Gabriele Marcotti
Thursday January 31st, 2008

Sometimes numbers don't quite add up. Less than a year ago, Tom Hicks and George Gillett Jr. bought Liverpool for $432 million. Or, rather, that's what the club's valuation was.

In fact, some $87 million of that total was debt, which the pair agreed to take on. So in fact, they really shelled out $345 million.

Actually, come to think of it, they didn't really shell out any of it. They borrowed it from various banks, putting up some of their own assets as collateral.

Of course, they need to pay interest on that loan which, at market rates, looks to be close to $50 million a year. But it most likely won't be Hicks and Gillett paying the interest, but rather Liverpool FC itself or, possibly, Kop Holdings, the company they created to buy the club.

But I digress. This column isn't about the implications of two guys crossing the ocean to buy one of the most historic and successful clubs in the world for "no money down," like the people say in those crappy real estate infomercials you might stumble upon at 2 a.m.

In fact, I come to praise Gillett and Hicks, not to bury them. Because the fact of the matter is that, if they wanted to (and, in public at least, they say they don't), they could easily sell the club for between $600 million and $1 billion. Depending on which estimate you believe, that's how much Dubai International Capital -- the company which Hicks and Gillett outbid a year ago to gain control of the club -- is willing to pay for Liverpool FC.

Which, of course, means that each of them could sell and walk away with at least $100 million (and possibly much more than that) in profit.

"Buy low, sell high" is, of course, an age-old rule in business. Gillett and Hicks have figured it out perfectly. But when you (potentially) make so much money in so little time, there can be only one explanation: Someone -- either the guy who sold you the asset or the guy who bought the asset from you (or possibly both) -- got his numbers wrong. Spectacularly wrong.

And so the question here is, who needs to wear the financial dunce cap? Who completely misread how much Liverpool is really worth? Was it David Moores, who sold Hick and Gillett the club, valuing it at $345 million? Or is the folks from Dubai, who think it could be worth at least $600 million?

That's a difference of $255 million. And one thing which everyone can agree on is that the value of Liverpool FC did not increase by that amount in 11 months.

Just look at what happened since February 2007. Liverpool is currently seventh in the Premier League after finishing third last year. Most likely it will finish third or fourth, which is pretty much where it has finished most seasons for the past decade.

It did get to the Champions League final last season and, while that was a nice little money-spinner, it's not something you can bank on year after year. The club bought some players and sold others, ending up with a negative transfer balance, which was generally covered by the extra Champions League income.

As for the much-anticipated 70,000-seat stadium, it's still just a drawing right now, although Hicks says they spent a lot of money on architectural and engineering studies.

So, back to the question. Who got it wrong? Moores or Dubai International Capital? Or both?

Here's a little clue. When Liverpool was sold last February, it owned both Anfield and the Melwood training ground outright, two venues which, at a conservative estimate, must be worth around $100 million alone. It had a Premier League contract guaranteeing between $60 million and $100 million in TV money over the next three years. And it had a collection of players which, again speaking conservatively, had to be worth in excess of $200 million.

And then you can factor in estimated future income from the Champions League, FA Cup, Carling Cup, the club's merchandising operation and its sponsorship deals (we're talking, after all, of the second-biggest club in England in terms of number of fans).

So $345 million with no money down for all that? Sounds like quite a deal.

The Gillett and Hicks takeover of Liverpool FC has probably been bad for the game and for the club. But it's been a phenomenal bit of business for Gillett and Hicks themselves.

Ivory Coast may be the most impressive team in the African Cup of Nations. Ghana, the hosts, may be getting stronger game after game. Cameroon may be the most resilient side, blessed with a genuine winning mentality.

But look out for Nigeria. Teams that start poorly can, and do, turn it around in the knockout phase, particularly if they are stacked with talent like the Super Eagles are. All of which makes Sunday's quarterfinal clash with Ghana -- if you can find it -- a must-watch.

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