When Westfield founder Frank Lowy become the president of Football Federation of Australia (soccer’s governing body in this country) back in 2003, everything looked so exciting. Australia would soon head to its first World Cup in decades. A new national competition was up and running, called the A-League. And Lowy had managed to lure wealthy, big-name owners in to support the game.
But those big names have become the bane of Lowy’s soccer life in recent months.
First Lowy and FFA chief executive Ben Buckley were forced to kick Clive Palmer’s Gold Coast United out of the competition over various breaches of their agreement.
Then yesterday, mining billionaire Nathan Tinkler has attempted to hand back the license to run the Newcastle Jets, citing irreconcilable differences. Tinkler is unhappy about a number of things, but top of his list are two items.
Firstly, he is angry that he was forced to pay what he says was a $5 million acquisition fee to buy the club from the FFA, after the former owner went broke. The FFA says it was only $3.5 million, but this is still far more than the fee Clive Palmer says he paid for his club, a mere $500,000.
Secondly, Tinkler is angry about the way the game is being run. He says he’s spent $12 million on the club and claims the FFA has refused to listen to suggestions on how to run the game on a more sustainable footing.
“These frustrations have been highlighted with the FFA’s own report identifying combined club losses in excess of $27 million for the 2012 financial year. Projections of similar losses are forecast for next year,” Tinkler’s Hunter Sports Group said in a statement yesterday.
Ben Buckley has since hit back, saying Tinkler cannot hand the license back and must meet his commitment to operate the club until 2020.
Not surprisingly, both sides are now threatening legal action in what has become yet another farce for Lowy and Buckley.
Soccer writers have been quick to slam Tinkler as a billionaire who has thrown his toys out of the pram. Fairfax writer Michael Lynch went so far as to say that it was Tinkler’s fault he let the FFA charge him what appears to be an exorbitant fee for his club licence.
“[Tinkler’s] surely a bright enough bloke to have completed his due diligence on the club and the business and decided that in the scheme of things $5 million was a fair ask for what was on offer. If he didn’t, he has no one to blame but himself.”
“After all, if I pay $800,000 for a house and then discover that the one next door was sold a week later for $400,000 I can hardly blame my new neighbour who bought it, can I?”
Leaving aside the house analogy – the market for houses is a bit more liquid and a lot more transparent than the market for soccer clubs – it is certainly possible that Tinkler didn’t do enough due diligence.
But you could also argue he was within his rights to take the FFA at face value when it said this was a standard fee that every club owner paid. After all, the FFA is supposedly trying to support the game and its owner in every way possible.
Surely Tinkler was within his rights to discourage a new owner from entering the game by stinging him with what now looks like an inflated licence price – particularly when they were desperate to get Tinkler into the club after the previous owner could no longer pay the bills.
“We have attempted to organise meetings with the FFA to discuss our $5 million acquisition fee, with our only condition being we must be advised what other clubs have paid, if anything, why acquisition fees vary, how much of a success fee was paid to the FFA’s agent and how the money was used,” Hunter Sports Group chief Troy Palmer said yesterday.
“Having rejected our terms on every occasion, we had no confidence a consistent and rational explanation for the fee would be forthcoming, particularly after inflammatory media comments from the FFA.”
That might sound like a billionaire taking his bat and ball and going home to some, but to me it looks like an experienced business person who believes he has been ripped off and has failed to get answers as to why.
For his part, Buckley says the acquisition fee was a market price agreed after a series of negotiations. He also says Tinkler was given the option of getting an interim licence that would have allowed him to do more due diligence, but HSG opted to grab a 10-year licence.
The FFA says it will hold Tinkler to his contractual obligations, but exactly how it will force Tinkler to lose as much as $5 million a year by continuing to run the club isn’t clear.
What is clear is that the Tinkler fight, coming so soon after the battle with Palmer, leaves Frank Lowy and Ben Buckley with a big problem.
Buckley admitted yesterday that the competition’s financial model needs review, but after losing two wealthy club owners in the space of a few months, there will be questions about whether it should be the current administration that conducts that review.
Lowy and Buckley must regret ever letting Tinkler and Palmer into the game, but they knew what they were getting – with big wallets come big egos and big opinions.
Tinkler and Palmer may not know much about soccer, but they do know about cash. I’d bet neither man was expecting much of a return from their A-League club – after all, who has actually ever made a buck from sports ownership in this country? – but they were expecting the FFA to run the game properly and work with the owners to improve the financial model.
That clearly hasn’t happened and now Frank Lowy has a massive clean-up job ahead of him.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
