Leeds United Ownership Sells 10% Stake 4 Months After Purchasing The Club

Gulf Finance House Capital (GFHC), the owners of the storied English football club Leeds United, sold 10% of its stake in the team to another Bahraini based financial house, International Investment Bank (IIB). GFHC purchased Leeds from parent company Leeds City Holdings Limited for £52 million just 4 months ago in December of 2012.

If one were to look into IIB’s holdings portfolio on its website, they’d find a list that included real estate, insurance, and other investment firms – but no football clubs. This purchase might suggest IIB wants to broaden its portfolio and expand into new markets. The Guardian reports that IIB was not exempt from financial struggles in recent years following the global economic downturn. The company’s fund reported only £1.98 million in income for 2010-11, and IIB suffered a loss of £9 million. This followed a £28 million loss in 2009 (click here for the full article).

Given the financial struggles of IIB over the last few years, and the company’s lack of experience in the world of football, one must ask the question: why Leeds United? And, why now? Very few financial details about the sale of the 10% stake in the Championship club were announced, leaving much of the deal open for question – including the price IIB paid for its share.

To further add to the turmoil surrounding this deal, Gulf Finance House (GFH), GFHC’s parent company, is sending conflicting messages about its intentions as Leeds’ owner. GFH, according to multiple sources, has stated that the intent behind GHFC’s initial purchase of Leeds was to “flip” the club and sell it for a profit within a year. GFHC Deputy Chief Executive, Daivid Haigh, was quoted in an article by The Guardian saying that their strategy is to sell several minority stakes to build a “consortium of like-minded investors”, which he believes will provide a sound financial ownership structure for the Club’s future success. In other words, Haigh is saying that GFHC is going to be around for the foreseeable future – quite the contrary to what GFH has stated. The Bahraini stock exchange, on which GFH sits, has not yet clarified which statement is accurate regarding the future of GFHC as the majority owner at Leeds United FC.

As with any two sided scenario, there are pros and cons that come with each. On the one hand, a single driving voice of leadership coming from the front office provides continuity and consistency for a club that has seen three different changes in its ownership structure in almost as many months. But, if the Arab Spring truly has left many Bahraini based firms in financial uncertainty, this leaves an already financially struggling Leeds with a struggling ownership. On the other hand, a “consortium of like-minded” companies would deepen the Club’s pockets, opening more doors for future player purchases and the like, bolstering the teams hopes for a push into the Premiere League. But, with more heads at the table, comes more opinions to be thrown into the mix.

This financial mystery comes at a time when Leeds could use some stability in that arena. The once Elite club has struggled in recent years, both on and off the pitch. The three-time English Champions were relegated out of the Premiere League in 2004, and dropped to the third tier not long after. Leeds struggled financially after overspending on underperforming players, and even spent time in bankruptcy protection. They now sit in 10th position in the English Championship, and are seven points out of playoff contention for a spot in the Premiere League. If they hope to return to the top flight of British football, they need an ownership capable of funding the charge.

Reporting on the business side of the world's game.