It is the first anniversary of Saudi Arabia’s Public Investment Fund’s (PIF) takeover of Newcastle United FC in a GBP300 million and it is planning to turn it into a GBP3 billion super-club.
Newcastle’s performance is not merely of interest to football fans, but the whole sovereign investor universe, which seeks yield in sport and leisure sectors through long-term investment.
PIF have won the hearts of much of the “Toon Army” followers of the Tyneside club, following the unpopular ownership of Sports Direct boss Mike Ashley. The Saudi fund has turned Newcastle from being also-rans in the English Premier League to potential future winners on the back of the patient capital of a sovereign wealth fund. Ticket sales are up, the mood is lifted and under PIF there is a sense of hope, under a new management team. After Steve Bruce was replaced as manager by Eddie Howe, the club soared from the relegation zone to seventh in the league.
PIF has spent a further GBP210 million on eight new players with more to come in the January transfer window as the club rebuilds. The question is, how deep will the Saudis go to bolster Newcastle? The new Saudia airline, being established under PIF, would be an ideal sponsorship partner for Newcastle, providing tens of millions that would allow bigger spending on transfers and wages. Noon, a Gulf-based, PIF-backed online retailer, became one of the team’s shirt sponsors in June.
United’s turnover is currently around GBP170 million compared to the top four who exceed GBP400 million and income usually reflects league position. So, it could be many seasons before the club will enter the elite and perhaps a decade before it stands a chance of winning a title, which would add massive value to the asset.
PIF had been approached to buy up other clubs before the Newcastle acquisition. Yasir Al-Rumayyan, the governor of PIF and Newcastle’s chairman, explained that the fund was previously offered a stake in another Premier League – believed to be Manchester United.
He said: “Football, of course, is one of the most important sports there is. Whether domestically (in Saudi) or abroad. It’s the number one sport in the world. And why the English Premier League? Because it’s the best league in the world. No other league competes with it.
“There are 20 teams, three are relegated and three are promoted. The advantage of the Premier League is that any of the 20 teams can beat the best team in the league. When we looked at it, we looked at it form a financial perspective. By the way, it wasn’t the first offer we got regarding a football team. We looked in Italy, France and the UK as well.
“For example, in the UK there was a team that approached us on the basis that we take 30% of the ownership, and we don’t interfere at all in terms of managing the club, for GBP700 million.”
Instead, PIF bought 80% of the club, in partnership with others, and full control. As an SWF, PIF’s priority is return. Al-Rumayyan suggested he hoped PIF could grow Newcastle’s value exponentially. He said, “You can see Chelsea was sold for US$3.5 billion. So, my potential now is to go from GBP350 million to at least US$3.5 billion.”
Yet, Newcastle is just a small part of PIF’s efforts in sport, which include hundreds of millions on their LIV golf series. The fund has also committed SAR8.75 billion (US$2.3 billion) in new long-term football sponsorship deals this year, mostly to domestic football. Much of the spending surge is due to a series of 20-year commercial partnerships between investee companies Qiddiya and Jeddah Central, as well as several domestic football clubs.
Qiddiya Investment Company (QIC) has signed two landmark deals with Al-Nasr FC and Al-Hilal Saudi FC worth a total of SAR100 million (US$26 million) per year per club over 2022-2042, with the possibility of a review every five years. Meanwhile, Roshn, a real estate firm owned by PIF, has a five-year agreement to sponsor the Saudi Football League. PIF’s Central Jeddah Development Company has also concluded two strategic cooperation agreements with Al-Ittihad and Al-Ahli clubs under the same terms.