Shareholder Windfall?

By Richard Larnder :: 15/06/2012

9 Comments (�Last) The new TV deal signed this week means that Sky & BT have paid over £3bn for the Premier League rights for the three seasons starting 2013-14. This is a 70% increase on the previous deal.

It's not clear how this will translate into earnings at the individual club level yet but, presumably, it will be largely based on the number of appearances made by each team.

However, using a crude assumption that Everton's Broadcasting revenue could increase by 70%, this might translate to a £37m increase in EBITDA by May 2014 (Everton's Broadcasting revenue was £52.9m in 2010-11). Of course, this assumes that the £37m doesn't go straight in the players' pockets!

I won't go into detail about corporate valuation techniques (as I have in the past) but a common methodology uses multiples of sustainable or 'normalised' earnings before interest, tax, depreciation and amortisation ('EBITDA') in order to generate an 'Enterprise Value'. From this number you subtract, amongst other things, the net debt, some working capital, and any capex underspend (e.g., amounts that should have been spent on the stadium) to arrive at the true cost of the business: Purchase Consideration.

Even assuming a conservative EBITDA multiple e.g. 3x, it's easy to see the effect that this could have on EFC's potential value.

Perhaps there has been an incentive for Shareholders to hold on to their shares whilst the new deal was being negotiated?

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