Granada Media to take 5% stake in Arsenal as part of £47m deal

Granada Media yesterday agreed to buy a 5 per cent interest in Arsenal Football Club as part of a £47m deal that values the north London team at around £400m - second only to Manchester United.

Granada Media yesterday agreed to buy a 5 per cent interest in Arsenal Football Club as part of a £47m deal that values the north London team at around £400m - second only to Manchester United.

Arsenal is to use the funds to help finance a proposed60,000-seat stadium. Granada has an option to buy a further 4.9 per cent stake in the club for £30m once planning permission to build the facility, expected early in 2001, is received.

About £20m of the consideration is targeted for a joint venture called AFC Broadband. This will seek to exploit the club'smedia rights in delayed match coverage and internet opportunities. A revamped website,arsenal.com, is also to be launched. Steve Morrison, Granada Media chief executive, said: "We have bought into a very successful growing concern ... We have quite an advanced strength in broadband and that crystallised with their own plans."

Granada's deal includes around £7m-£8m for investment in other commercial services. These are related to merchandising and promotional opportunities at home and abroad.

Arsenal reported pre-tax profits of £21.2m on sales of £60m for the year to June 1999. Arch-rival Manchester United, which has a market capitalisation of £760m, earned £22.5m in fiscal 1999 on sales of £111m.

The deal solidifies Arsenal's position as England's second biggest club. Chelsea Village, which owns Chelsea FC, has a market capitalisation of £103m.

The deal with the north London club follows Granada's agreement last year of a media rights and services pact with Liverpool FC. Granada also secured a 9.9 per cent shareholding in the Merseyside club.

Arsenal shares spiked up £500 to £4,000 on the unofficial Ofex market. This values the club at about £250m; in line with other media investments in football clubs Granada had to pay a substantial premium to secure its stake.