It is a story that keeps coming around and around – at any minute Arsenal are going to fall into a Liverpool Beachball or Manchester IOU situation, with millions of pounds-worth of debt created by the purchaser.
Comments fly everywhere and I have to say that even though I have spent many years in business I was not fully conversant with exactly what happens and how in such scenarios.
To try and resolve this I turned to the Arsenal Supporters’ Trust www.arsenaltrust.org and I have been most grateful to members for giving me the benefit of their expertise on these matters.
So here is the definitive answer on what happens in circumstances when someone wants to buy a company like Arsenal.
1. THE MANDATORY BID
This is triggered if anyone reaches 30% of the ownership – a person can get to 29.9999% and still not have to make a bid. At 30% this has to happen. This is worth stressing because papers have been quoting 29.5% which is wrong. It is 30%.
But there is no need for other shareholders to accept the offer. They can vote no, and that’s the end.
2. ACCEPTING THE BID
If 50% plus one share of the rest of the shares vote no, then the bid falls and nothing happens. Although we cannot possible know what is in the mind of individuals, it is likely that if Mr Kronke bids, Mr Usmanov would oppose, and vice versa. That would mean that only if half of the remaining shareholders say no, the bid would be blocked.
I am advised that the board holds 50% of the vote – the rest being held by the one major shareholder, some minor shareholders and the independent shareholders.
3. THE SPECIAL RESOLUTION
75% of shares need to vote for a special resolution such as the issuing of new shares, pledging assets etc. Because RED & WHITE have almost 26% they are able to block special resolutions, but no one has told me of any special resolutions that the board want to put through that have been blocked.
4. THE 90% SCENARIO
This is what happened at Manchester United, and I believe at Liverpool. When one person owns 90% of the company the company is delisted and there is no market in the shares. People don’t have to sell their shares but they tend to because the shares are of limited value unless there is another sale – which could be years away and by then the shares might be worth far less.
5. AT 98%
When one person or group own 98% then there is a compulsory purchase of the remaining shares at the bid level.
ARSENAL’S SPECIAL CASE
Manchester United when purchased was a debt free club. I believe Liverpool was much the same. But Arsenal has a debt of £245m on the stadium and all the assets of the club are already pledged to the lenders of that money. So a buyer would not get the security of the club or its ground or any assets on buying. Anyone who wanted to put a load of acquisition debt into the club would really need to repay the debt on the ground first! That would in fact be quite an odd transaction.
You spend a fortune buying the shares, then you make your bid and buy up the rest of the shares, then you pay off the debt of the ground, and then you load the club with debt. It doesn’t really seem that attractive a deal to me.
Meanwhile in other news…
Finally the press have realised what we have been saying here for two years – that Liverpool are Insolvent and one misadventure is going to trip them up. Leeds United have banned the Guardian from reporting its matches, and Sir Alex F Word walked out of a press conference. Same old world.
Nasri and Fabianski came through the 2-2 reserves draw and the first team seem to be going through quite a long unbeaten run. And the ladies team score so many goals you now need a calculator to attend their matches. Quite a good scenario really.
The latest Arsenal book: MAKING THE ARSENAL is available to purchase on line – orders received now will be despatched the moment the book is released – in approximately ten days.
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(c) Tony Attwood 2009
“Finally the press have realised what we have been saying here for two years – that Liverpool are Insolvent and one misadventure is going to trip them up.”
Is it too soon to say that the misadventure has arrived? They probably need to win three out of three of their CL matches to go through to the knockout. And they have made a very bad start to their fight for fourth place. If we have a whip round, they will soon be priced for us to buy them and use them as a feeder club.
Far more important is the question of our ownership. I cannot begin to guess at what motivates either Usmanov or Kroenke. Neither seem to be huge football lovers like Abramovich. Both are so rich that any profits they might make are small change. And the downside risks seem much larger than potential upside. If my name was Glazer or Hicks or Gillett, I wouldn’t have a good feeling about the financial wellbeing of my English football investments.
