An example of some bad business in football: the 2016 takeover of Swansea City (Dinas Abertawe) by a group of U.S. investors led by Steve Kaplan, who owns a minority stake in the NBA’s Memphis Grizzlies, and Jason Levien, the co-chairman and CEO of MLS side D.C. United.
Swansea were nearing the end of their fifth consecutive
season in the Premier League when Kaplan and Levien bought a majority stake in
the Welsh club at a valuation of £110million. Unfortunately, they were relegated
to the Championship in 2018 and have haemorrhaged money in that division ever
since.
But now — for Kaplan and Levien, at least — the bleeding has
stopped, as they have sold their 65 per cent stake in Swansea to three
investors they first introduced to the club last year: Andy Coleman, Brett
Cravatt and Nigel Morris.
A shareholder at D.C. United, Coleman has been Swansea’s
chairman since May 2023, while private-equity firm boss Cravatt and
Welsh-American fintech entrepreneur Morris have been on the board for over a
year, too. Cravatt’s business partner Jason Cohen is joining the gang, too.
One of several rather disgruntled fellow investors sent The Athletic the email Kaplan and Levien
wrote to shareholders in Swansea Football Holdings, the club’s parent company,
explaining why they were selling up and the deal they had secured.
They reminded everyone how relegation had seen the club’s
income fall by 80 per cent, with parachute payments and wage cuts only
partially offsetting the pain. Their woes were compounded by the £30million
they wasted on transfer fees and three-year contracts for strikers Andre
Ayew and Wilfried Bony, in a failed attempt to avoid the drop, and the
impact of the pandemic.
There were two promotion play-offs appearances, including a
defeat by Brentford in the 2021 final, but once the parachute
payments stopped that summer it has been mid-table mediocrity and “substantial
operating losses”.
In 2023, after “years of exhaustive searches for
alternatives”, they brought in three new investor groups led by Coleman,
Cravatt and Morris, in return for an equity injection of over £40million, and
now, 18 months further on, “it is this group of investors who are purchasing
our interests and committing to make another significant investment in the
club”.
Before outlining the terms of the deal in an attachment to
the letter, “Jason and Steve” said they had “spent many sleepless nights over
the years” worrying about what to do, acknowledged “there are things we would
have done differently”, but assured everyone they had “forgone all management
fees owed to us since relegation”, before asking them to “take some solace in
that we never burdened you with a capital call”.
“This is an outstanding group of partners,” they added. “It
pains us that this investment did not work out financially.”
So, just how bad was it?
There are three parts to the deal.
The first is a commitment by the newish investors to fund
the club with a minimum of £20million in new equity. The second is a series of
share transactions that hand over control of Swansea City to Cohen, Coleman,
Cravatt and Morris for the grand total of $3,000, or £2,370.
And the last is an “inducement agreement” between the club,
on one side, and Kaplan, Levien and their investors, on the other, with the
latter receiving an additional £10million for every season Swansea spend in the
Premier League between now and May 2035, capped at a maximum of £40m.
Does that give investors a fair chance of getting some more
money back or is it just condemning them to another decade of dashed hopes? Dwi
ddim yn gwybod.
One of my granddaughters is now going to Swansea every weekend to see a new boy friend, so if he turns out to be a supporter, I may learn more.
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