How much would you pay for Rangers?

The subject of what a rational investor would pay for Rangers FC could occupy several dissertations.  This post will take a look at Rangers’ financial track record and ask why someone of little proven wealth, and a weak history of supporting Rangers, would even want to take on the burden of being Rangers’ custodian.  We will see that it makes no financial sense for anyone to make Rangers’ fans dreams come true by picking up the madness where David Murray left off.

The formal definition of the “intrinsic value” of any business is the “net present value of all future free cashflows”.  Free cashflow (and its more descriptive alternatives such as “owner earnings”) basically means the money that the shareholders are able take out of a business.  (It is formally defined of the operating cashflows generated by the business minus the capital investment cashflows required to generate the operating cash).  For a football team, the operating cashflow is basically your net profit for a year with non-cash deductions like amortization added back, and the cash effects of delaying paying bills or getting your own bills paid faster taken into account.  The capital expenditure cashflow for a football team will be the net cash spent from player transfers in and out, plus anything you spend on major stadium upgrades.  The difference between how much cash you bring in and how much you reinvest in the business, is money which the owner could take for himself.  Add up all of the free cashflows for future years (discounted for cost of capital of course, but let us not deal with the finer points here), and you have the value of a business.  Any business.

As an aside, other valuation techniques derive from this basic principle and have been developed because predicting future free cashflows accurately can be difficult.  However, when we are looking back in time, we can calculate the free cashlows accurately from the audited accounts of any business.  So it will be instructive to look at how much free cashflow Rangers have generated since Murray International Holdings Ltd bought over John Lawrence (Glasgow) Ltd’s controlling stake in December 1988.

Ready?  Adding up the numbers from the annual reports for every year since 1989 – 2010, Rangers have generated the princely sum of -£176m.  Do not miss the minus sign there!  The historical record over a 21 year period is simply that owning Rangers is a financial disaster.  As £1 in 1989 bought much more than £1 today, if we took inflation or cost of capital into account, this number would be dramatically worse.

So, we might think that Sir David Murray must have supplied all of this cash.  If so, he would surely be deserving of his ‘generous benefactor’ press clippings.  Well this media promoted notion collapses under scrutiny.

This is how this money was funded:

 £       12 The Rangers Bond Paid by supporters for the Club Deck
 £       12 Grants Government & The Football Trust etc.
 £       78 External Investors ENIC, Dave King & others
 £       50 MIH Capital Increase Underwriting of failed share issue
 £       23 Increased bank debt HBOS/Lloyds
 £     176m

We know that ENIC invested £40m and that Dave King invested £20m.  Several other directors also invested in Rangers through same vehicle as Dave King (Murray Sports Limited).  MIH may also have contributed some at this stage, but Murray’s main claim to having been a benefactor was in underwriting the failed share issue in 2005.  This exercise took place at a time when Rangers’ debt exceeded £83m and the media was starting to ask questions about the stability of the club.  What looks in retrospect to have been cynical ploy to just get Rangers’ financial mismanagement off the back pages has yet to actually cost Sir David a penny of his own money in practice.  (HBOS/Lloyds have, and will, pick up this bill).

Reasonable people can have a fair argument about this analysis of David Murray’s contribution to Rangers through the underwriting of the share issue.  However, the discussion of his contribution to Rangers is incomplete without looking at how much he has withdrawn.   His famous boast from over a decade ago that he has not taken a penny from Rangers would be more difficult to make in recent years.  When we look at the  Related Party Transactions in Rangers’ accounts, we see that beginning in 1997, Murray starts to charge Rangers for services provided by a variety of his companies.  The net balance of David Murray’s declared transactions with Rangers FC amounts to a total of £26m between 1997-2010.  At its peak in 2004, Sir David’s other interests were taking out £3.9m per year more than they bought from the club.  When you take £1 out of a company in which you personally own only 60% and move it into a company in which you own 90-100%, you have made money at the expense of your other shareholders.  Nothing illegal about it so long as it is declared, and it is for the other shareholders to complain and stop you.  Quite whether Sir David’s other businesses (some outwith MIH) were uniquely capable of providing the best possible pricing for their travel arrangement, call center services,etc. only Rangers’ employees will really know.   However, the idea that Sir David Murray has been a selfless benefactor for Rangers is definitely open to question.

