China's Liverpool bid favourite with board as details of Huang's backing emerge
A Chinese bid for Liverpool has been revealed to be backed by the state-owned Chinese Investment Corporation (CIC) which has $332bn (£209bn) of assets under management.
The club's American owners Tom Hicks and George Gillett appeared to be losing their fight to walk away from the club with a profit last night as Gillett's preferred Syrian buy-out bid was widely dismissed as lacking credibility.
In a day of dramatic scrambling for the ownership of Liverpool, which coincided with manager Roy Hodgson confirming he is ready to make an £8m bid to bring Juventus' defensive midfielder Christian Poulsen to Anfield as a likely replacement for Javier Mascherano, representatives of Yahya Kirdi, a former Syria international now fronting one bid, insisted that a price has been agreed and a formal purchase agreement "is in the final stage of negotiation".
But the Kirdi camp could not explain last night where their money comes from, and this newspaper also understands that CIC is behind the rival Chinese move for the club, led by businessman Kenny Huang, which appears to remove one of the key uncertainties.
None of the prospective owners have presented proof of their claimed backing, but provision of such details is due to begin next week, at which point the CIC involvement may be crucial.
CIC, formed in 2007 as a way of investing Chinese currency reserves, ploughed €800m (£665m) into one of the funds operated by the Apax Partners private equity company earlier this year, though a move for Liverpool would be something completely different to its previous activities.
Though questions remain about Huang – claims that he bid for a stake in the Cleveland Cavaliers basketball team in the United States have been denied by the National Basketball Association – the precise source of the sovereign wealth which his representatives assert is behind him has not been divulged until now.
Gillett is desperate to fend off Huang's bid as the money would be used to buy the club's £237m debt from the banks and to invest in the club. None of the funds would go to Gillett or his co-owner Hicks, leaving them with nothing from their initial personal investment of £130m. The suspicion remains that Gillett is touting Kirdi as a stalling device to prevent a Chinese takeover at the end of the month.
Liverpool's non-executive chairman, Martin Broughton, of Barclays Capital (BarCap), was recruited by Hicks and Gillett to find a buyer for the club but is aware that if he arranges a sale to buyers who make a mess of the club's future his reputation will be damaged. Broughton has suggested that there are several bids to weigh up before preferred bidder status is granted, preferably before the transfer window closes, though as of last night the Huang bid and that of the New York based Rhône Group – who have re-entered the picture, four months after their £100m bid for a share of the club proved fruitless – were the only the main contenders.
Despite reports to the contrary, a source close to the process said a bid from the Kuwaiti Al-Kharafi family looks unlikely to succeed despite them having re-entered the picture recently.
Having made his part in the scramble for the club clear – perhaps to make sure that Hicks and Gillett can not manoeuvre him out of the picture behind the scenes as they did Rhône Group back in March – Huang has decided, or been asked, to move back into the shadows as his offer to buy out the club's £237m debt from the Royal Bank of Scotland is now considered. To that end, Huang has clarified that his negotiation is ongoing and stipulated that only his PR agents, the Hong Kong office of Hill and Knowlton, are authorised to speak for him. But the public job of pressing Liverpool to accept his bid by his deadline of tomorrow week, apparently in time for Hodgson to get his hands on Chinese funds to spend on transfers, has been well and truly done.
Though Broughton and BarCap have given Gillett clearance to pursue discussions with Kirdi, claims from the Syrian's representatives yesterday that an agreement on purchase price has been reached, which would pay off the club's debt and build the new stadium critical to their financial future, were met with bemusement by those close to the investment process.
Two sources in the financial community have suggested that the size of Kirdi's offer far outweighs Haung's, though with the source of his funds so unclear the fear is that he, like Gillett and Hicks, may be planning to borrow for leveraged buy-out which would leave the club's future as uncertain as ever.
Of the uncertain financial future, Hodgson would say only that it is better that the Americans be gone soon. "I don't want to go down the ownership route because I don't know enough about it," he said. "Unfortunately the owners we have are very unpopular with the fans. They know it. That is why they are prepared to sell the club."
The Chinese investment fund behind Huang's bid
* Established in Beijing in September 2007, the China Investment Corporation (CIC) is a $300bn (£190bn) sovereign wealth fund.
* Modelled on a similar fund in Singapore, It was originally established to utilise China's foreign exchange reserves for the benefit of the state and to mitigate risks in the country's huge foreign exchange reserves.
* The fund comprises of two halves: an operation which makes global investments, and China Huijin Investment Ltd, which invests in domestic state-owned financial institutions on the government's behalf. Reserves are mainly held in low-risk, low-yielding instruments such as US Treasury bonds, but the global recession has led CIC to attempt to diversify to improve returns.
* CIC recorded an 11.7 per cent return on their £37bn overseas investments last year, reversing a decline from the previous 12 months when investments fell 2.1 per cent as an indirect result of the global financial situation. Net profit totalled $41.66bn (£26.2bn) last year, almost doubling the $23.1bn (£14.6bn) from 2008. Nearly 44 per cent of the fund's equity investments were in North America, with 28.4 per cent in the Asia-Pacific region and 20.5 per cent in Europe.
* At the end of last year, the fund held shares in dozens of US-listed companies, including Coca-Cola, Morgan Stanley, Citigroup and private equity giant Blackstone, while also having equity holdings in US-listed firms included shares in Motorola among others.