More on the takeover talkUpdated: December 26th, 2006

A 58% rise in City’s share price is fuelling speculation that a takeover bid is in the offing.

City’s shares have risen from 22.5p to 35.5p on Plus Markets since Thursday’s announcement that the club were in talks with a potential investor. That values the club at £19.2million - close to what an investor would expect to pay in a takeover.

The Sunday Mirror believes Phones4U tycoon John Caudwell is the man in the picture. The 53-year-old sold his company for £1.46billion last month and the Mirror claims Wardle “plans to have further long discussions with Cauldwell over Christmas”. The paper ruled out Norwegian shipping magnate Inge Steensland and ex-Coventry chairman Bryan Richardson as potential buyers.

But the Daily Telegraph claimed on Friday that Caudwell wasn’t the person referred to in Thursday’s announcement. It is possible, though, that discussions with Caudwell were already ongoing and that Thursday’s announcement refers to another potential investor.

Late last month representatives from City attended the Soccerex conference in Dubai. Also represented there was Hermes Sports Partners who recently announced it was giving City “ongoing general corporate finance advise relating to, amongst other things, capital raising and restructuring”.

Three days ago Hermes’s managing director Harry Philp told the Sunday Times that City could be the next club to be bought by a foreign investor, though he does have something of a vested interest in making that claim.

Rumours of an Irish consortium headed by Formula 1’s Eddie Jordan and an unnamed American/US institution are also doing the rounds. It’s still possible that the share price rise is little more than a reaction to the gossip, particularly as the volume of shares changing hands is relatively small. But what is certain is that the club is available at the right price.

Here are the details of the main shareholders:

John Wardle & David Makin (29.95%): Short of hanging a ‘For Sale’ sign outside Eastlands, Wardle & Makin couldn’t be more explicit about their desire to sell.
Rumour has it that they would accept as little as £2.5m (15p per share) for the stake as long as the £22m the club owes them is repaid in full.

The Boler family (18.75%): Director Mark Boler, along with his brother and two sisters, inherited the stake following the death of father Stephen Boler in 1998.
In 2003 he told EN magazine: “My father bought it (the stake in City) as an investment and at the moment the share price is not as high as it should be. There are no plans to sell, but if someone offered a great price…”
I understand an offer of around £4.5million would be enough to buy the stake.

BSkyB (9.88%): City is the only club BSkyB now has a stake in, and the broadcaster appears to have little interest in holding on to it.

Francis Lee: (7.13%): It’s unclear whether he would want to sell his stake.

The £70-75m figure being bandied about is not what it would cost to buy the shares, but reflects the full investment needed to get City trading profitably.

Here’s the breakdown of the likely costs:
£18m to buy the shares
£22m to repay Wardle & Makin’s loans
£20m to reduce the debt to levels which would allow City to break even each season
£10m for transfer funds
Total: £70m

The big question is whether anyone would be willing to spend that much to buy us.

Abramovich’s purchase of Chelsea has the look of an expensive insurance policy which he hopes will protect him from oligarch-eating Vladimir Putin, the economics of the Glazer takeover of United follow different rules to City, while the West Ham and Villa deals hinged on lucrative landholdings.

While the prospect of big increases in Sky’s TV payments next season might seem a tempter, Ken Bates once described TV revenue as “prune juice, that passes straight through the clubs and into the players’ wallets”.

This weekend the Mail on Sunday reported that any takeover talks would wait until after Christmas to see whether we would be relegated. Considering that buying a football club is a long-term investment and that relegation is a fear for any club mid-table or lower in any season, that seems an unlikely reason.

Unless a potential buyer is coveting City as a rich man’s toy, the fear that this club could become a money-pit might ensure no firm bid ever materialises.