The Liverpool reign of US “entrepreneurs” George Gillett Junior and Thomas O. Hicks has been full of oddball news stories from the two warring co-owners’ busy PR departments. But none were stranger than last week’s space-filler about Liverpool’s (latest) sale process. Had the papers waited a day, they’d have had their story. Kop Football’s accounts were published and, as last year, had “material uncertainties” written all over them, as well as a genuine revelation that the banks wanted their loans repaid two months ago, rather than in two months’ time, as most commentators had assumed. Instead, the papers took the following quote from an interview Hicks gave America’s Sports Business Journal: “We’ve owned it (Liverpool) three years, we won’t own it in five,” and translated it as “Hicks says Liverpool sale may take two years,” thereby apparently crushing hopes that the Texan would soon be on his way.
At first glance, the headline and “story” plainly didn’t match, in the style of the Daily Mail’s countless “asylum-seekers on benefits” stories over the years. Hicks must surely have said something else which, alongside the quote, would have justified the (Times) headline. Well, he didn’t. But perusal of the whole interview shows that he did say enough to justify plenty of other headlines. Two paragraphs above the quotes used by the UK press, the article’s author, Bruce Schoenfeld (“a writer in Colorado”) states: “His exit strategy (will) almost certainly involve selling all three entities over the coming months,” referring to the topic of the piece, Hicks’ need to sell his baseball and ice hockey teams…and Liverpool. And then there’s Schoenfeld’s summary of Hicks’ Liverpool tenure, which you would be advised to read only if seated, and certainly not as you are about to take a mouthful of tea or coffee.
It is the sort of in-depth article rarely seen in the UK. Newspapers, even supplements such as Observer Sports Monthly, rarely have the time, resources or space between the adverts to run pieces of this length. It is our loss. What starts out in hagiographical fashion quickly becomes a sharp analysis of Hicks’ ultimate failure as a sports owner, which is the reason he is selling up and having to do so in rather less than two years. Hicks is even more the “businessman-not-sportsman” that his UK critics (i.e. everybody) have always believed him to be. But two others aspects of the article will disturb Liverpool fans and former owner David Moores. Firstly, Schoenfeld pinpoints 1999 as the peak of Hicks’ business career and his success in sports ownership… SEVEN… AND… A… HALF…YEARS before he rocked up at Anfield.
It’s been pretty much downhill all the way since in both fields, long before any global economic downturn (nee credit crunch), and now Hicks needs to sell Liverpool, baseball’s Texas Rangers, and (ice) hockey’s Dallas Stars. His modestly-entitled Hicks Sports Group is in a financial mess. The spin, picked up on by much of the UK press, was that the group defaulted on $525m in bank loans last year in a strategic move to wake the banks up, for reasons which the PR-releases neglected to fully explain. Schoenfeld offers the real reason: “(The default) last season forced an embarrassed Major League Baseball (MLB) to meet the Rangers’ payroll. ‘The feeling in the (National Hockey) League offices is that the problem isn’t the market, its Hicks,’ said a league insider, ‘he needs to be gone.’” And secondly, Schoenfeld says (and this, Liverpool fans, is where you will need to be seated, well away from the coffee cups):
With George Gillett, Hicks bought Liverpool FC at a bargain price and has made it one of the English Premier League’s most profitable clubs, with a windfall to come if a new stadium is built as scheduled.” I did warn you. This “alternative version” of what Hicks has actually done at Liverpool may cast doubt on the veracity of the rest of the article. For instance, Schoenfeld claims that “along with Manchester United, Liverpool – not Chelsea, not Arsenal – is the great potential revenue-producer in the EPL,” which suggests he hasn’t looked at the EPL table this season. But he quotes extensively from associates of Hicks, past and present, none of whom have any discernible reason to bad-mouth him un-necessarily, yet none of whom are loath to criticise him. The picture that emerges of Hicks “personality” will surprise few. Overbearing, bullish, without remorse. They’re all there. And Schoenfeld directly links these personality traits with Hicks’ sporting and business failures in America during the last decade.
