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Leeds Owner Stalls on Explaining Team Sale, Exchange Says

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March 27 (Bloomberg) -- Bahrain’s stock exchange said the Gulf-based owner of Leeds United hasn’t explained conflicting statements made about a possible sale of the three-time English soccer champion.

Dubai-based GFH Capital, which bought Leeds less than four months ago, said on the club website last week it was seeking “investment in part of its share,” although not a full sale. GFH’s parent, Gulf Finance House EC, said in its 2012 financial statement released in February it was looking to sell the club within 12 months after securing it as a “bargain purchase.”

Gulf Finance House is listed on the Bahrain bourse. Under its regulations, companies are required to clarify any statements that contradict information released to the exchange.

Shaikha Al Zayani, an official in the bourse’s companies affairs department, said the exchange has been seeking clarification from Gulf Finance House’s compliance officer about the contradicting statements since last week, and called again today.

“He says the company has already disclosed its position in the financial report for the year so we requested to clarify the article on the website and we haven’t had a response,” Al Zayani said in a telephone interview. “Usually the companies give us a response immediately and take actions to amend if statements are wrong.”

Salem Patel, head of investment management at Gulf Finance House, said any enquiry should be referred to the Bahrain stock exchange when contacted by Bloomberg News on March 21.

‘Bargain Purchase’

GFH Capital said in a statement today that it “remains committed to retaining a substantial part of its investment in Leeds United Football Club. It’s always been a part of the group’s plan to bring on board a group of like-minded investors.” Leeds spokesman Paul Dews said he had no immediate comment on the exchange’s observations.

GFH Capital paid $33 million for the Yorkshire-based team and estimates that it’s worth $10 million more than that, Gulf Finance House said in its year-end statement. The parent company said it made a “bargain purchase” because of “pressure on the sellers to exit their holdings due to a change in their business plan.”

“The group has an active plan to sell its stake in LUFC Holdings Limited, and accordingly, the asset and liabilities acquired were classified as held-for-sale and presented in the consolidated statement of financial position,” the parent company said in its statement for the year ending Dec. 31, 2012. “Subsequent to the year end, the group has commenced negotiations relating to the sale of its stake.”

Financial Troubles

Leeds had success more than a decade ago, reaching the semifinals of Europe’s elite Champions League in 2001 and producing international players including Jonathan Woodgate, Harry Kewell and Alan Smith from its academy. The team stumbled into financial troubles by overspending on players, and slipped out of England’s Premier League in 2004. After falling into the third division and spending time in bankruptcy protection, Leeds now plays in the second-tier Championship. It’s 10th in the standings, seven points below the playoff positions for a spot in the Premier League.

Gulf Finance House is due to hold its annual meeting tomorrow and may provide shareholders with further information then, Al Zayani said. She said that not correcting misleading information is a breach of regulations for Bahrain-listed companies.

‘Right or Wrong’

“At least they need to tell us what is right or wrong,” she said. “They said it’s already defined in the annual statement.”

Gulf Finance House is “not following regulations defined by the central bank of Bahrain,” Al Zayani added. “They have to confirm, deny or correct whatever statement is declared to the public or to newspapers.”

In May, Gulf Finance House, which specializes in Islamic finance, obtained permission from creditors to restructure a $110 million debt. Its accounts showed profit of $10 million in 2012 on sales of $63.6 million.

To contact the reporter on this story: Tariq Panja in London at tpanja@bloomberg.net.

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net

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