So back to our original question: how much would you pay for Rangers?  On the basis of past performance, nothing at all.

Yet we are supposed to believe that a rational businessman (despite not having sufficient independently verifiable wealth) is willing to part with £25-33m and to carry the risk of losing either all of his shares in the club or paying an additional £54m for the EBT tax problem?  Whatever is really going on at Rangers just now regarding the claims of imminent takeover and what we are being told will be very different.

Sir David Murray expoited a brief window of optimism in Scottish football where it was possible to part fools and their money with hopes of ever increasing TV revenues, European leagues and entry into the English Premiership.  (Celtic did much the same thing with its own share issues).  Today, that window has been boarded shut.  External sources of funding will be difficult to obtain.  Even a bank overdraught will be difficult to retain.  Buying Rangers  today is a job for someone with billions who does not care about the business case nor the tax bill.  If we had objective journalism in Scotland, we could start an intelligent discussion and investigate: how much money does Craig Whyte have; what are the sources of his claimed wealth; and what are his real motivations?

About rangerstaxcase
I have information on Rangers' tax case, and I will use this blog to provide the details of what Rangers FC have done, why it was illegal, and what the implications for what was (updated) one of the largest football clubs in Britain.

75 Responses to How much would you pay for Rangers?

  1. No. The First Tier Tribunal will go to a conclusion. What happens if/when Rangers are hit with a bill becomes a bit more variable.

  2. Boab says:


    HMRC would have been willing to do a deal, they probably even had negotiations. The old IR always liked to do that if they could. There are even well placed rumours that Rangers did make offers to pay an amount, tantamount to an admission that there is a tax liability in my view.

    The fact that it is at a Tribunal tells us that no agreement was reached, Rangers have appealed the assessment, HMRC are sticking by their figures, it has gone to an Independent Tribunal.

  3. Repayment took the form of MSL’s 30% ownership of RFC being distributed to MIH and Dave King.
    I will need to check the MIH books to try to track through how this affected the MIH balance sheet. There were so many things going on such as debt for equity swaps, that it is not easy to spot. They should have taken a full £60m write down. It will be interesting to see how they have valued the RFC shares.

  4. Boab says:

    Indeed, see my last question to you with regard to the valuation of the shares etc.

  5. davo says:

    does David Murray have anything to do with a take over? If his 85% shares in rangers are owned by MIH and LBG now owing MIH and David Murray just working for MIH surely he has no say in the matter?

  6. Boab says:

    Fair point, if Lloyds are the de facto owner of MIH and it is the MIH shares that Craig Whyte is (allegedly) buying then Mr Murray doesn’t really have a say in the matter. Lloyds will decide what is best for them, MIH will then do as they are told. Pretty much the same as Rangers themselves have been doing for quite a while now, letting Lloyds tell them what they can and can’t do.

    I hope people are really getting the irony here. Rangers are getting the hardest time they have had in years, perhaps ever, by Her Majesty’s Revenue & Customs and Lloyds banking group which is owned to a very large extent by Her Majesty’s Government.

    Rule Britannia, Britannia rules the waves …

  7. Adam says:

    Ian, i have been trying to reply to you regarding our debate on Phils website but unfortunately censorship is firmly in place, despite my replies having nothing controversial in them. Sorry.

    As for this takeover, well im of the opinion it wont happen. The guy would have to be nuts to invest.

  8. Lord Wobbly says:

    Love the site. Don’t understand much of the technical stuff but am beginning to pick up bits and pieces. Please keep explaining in words of one syllable for those of us without a university education.

    But even I can see that the fact that the media seem to think that what the ‘fans’ sing is more important than the future of their club is a nonsense.

    Just out of interest, is anyone aware of any Rangers site that refutes any of the stuff posted on here?

  9. Sir Dirty Money says:

    Derherold, I think it’s Schadenfreude that you detect here, not hatred. If you knew anything about scottish football you wouldn’t deny us a wry smile at the mess Rangers have gotten themselves into. 😉

  10. I think Murray’s interest in this is that his reputation is tied to Rangers.
    His business recovery depends upon him being able to distance himself from the impending disaster at Rangers. “I sold it to someone who knew the risks and said that he would take care of it. I was misled. Sorry, not my fault”

    Murray is still Chairman at MIH, but his role is more like that of an employee. He is not without influence, but does not make the final decisions anymore. So as the employee with the greatest interest in getting rid of Rangers, he will definitely be involved in any discussions about a sale. In particular, the media coverage of the “sale” has Murray’s fingerprint hyperbole all over it.

