Football: Newcastle United takeover by a Consortium involving Saudi Arabia Sovereign Wealth Fund
By Jonathan Copping, Lawyer, Stone King, London, UK
On 7 October 2021, Newcastle United FC was purchased by a consortium for a reported £305 million.
The purchase delighted the supporters of Newcastle, as it brought to an end the 14-year ownership of Mike Ashley, an individual who was unanimously despised by the supporters, due to his perceived lack of ambition for and investment in the club.
The purchase by a consortium is not in itself surprising in football; however, the consortium involved in the takeover of Newcastle was different. The majority purchaser, with an 80% stake in the ownership, is the Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia.
The involvement of the PIF has caused severe criticism by human rights’ groups, who believe that the PIF has invested in Newcastle United, in order to ‘sportswash’ its image and reputation.
It is reported that the PIF owns the planes that transported the individuals involved in the heinous murder of exiled Saudi journalist, Jamal Khashoggi, to and from Turkey. Further, US Intelligence Agencies have concluded that the Saudi Crown Prince, Mohammad Bin Salman, approved the murder of Jamal Khashoggi. The Crown Prince is the Chair of the PIF and has denied any involvement in the Khashoggi affair.
The consortium that has purchased Newcastle United also consists of PCP Capital Partners, who own 10%, and the Reuben Brothers (RB Sports & Media), who also own 10%. The involvement of the PIF in the takeover has been controversial from the beginning.
In the Summer of 2020, the English Premier League blocked the takeover. This led to Newcastle’s then owner, Mike Ashley, via St James Holdings Limited, to issue legal proceedings against the League. Those proceedings took the form of arbitration proceedings, meaning that they proceeded in private. Separately, Mike Ashley, again via St James Holdings Limited, commenced proceedings in the UK Competition Appeal Tribunal.
The Competition Appeal Tribunal hearing took place at the end of September 2021. The claim by St James Holdings Limited was that the prevention and/or delay of the proposed takeover was liable to and did distort and/or restrict competition between Premier League clubs, which, in turn, infringed Article 101 of the Treaty on the Functioning of the European Union (TFEU) and/or the Chapter I prohibition and/or Article 102 TFEU and/or the Chapter II prohibition.
The takeover of Newcastle was completed before the Competition Appeal Tribunal handed down its judgment. The arbitration hearing, scheduled to commence in January 2022, is now unnecessary.
News broke on 6 October 2021 that the takeover was imminent. The news came somewhat unexpectedly and resulted in significant movement by the Premier League. On 7 October, the Premier League released a very short statement as follows:
“The Premier League, Newcastle United Football Club and St James Holdings Limited have today settled the dispute over the takeover of the club by the consortium of PIF, PCP Capital Partners and RB Sports & Media.
Following the completion of the Premier League's Owners' and Directors' Test, the club has been sold to the consortium with immediate effect.
The legal disputes concerned which entities would own and/or have the ability to control the club following the takeover.
All parties have agreed the settlement is necessary to end the long uncertainty for fans over the club’s ownership.
The Premier League has now received legally binding assurances that the Kingdom of Saudi Arabia will not control Newcastle United Football Club.
All parties are pleased to have concluded this process which gives certainty and clarity to Newcastle United Football Club and their fans.”
In response to the news, a number of other Premier League clubs criticised the Premier League for its decision and also what they believed to be a failure to keep them informed of the developments.
It should be noted that one of the allegations that came out of the Competition Appeal Tribunal is that other Premier League clubs requested that the Premier League block the takeover. Whilst the other clubs might claim that the image of the Premier League is damaged if Newcastle is owned in part by a sovereign wealth fund of a country that has a bad human rights record (and in relation to this point, there may be some truth behind it) one must also consider that the other Premier League clubs are concerned that the takeover of Newcastle will hamper their own ambitions.
The sums that the PIF has at its disposal, dwarf the resources of the owners of any of the other Premier League clubs. If the PIF decides to flex its financial resources to its full extent, it could see Newcastle United become the next Manchester City, whose fortunes on the pitch took a significant upturn when it was purchased by the Abu Dhabi United Group for Development and Investment, a private equity company owned by Sheikh Mansour bin Zayed Al Nahyan, a member of the Abu Dhabi Royal Family.
Whilst the PIF has managed to persuade the Premier League that the Kingdom of Saudi Arabia will not have control of Newcastle United, which ultimately led the way to the takeover being approved, in addition to the resolution of the broadcasting dispute between Saudi Arabia and BEIN Sports, a Qatari company that holds the rights to broadcast the Premier League matches, but which Saudi Arabia had banned from broadcasting in the Kingdom, the takeover raises concerns regarding the direction in which the Premier League is heading.
Newcastle United has been available for sale for a number of years. Whilst it is known that other parties have been interested over the years, the fact that the sale of Newcastle United has ultimately gone to a sovereign wealth fund of a country with a bad human rights record, tends to suggest that finance trumps ethics in football!
Jonathan Copping may be contacted by e-mail at ‘
