permission. It did, however, put a price tag on the development of the stand, and the conversion of the existing St James's Park site into an indoor arena, of pounds 90m. No details of where that money would come from were given.

The heavy costs of building and maintaining a top squad was spelled out in yesterday's prospectus. Newcastle made pounds 29m from its four main income streams of gate receipts, television fees, sponsorship and the sale of branded products in the year to July last year. But that turnover was wiped out by operating expenses, mainly players' salaries, of pounds 23.1m and transfer fees worth a massive pounds 29.9m. That resulted in an operating loss of pounds 24m and brought the aggregate operating loss for the past five years to pounds 37.9m.

Mr Fletcher disputed the claim that investors might be concerned by the abrupt departure from his two previous jobs of Newcastle's manager, Kenny Dalglish, who took over recently from Kevin Keegan. He attempted to reassure potential investors by saying Dalglish had signed a three-and-a-half year contract and would be in receipt of unspecified share options. No players are to get options.

According to yesterday's prospectus, 40 million Newcastle shares will be issued at between 120p and 135p each to raise pounds 51m before expenses. Assuming a price in the middle of that range the shares are being sold at 22.4 times earnings per share, as adjusted for transfer fees and other exceptional items. The company said it would have paid a dividend of 1.6p a share had it been listed for the whole of the year to July 1997.

The retail offer closes on 20 March.The institutional book-building process ends the following day with pricing to be announced on 4 March and dealing due to start on 2 April.

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