  11. Firstly, great site. One of your posts is more credible than the history of investigative sports journalism in Scotland.

    I’ve been following RFC / MIH accounts circus for years. I used to be surprised at scottish journalism’s ability to miss the obvious on such a frequent basis then I realised they are not biased, they are just incompetent. … perhaps they have dabbled in tax consultancy as a hobby!

    There are a few things I don’t get regarding MIH/RFC. Whilst not directly related to RFC-HMRC they must influence the decision making process behind the scenes … so your thoughts are appreciated.

    Firstly RFC have a ‘direct’ debt to LBG of c21m.
    They have future crippling ‘unknown’ liabiilites to HMRC (c54m+).
    Based on their ability to not know key company risks RFC appear to have crippling liabilities in the boardroom. (and that just makes me smile!)

    In addition, when you go back to the 50m shares issue underwritten by Murray.
    My understanding is murray’s underwriting effectively transferred debt from RFC to MIH.
    As such MIH accounts last year showed a ‘loan note’ of £48m from RFC to MIH.
    My understanding is the loan note does accrue interest, but the interest is only payable when RFC make a profit. I assume all this was agreed when Murray was dealing with Bank of Scotland when making a profit or paying their way was not an imperative. The problem for Murray is he is now dealing with LBG.

    Personally, I find it refreshing to see that LBG don’t give a flying about RFC, MIH, Murray or the self proclaimed ‘peeple’ – they just want their cash … if only we could repay in buckie instead of cash or oil!

    I would imagine all of this is a bit of “step change” to the likes of Mr Murray … what do you mean we must live within our means? This is not a habit we are accustomed to … do you not recall Mr Le Guen?

    Anyway, back to MIH … I believe they are essentially run by LBG following the debt for equity deal last year.
    MIH is now £900m+ in debt to LBG. As the old adage goes: if you owe the bank c21m you have a problem but if it’s £1bn the bank has a problem. And MIH owe c1bn, so where is the problem?

    So let’s summarise who owes who …
    RFC owe LBG c21m (direct LBG debt).
    RFC owe HMRC £xxx xxx (unrecognised debt) …. in my view xxx xxx means rfc rip!
    RFC owe MIH c48m+interest (forms part of debt below) interest only kicks in if RFC make a profit
    MIH own LBG c£900m (direct LBG & massive debt)

    So my decision making questions are:
    1) if Whyte is [really] ‘talking to’ Murray about everything, is he actually talking to the right person?
    2) If LBG do agree to getting their 21m back, why would they honour the hmrc debt that means they lose c33m & give the people who caused it they means to do it again?
    3) If LBG do agree to getting their 21m back, why would they let the man who got them into this pile of crap write off the 48m loan note+ interest, never mind the plus “unknown” c54m tax bill?
    4) If LBG have so much to lose, why would they even let Murray be in the same continent as the negiotating table?

    I see no commercial reason why LBG would let Whyte buy RFC. They have the [only] cash cow of the MIH empire. There is plenty of milking to done for many a year to come.

    Imagine the season tickets sales for RFC when they are trying to stop Neil Lennon’s Celtic doing 10, 11, 12 and beyond in a row!

  12. davo says:

    As previously stated in the site does David Murray have anything to do with a take over? If his 85% shares in rangers are owned by MIH and LBG now owing MIH and David Murray just working for MIH surely he has no say in the matter?

  13. davo says:

    sorry my phone refreshed and posted this again

  14. Frank Galvin says:

    Many Rangers fans (and journalists like James Traynor) are assuming that, like Motherwell, Dundee and Livingston, Rangers will eventually go into administration, repay their creditors a fraction of what is owed, come out of administration, and start afresh with the decks cleared. They are wrong. In Rangers case, it isn’t going to work like that.

    Administration is just a legal process where an insolvent company enters a period where they are protected from their creditors whilst an administrator tries to trade the company out of difficulty. Often this is achieved by reaching an agreement with the creditors to accept a fraction of what is owed to them.

    This is what happened at Motherwell, Dundee and Livingston. It is unlikely to be repeated at Rangers. Why?