Good basic study, I must acknowledge. Many fools in media are jumping with anticipation of possible takeover and other stories. The Fun has been doing its job by employing some 1000 unemployed writers and poets on ‘Arsenal-The Inevitable Takeover…The Opera, Instrumental’ project.
Things are simple, yes..market rules make it compulsory to launch bid on acquiring 30% but doesn’t mean that if others don’t agree it, are going to be sent to communist jails…apply some logic…
Again…Nice post.
I suspect the fever pitch speculation about Kroenke’s next move is because of the AGM tomorrow. The truth is, no one really knows what’s on Kroenke’s mind. While you can deduce the fact that Kroenke does not have liquid cash lying around for a takeover and will have to borrow against his assets, it’s still conjecture to state that he’ll launch a bid for the club. He may well do, but it won’t be a walk in the park, especially if Jabba decides to say something about it.
As for Liverpool, the writing is truly on the wall. The way things are happening on the pitch, it makes it harder for investors to take the club seriously. What is happening at Liverpool though, gives a clear indication that Wenger’s vision and direction in youth development as a long term strategy is one that will stand Arsenal in good stead.
The “cheque book” management that has been trumpeted by all and sundry in the media, punditry and football circles is a dangerous game to play. Liverpool are dealing with their demons now, and Manchester Utd is not far off.
As for yesterday’s game, me think’s Almunia has got a serious bout of Lehmann’s elbow, the prerequisite disease for a goal keeper who’s no.1 jersey is at risk.
Nice post Tony, now we wait and see…
On Liverpool…they re getting whipped on and off the field. It shows you how Wenger is a legend and genious in his own league. Sometimes football isn’t only about winning everything all the time, we re at this point as a club because of a man who saw things years ahead and you know what? he, the team, and us will be rewarded with truly worthy and well-earned trophies in the near future.
Some defeats in league (i guess 2 or 3) and 4 draws and everyone was laughing on Arsenal last year. But Liverpool has already lost 4 games and yet to qualify for CL knockouts. But surely only Wenger could have taken us to CL, FA semis and comfortably fourth from that position. If Rafa can even do 1 out of these 3 he will be considered genius. Lets see if he can even do a fraction of what Wenger did.
“For Cape gooner”
I think that the fame and publicity that you get out of owning such a great club is the biggest reason why someone would want to invest our clubs. Most of the billionaires who invest in club do it for glory. Else who talks about the sheik who owns Man city. In US its the few billionaires already own basketball teams to show off. Maybe they just want a bigger brand.
A really intresting article, do I have to ad ” as usual” ? The truth must be told so yes as usual.
It makes thing much clearer to everyone.
And I think it might settle some nerves down because even if one of the Kronke-Usmanovs reach the 30 % it seems that the other shareholders just can say no and everything stays the same.
To keep our club out of the hands of only one shareholder is all we can ask for.
Thank you for setting out the information so clearly, Tony. Sameep makes a good point – people tend to forget that a bid being launched for your shares does not mean you have to accept.
So perhaps the board are justified in being sanguine about the possibility of a takeover?
I read somewhere that if the bid fails, the bidder has to sell shares to take him/her below the 30% bid threshold again. Do you know if that is correct?
well, as there’s nothing we can really do until Usmanov or Uncle Stan decides to do something, all thats left is to learn from the lessons of Man Utd and Liverpool’s takeovers.
And what we learn is that its a bad idea to leverage the debt back on the club. As if we didnt already know that! The Man Utd fans knew it before the Kroenkes took over, while the scousers were too excited to look beyond the hollow promises that Gillett and Hicks offered.
Utd are keeping afloat because they’ve done rather well on the pitch over the past few years – but not been able to profit from that in terms of financial strengthening. while Liverpool are now reaping the benefits of what they sow – Rafa says terrible injury crisis? my foot. 2 good players out and a crappy right back out for a game or two. And the media lap it up and regurgitate ad nauseum. Didnt hear much about the terrible run of injuries we’ve faced over the past few years? when was the last time Lord wenger actually had a genuinely full strength squad to pick from?!
