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Mike Ashley Rejects Initial £300 Million Offer

Fact: Mike Ashley is good at one thing: making money

Newcastle United v Barnsley - Sky Bet Championship
One day we can finally stop using this picture of Mike Ashley
Photo by Stu Forster/Getty Images

Mike Ashley has rejected the £300 million offer from Amanda Staveley’s PCP Partners Group (Lee Ryder). On the surface, this seems like an awful thing, but as Brad eluded to yesterday, this was expected.

Mike Ashley’s initial valuation of the club was roughly £400 million, which of course is much higher than what Staveley’s group offered. It has been known for quite some time that Amanda Staveley values the club at £300 million, and that was likely going to be her initial offer when she submitted a bid to purchase the club.

There are two main reasons why there is such a large gap between Mike Ashley’s valuation and Staveley’s valuation. The good news is that there are legitimate reasons why each person values the club at the price that they do. This means that at least both parties are thinking rationally. Ironically, the bad news is that there are legitimate reasons why each person values the club at the price that they do. This also means that it could be difficult to sway each party to budge much form their valuations.

Ashley’s price is rooted in the belief that he deserves to generate a profit from the sale. Ashley bought the club for £134.4 million and has loaned roughly £129 million pounds to the club interest-free which means he has put in at least 263.4 million into the club. That figure does not even include some transfer fees Ashley has helped pay for as well. So it makes sense that Ashley wants a little more than the 37 million pound profit he would get by accepting the Staveley offer. Ashley’s asking price of £400 million is a bit ambitious, but it is safe to say this is simply him setting a high price that can be negotiated down to whatever price he actually wants. Ashley likely would be happy with anything in the £355-365 million range, giving him nearly £100 million in profit.

Staveley’s offer for the club after weeks of combing through finances is rooted in the state of Newcastle’s finances and the troubling HRMC investigation. It makes a lot of sense to devalue the club based on this ongoing investigation, because it is a federal investigation and the punishments awarded to club could be detrimental to whoever owns the it. Furthermore, it seems as if Staveley’s offer is set up to allow her to protect her investment and pump money into the club immediately. According to the Press Association’s Sport division the offer was closer to £280million, and much of that relied on a series of future performance-based clauses. They also reported that there was a clause in the offer that included a repayment if the club was relegated.

With an offer meant to protect Staveley’s investment to a buyer who is looking to make money from a “bad investment”, on the surface it seems as if this is bad news for the sale of the club. However, it is important to recognize that this is a negotiation, and with negotiations initial offers should always be taken with a grain of salt. This offer serves as grounds getting the process started. Both parties have tabled numbers that are just starting points for them to negotiate a deal in which they would be happy paying or accepting. Fans should not be worried about the state of this deal.

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