    Motherwell, Dundee and Livingston all had multiple SME creditors who were each owed smallish sums that amounted to quite a lot. Their choice was to accept a fraction of what was owed to them, or get even less by refusing the offer and having the debtor club liquidated.

    The difference at Rangers is that they owe a huge amount to one very large gorilla sized company (Lloyd’s) and may yet owe the same amount again to an even larger gorilla (HMRC). What will these creditors do if the administrator offers them a fraction of what they are owed when the other option is to refuse such an offer and liquidate Rangers? Rangers have a lot of debt, but unlike Motherwell, Dundee and Livingston, the value of their liquidated assets could probably reach the amounts owed.

  15. gorillainaroom says:


    The uefa debacle means that the fakover no longer makes the back pages. Convenient!

  16. JohnnyPaton says:

    I had to laugh when BBC sports reporter Chris McCuagh breathlessly reported that following the fakeover, new manager Ally McCoist would have maybe £9million to spend in the summer transfer market. This was accepted without challenge by the rest of the Sportsound team whilst I was left screaming at the radio.

    This is what frustrates me. I can accept the idiocy of Clyde and the red top rags but I pay towards the wages of these Rangers puppets therefore for my money I want decent, balanced journalism.

  17. Monsieur says:

    The Daily Record

  18. Boab says:

    Precisely correct.

    I don’t know if HMRC would even be allowed, under their own rules, to accept a much reduced amount, from a company which has assets it could dispose of to satisfy the debt. Why should the tax payer pick up the bill for Rangers, and leave them with tens of millions of pounds in assets.

    There is also the assumption that the administrator would decide that was the best way to go. People forget that the administrator also has a responsibility to the creditors of the business. In this instance there is every possibility that it will be us.

    It is not, as you say, analogous with other Scottish clubs which have gone into administration. Purely because of who the money is owed to, and whether they will accept a pennies in the pound settlement when they don’t have to.

  19. Mark Dickson says:

    Has anyone else thought of the possibility that Craig Whyte and/or Andrew Ellis might be somehow proxy or front men for Dave King ? I know most of his official wealth is supposedly sequestered by the South African Revenue Service (another Tax Case……) however there was some reports last year or so about a Jersey trust fund in his Mothers name or some family member iirc?

  20. Boab says:

    Assets in his Mother’s name, which are clearly his, would be subject to the same orders. In this country they would be described as (at best) tainted gifts, and if anything would risk his old mum being charged with money laundering as they would potentially represent the proceeds of criminal conduct.

  21. Mark Dickson says:

    We already know King is a slippery character and not beyond stretching laws beyond breaking point – now obviously he has his own problems however given the content of this interview last year is it feasible that he has somehow found a way to use Whyte and/or Ellis as a conduit for a take-over?

    The talk of eliminating debt and 5 year spending plans all seems strangely familiar……….

  22. Boab says:

    I would not take anything that Dave King takes seriously. He has been described, by a judge, as a glib and shameless liar whose evidence should not be trusted.

  23. Mark Dickson says:

    Yes of course he shouldn’t be trusted that is why iam wondering if he has truly declared all his wealth to SARS or if he has somehow found a way to use some potentially siphoned or stashed funds for his other pet project?

  24. droid says:

    Details of Mr King’s activities may be of interest to this person –

    The National Prosecuting Authority of South Africa –

    Remember this from the bbc?

    “However, on Friday, Stock Exchange reports revealed a degree of redistribution of shares within the Ibrox club.

    The 37 million shares held by Murray Sports Limited were
    brought under the banner of Murray International Holdings

    MIH then dispensed with more than 6m shares, with a company
    named Metlika – owned by Rangers director Dave King –
    acquiring 5.8m, effectively the holding previously held by
    King under MSL.

    The effect of that is to consolidate Sir David’s overall
    hold on Rangers under one company, which now controls 85.3%
    of the shares.

    Whether this has any significance regarding a takeover
    remains to be seen.

    South Africa-based businessman King, who has often been
    linked with a takeover of the club himself, is still trying
    to extricate himself from a legal battle with both the South
    African taxman and the National Prosecuting Authority.”

  25. King did get SFO clearance for this transaction. It was seen as value-neutral i.e. just a conversion of an existing shareholding to an equivalent one in another company . You could argue that point, but it is too late just now.

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