US hedge fund targets Hall's Newcastle stake

Click to follow
The Independent Online

The former chairman of Newcastle United is being wooed for his controlling stake in the quoted football club, with the hedge fund Polygon among the potential buyers.

Sir John Hall, whose family paid £3m to acquire the club in 1993, admitted yesterday he had received "expressions of interest" for his stake. Shares in Newcastle United leapt 15 per cent to 54p, valuing the club at £72m.

Sir John's family controls 28.8 per cent of Newcastle United through a Guernsey-based company called Wynyard. They floated the club in early 1997 at 135p per share. The shares have been as depressed as most of the quoted football sector, peaking at 137p but languishing for the most part below 45p.

In addition to Sir John's stake, his son Douglas is connected to interests that speak for a further 13 per cent of the stock. The club's chairman, Freddy Shepherd, owns another 27 per cent stake.

Polygon, the US hedge fund that has held the boards of British Energy and Monsoon to account in the past, has been running its slide rule over the football club with the help of UBS. It is thought the odds of it making a move have lengthened in recent days.

In the past, the City has expressed concern about the Hall family's level of influence on corporate matters, particularly given the revolving boardroom door in the years after its flotation.

There has been a rash of football club takeovers in recent years, sparked by Roman Abramovich's move on Chelsea in 2003. Of the 20 Premiership clubs, just seven have their shares listed. Last May, Malcolm Glazer controversially paid £790m for Manchester United. Polygon may have been spurred on by that deal to cast its eye over Newcastle: the hedge funds Och-Ziff Capital Management, Perry Capital and Citadel all invested alongside the US sports tycoon.

Fans of investing in football clubs believe the steady stream of income from season ticket holders and broadcasters provides solid cash flow for investors. Newcastle United sells about 45,000 season tickets each year, providing a stable earnings stream.

The main downside is the amount football clubs splash out on new players. Newcastle United paid £16m for the England striker Michael Owen in August. For the six months to 31 January, it sunk to a £6.3m loss from a £7.3m pre-tax profit the previous year.

Sir John also used to own Newcastle Falcons, the rugby union club, but sold it in 1999 for a nominal sum.