West Ham Deal Has Broader Significance - 22/11/2006

The acquisition of West Ham by an Icelandic consortium has a broader significance for the future of Premiership football. With six clubs now in foreign ownership (if one includes Fulham), the sale of West Ham means that any club with a good support base and no immediate threat of relegation could attract a foreign bidder. The key to the deal is the expected £10m a year increase in television rights next season. Broadcasting income represented £28.1m of West Ham's £60.1m of turnover of last year. The club should be able to generate about £15m of profits a year even without the cup run that contributed significantly to £6m of profits last season. West Ham actually has a turnover of around £10m more than Aston Villa because they charge more for tickets. However, the East London club has far more competition in the London market, given that 'churn' among supporters is much greater than loyal fans are prepared to acknowledge. Villa is in a position to establish itself as the premier Midlands club.

Eggert Magnusson, chairman of the Icelandic FA, will replace Terrence Brown as chairman whose departure will not be greatly lamented by most supporters. However, the real power behind the throne is Bjorgólfur Gudmundsson, chairman of the Icelandic bank Landsbanki, who has a footballing background. He is chairman and a former player for KR, Iceland's oldest club, located in the capital Reykjavik (I have seen them play there against fishing port Grindavik). However, he has a past which might lead him not to be regarded as a 'fit and proper person' to run a football club. He was involved in a five year trial in which 450 counts of fraud and embezzlement were brought against executives of the collapsed shipping company Hafskip. He was eventually convicted on five charges relate to bookeeping and given a suspended sentence of twelve months' imprisonment. To be fair, Icelandic sources claim that he was maltreated because the charges against him were drummed up by politicians seeking to making political capital out of the affair. This is plausible as, for a cold country, Iceland can have remarkably heated politics. The emergence of such a small country as a world power in terms of foreign investment is an interesting story in itself.

The price of the deal is variously reported at £85m or £105m depending on how it is calculated. Upton Park is valued at £62m while the Chadwell Heath training facilities are worth another £6m. The sale was concluded when rival bidder Iranian-born Kia Joorabchian failed to come up with a deal, but he and his associates may still be in the market for other clubs. Eggert Magnússon has revived the possibility of moving to the Olympic Stadium, although whether politicians would want to see a publicly funded facility used in this way remains to be seen. In any event, Gudmunsson is no Abramovich, but rather a B list dollar billionaire with an estimated fortune of £520m. But for West Ham, that will do nicely. Now we have to wait and see which is the next club to move into foreign ownership. Newcastle and Liverpool are two likely candidates. More tangibly, Keith Harris from stockbrokers Seymour Pierce, who handled the West Ham sale and also the sales of Chelsea, Aston Villa and Southampton is reported to be lining up a deal for Cardiff City.