The Sale of Hampshire Cricket Club to GMR Group
Hampshire County Cricket Club has been sold to the Indian infrastructure and sports conglomerate, GMR Group. This post does some digging into:
How much GMR paid for Hampshire.
Looks at how Hampshire’s Rosebowl ground and the hotel and golf course that share the site were financed.
Wonders: what the hell are the ECB doing giving money to GMR and, indirectly, Hampshire’s former owners.
It is a truth universally acknowledged that GMR are paying £120m for Hampshire. And that seems to be true, sort of. What confuses matters is that Hampshire Sport and Leisure Holdings, the top company in the Hampshire group that leases the golf course and hotel and has the cricket club as a wholly owned subsidiary, has a lot of debt, roughly £73.6m at 31 December 2023. GMR is, I think, assuming this debt and paying a cash amount on top for equity. The only figure I’ve seen for the equity payment is £43m in the cricinfo article linked to above. The £73m of debt plus a further £43m of cash gives a total enterprise valuation of £117m, close enough to £120m quoted.
The total share capital of Hampshire Sport and Leisure Holdings is £7.8m so the shareholders have made a profit of £43m - £8m = £35m, with the majority of this going to controlling shareholder and chairman, Rod Bransgrove. Although that is a handsome return on the initial investment Bransgrove first invested in Hampshire at the turn of the century and hasn’t taken any money out in the interim, so the annual rate of return is perhaps in the 7% - 8% range. As explained below there is, apparently, going to be a subsequent additional payment from GMR to former shareholders for the value in the 51% gift from the ECB of the Hampshire Hundred franchise. Presumably this will be on top of the £43m equity payment referred to above.
There is a reference in the Wikipedia article on the Hampshire Rosebowl site that refers to Bransgrove putting an additional £35m into the second stage of the development project. However, the only source for this is a link to a cricinfo article that refers to the redevelopment but doesn’t specify who is going to invest that money. There’s no sign in the accounts of Hampshire Sport and Leisure Holdings of an additional £35m of share capital and I think the stage 2 development was financed by debt raised by Eastleigh District Council and there is more on this below. Obviously if anyone has additional information to support the wikipedia statement, I will amend.
In addition to the capital invested, Rod Bransgrove and other directors paid £5.8m for loan notes in Hampshire Sport and Leisure Holdings and in 2014 waived interest due to them on the notes of £1.9m. This could be seen as an additional, informal, contribution to Hampshire.
Given that the share capital of Hampshire Sport and Leisure Holdings was only £7.8m how did the company end up owning an international test match venue, a hotel and a golf course? The answer is the pile of debt on the balance sheet, something around £70m. Bank loans and debt issued on public markets makes up a very small percentage of the £70m borrowings and Hampshire Sport and Leisure has instead used more unconventional sources of funding.
This funding started prior to Hampshire being converted from a mutual member’s organisation to a private shareholder owned company. Wikipedia refers to £20m of funding from Sport England and the National Lottery supporting the first stage of the Rosebowl site development. Sadly there is no reference in the Wikipedia article for this figure but the contingent liability note to the Hampshire Sport and Leisure Holdings accounts up to December 2022 do disclose that Sport England had advanced grants of just shy of £8m for the development of the Rosebowl site as a cricket facility and therefore we can be certain that at least of £8m of public money was invested in the “new” ground prior to Hampshire being converted to private ownership.
There was a second round of investment in the site to support its application to host international cricket matches, improve road access and add a hotel and a golf course. Most of the money for this came from funding from Eastleigh District Council via a finance lease for the hotel of £40.4m and a sale and leaseback arrangement for the rest of the site of £6.5m. There is also a reference in the accounts to £3m of deferred rent which I suspect is also due to Eastleigh council but the accounts are not clear on this. In 2017 Eastleigh District Council restructured the hotel financing, taking a capital write off of £0.6m and reducing the interest rate on the funds lent by them.
As well as a supportive main lender in Eastleigh District Council Hampshire received central government furlough funding of £1.6m in the lock - down of 2020 and took out two Coronavirus Business Interruption Loans. The ECB has also helped to finance Hampshire. The 2020 accounts disclose that Hampshire received a £0.6m payment from the ECB as it did not have a test match that year (odd that the payment was made as Hampshire did eventually stage test matches in the year as matches were transferred from other grounds.) There was also another £0.6m of ECB covid support. Additionally the ECB lent money to Hampshire, the maximum amount advanced was £1.1m in 2016 but this had been repaid by 2023.
Despite a supportive main lender in Eastleigh council, initial grant funding from Sport England, Central Government furlough grants and both funding and grants from the ECB, the development of the Hampshire site was, prior to the sale to Indian company GMR, not a financial success. The 2023 consolidated accounts of Hampshire Sport and Leisure Holdings show aggregate losses of £13.4m.
Obviously GMR believes it can turn a profit on the Hampshire Rosebowl site. Part of the attraction of Hampshire may be that whoever owns the club is going to receive a gift of 51% of the Hampshire Hundred franchise and the television and other revenues the ECB will divert to that entity. Let’s make a conservative assumption that the Hampshire Hundred is worth £20m and a 51% share is worth £10m of that (it won’t be, see below). Accordingly GMR can expect to receive a gift of £10m from the ECB and they will have factored that into what they pay for the equity of Hampshire Sport and Leisure benefitting the former shareholders. In this City AM article Rod Bransgrove, Hampshire chairman and former controlling shareholder makes it clear that there will be an additional payment for the free 51% share in the Hampshire Hundred.
Of course a 51% share is worth more than 51% of a company’s total value. A 49% shareholder is, within the limits of the Companies Act, at the mercy of the shareholder with majority control. GMR has already indicated they want to buy the other 49% of the Hampshire Hundred to add to the gifted 51%. Any rival bidder risks being a minority shareholder who has already annoyed the controlling shareholder, GMR, by bidding against them. So GMR can pretty much offer whatever it wants for the other 49% of the Hampshire Hundred at the expense of English cricket. The ECB does seem to have realised that the 51% gift of Hundred franchises undermines the proposed sale of the other 49% and that the issues are particularly stark with Hampshire / GMR. Apparently they have threatened that unless GMR pay a fair market value for the 49% they will transfer the Hampshire Hundred franchise somewhere else. Whether the ECB would have the fortitude / money to pay for legal fees, to carry this through remains to be seen.
But I don’t want to get too into the 51/ 49 issue as it’s: complicated, doesn’t matter that much and covers up the more important issue which is this. The ECB’s 31 January 2024 accounts show the ECB had 100% ownership of the Hampshire Hundred franchise. In general terms it belonged to English cricket or more specifically the 40 members of the ECB (18 first class counties, 21 minor counties + MCC). I believe that by transferring the 51% of the Hampshire Hundred to GMR, value is being transferred out of cricket to a private company, GMR, and, as GMR purchased Hampshire after the 51% gift was announced, it is the former owners of Hampshire, who benefit from the diverted money. To me it doesn’t seem that the board of the ECB is acting in the best interests of its shareholders or cricket in general.