Hicks “considers his 15-year tenure as a team owner a successful one,” Schoenfeld notes, before detailing why it hasn’t been. “This clearly isn’t the end game he had anticipated. Some $550m in debt, and with more than $80m of his own fortune invested in the teams, he’s seeing the finish line rush to meet him as the vultures circle.” Schoenfeld chronicles the downfall of the Rangers, sourcing it back to the big money signing of baseball’s hottest property in 2000, Alex Rodriguez. Hicks had done a lucrative broadcast deal with the Fox network a year previously, which Schoenfeld calls “the apex of Hicks’ career as an owner.” The money helped sign “A-Rod,” a “superstar (who) was clearly a poor fit on a team who’d made the play-offs with a middle-market payroll,” a kind of permanent Robbie Keane to Celtic move, or, for those of a certain age, European Footballer of the Year Allan Simonsen to second division Charlton.
Hicks “felt he could win a world series with an aggressive spending approach.” But his business model couldn’t be applied successfully to sport. He tried a “buy-and-build” model which had led him to success in the soft drinks market. But his attempts to combine the operations of the Rangers and Stars were failures. Hicks said “I look for situations where one plus one equals more than two”, which said little for his mathematics. But the expected economies of scale didn’t materialise. As current Stars president, and no enemy of Hicks, Jeff Cagen said: “Baseball and hockey are passionate buys. It’s not a widget.” Hicks reversed his policy and became less involved in the “talent-evaluation process” after A-Rod and other failures. But he believed that, as a result, he had “really come to understand the business of sport. I understand it totally. And the thing is, they’re all different.” Yes, he really said that. And friends acknowledge another major fault, one which was far from exclusive to Hicks: “Hicks loved doing the deals and became more interested in playing (that) game than adding value. The deal became paramount.”
Hicks, chillingly, concurs: “I’ve been doing high-risk, high-return investment since 1977. It’s all I’ve ever done, so I’m used to having some deals be great and some not work out. I don’t get devastated because, whatever happens, it’s a deal.” Enough to make Shankly not only spin in his grave but rise from it, go up to Hicks and smack him in the mouth. The article offers a perfect summary of the inherent flaws in Hicks’ business model. “Hicks and Gillett bought Liverpool the same way they did everything, leveraging it with as much debt as they could,” writes Schoenfeld, giving lie to Hicks’ and Gillett’s claims that they didn’t initially intend to “do a Glazer.” Apparently, this “extended Hicks’ precarious financial position even further,” – more news to Moores after the assertion that he sold Liverpool “at a bargain price.”
But Michael Cramer, another former sports associate of Hicks who benefited from the association, adds: “Debt is generally good if you’re building a business. But you run into a credit crunch when you can’t get it extended.” And Hicks, of course, ran into a worldwide credit crunch. Ergo, the Liverpool debts of today. Schoenfeld himself is remarkably matter-of-fact about the inherent flaw he spotted, noting: “By using debt in the manner of a leveraged buy-out, Hicks’ exit strategy was always going to be to sell them…professional sports teams aren’t likely to generate enough profit to even service such debt, let alone pay it down.” While Hicks notes in the same paragraph, that “this was never going to be a dynastic asset,” clearly a different Hicks to the one who endorsed the words “the families’ ownership of the club will be a multi-generational family commitment” in his and Gillett’s offer document to Liverpool shareholders in 2007.
Yet there’s an explanation for Hicks’ ludicrous £800m asking price for the club – time to move away from the coffee pot again. Schoenfeld writes that Liverpool’s new five-man board are “shepherding (the club) towards the construction of the stadium and a sale to someone willing to include that future revenue in the value.” That’s right. The stadium he so utterly failed to build? He wants someone else to build it, after giving him the profits he believes it will generate. And he thinks “there are plenty of people out there” willing to do so (well, they’d have to be “out there”). Which is what leads to the “we won’t own it in five” quote. We shouldn’t be surprised really. Schoenfeld writes, without the remotest sense of shame, that “what matters most to Hicks is a big black number on his financial statement…and all three of his investments in sports franchises are primed to pay him handsome returns.” Liverpool’s latest accounts don’t hint at too much of this priming. But Schoenfeld is confident. As Hicks speaks to him, Liverpool are on the telly, and score. “Hick is happy,” says Schoenfeld. “He’ll be happier soon enough.” Sadly, for Liverpool and their fans, he won’t be gone soon enough.