Bahrain-based International Investment Bank plans to sell the stake it acquired in Leeds United last week once the value of the three-time English soccer champion rises, its chief executive officer said.
IIB bought the 10 percent stake for an undisclosed amount from Leeds’s Gulf-based owner GFH Capital, which is a subsidiary of Gulf Finance House, another Bahrain-headquartered company.
“I believe this stake has a great potential in terms of capital appreciation,” Abed al-Zeera, IIB’s chief executive officer, said in an interview in Manama, Bahrain. “Maybe not this year or next but surely over the medium term it will grow in value.”
Leeds, whose most recent league title came in 1992, is 12th in the second-tier Championship, five points above the relegation zone. Manager Neil Warnock quit earlier this week.
When it announced the share sale, GFH Capital said bringing IIB into the ownership group was part of a move in a long-term strategy targeting “strategic investors.”
The sale followed speculation over the future ownership of the club after conflicting statements from GFH Capital and its parent company over whether it would be sold. David Haigh, deputy chief executive officer of GFH Capital, told the club website last week that “the introduction of IIB is in keeping with what have always been GFH Capital’s aims for the successful, sustainable and long-term ownership of Leeds United FC.”
Leeds said other investors are expected to join as Dubai-based GFH Capital creates an ownership structure to provide “sound long-term finance” for a return to the Premier League, where television income per club will top 60 million pounds ($91 million) from next season.
Earlier this week GFH Capital’s parent company responded to a request from Bahrain’s stock exchange to clarify its plans for Leeds. It said in its annual report in February, two months after buying Leeds for $33 million, that it planned to sell the team within 12 months after describing it as a “bargain purchase.” The exchange said it asked for the clarification following a request from Bloomberg News.
In a letter dated April 1 to the Bahrain bourse’s head of trading and member affairs, GFH said any sale of Leeds stock or any of the parent company’s other investments fall within normal investment banking activities and “can’t be interpreted as a sign of a weak financial position.” It didn’t explain the difference between the statements of GFH Capital and Gulf Finance House.
In its annual report for 2012, GFH booked a $10.4 million one-time gain on acquiring Leeds even though it hadn’t yet sold the team. Without that income GFH’s annual profit of $10 million in 2012 would have been wiped out. In May 2012, GFH, which specializes in Islamic finance, obtained permission from creditors to restructure a $110 million debt.
Also on April 1, the Bahrain exchange issued a statement announcing the canceling of a trade executed on March 26 for the purchase of 35,000,000 GFH shares at $0.135 per share. The exchange said the action had been taken because of “ confirmation that the said shares are disputed and fall within the ambit of Bahrain Chamber for Dispute Resolution decision in Suit number 5/2013.” No further details were provided.
Warnock left the club two days ago following a home defeat to Derby County. Leeds had success more than a decade ago, reaching the semifinals of Europe’s elite Champions League in 2001. The team stumbled into financial crisis by overspending on players, and dropped out of the Premier League in 2004, at one stage falling to the third division.