Quit your whingeing Rafa. Accept that you’ve mis-managed the money that you did have, and that you wont be getting any more! Learn from the quiet dignity of AW…
Sorry, rant over! (great article as ever Tony.)
Can you look at the media already started sympathising with Rafa (BBC). Rafa has stated that he does not know who to select. I guess they do not even have half of our injuries.
Fun Gunner – that point about the 30% is interesting… that when someone has bid 30% and failed to get a take over he/she has to sell to go back down to 29.999999999% again. I have never heard this, but it might be so. I know that once a bid has failed at that level, the owner of the shares is precluded from making another bid for a period of time (a year perhaps).
Tony
Hi Tony
Just wondered if you knew! I think the logic behind the rule was to maintain stability. But as I said, it’s only what I think I read, and it might apply to a different category of listed company.
I hope neither Kroenke nor Usmanov succeeds in a takeover bid.
I’m not very convinced a bid will succeed because as Tony said, either will block the other’s bid.
But you never can tell. For the right price Usmanov might cut his losses and <> off.
A great article Tony.I will print that off for furture refrence.I do hope that neither the Yank or the Gangster get control.We do not want the club saddledwith more debt.
Regarding Liverpool,you and fellow Gooners new this was going to happen.You could see from their first game against the spuds that the squard was poor.How the pundits could and did say that Liverpool were going to be a force is beyond me!.Can anyone on this site name their strikers, Torres and and and.
Next weeks Carling cup match is of massive importance to them.When we beat them with our kids, the media hopefully will have a field day.
A very well laid out explanation as usual, Tony. Perhaphs now the myriads of ‘town-criers of doom’ that plague our club and pervade our supportership will read this piece, digest it, ask question(s) if needed, and let our club be in peace.
my info on the kroenke buying of shares is that it is only designed to be a deterent to usmanov from making a takeover bid, if the fat russian makes a bid stan will make a counter bid if needed, and indeed stan might even announce at the AGM tomorrow that he has no plans to make a takeover bid and that he will not go over the 29.9% shareholding.
Also I do belive that even if stan gets 30% he does not have to launch a bid but just like a failed bid he would then not be allowed to bid again for a year, so he will not go to 30% now cos if he did and then did not bid he could not counter a bid from Usmanov.
On to liverpool, I cannot believe how the media are backing him so much, if it was Arsene in the same spot they would be baying for blood, rafa has signed 76 players in his 5 years at pool and no more than 5 have been a success, he moans about lack of money, well maybe if he had bought less in numbers and more in quality he would not be in the mess he is in now. I hope the keep losing for weeks to come and especially for big nose phil (there is now only a big three) thompson I do hope pool finish mid table and out of cl, fac and cc early on
Sorry you are missing a few things. K and U are predators, hard nosed investors, they are not here out of the goodness of their hearts, they are not putting millions in for charity, or for “sport”. They are investing for a return. They will either buy the club and likely saddle it with debt (Glazer, etc style) or they will sell out to the other at a profit. If for example K wins and bids at (for arguments sake) 10k per share, then U can quite easily sell the lot of his shares at a profit in the same way that McManus sold his shares at a great profit when Glazer bought MU. Fitzman, Dein, et al are all making money the same way, and arguably will feel they deserve it after the work they did in building the club (Fitzman did after all see through the new stadium to budget and to time).
Your argument that they will not saddle the club ignores the fact that the club is a “cash cow” none other is in such a strong position (AW, nil tsf spending, CL for 10 yrs, regular top performers, growing brand, growing international support, attractive football) all of these are attractive to a full owner, who also has the benefit of taking dividends to pay off debt once they are over 90% (and no one knows the extent of the milking of the club as they own it outright and do not have to disclose everything).
I agree that wider ownership is best for the club but ultimately it will change, this is the reality, its called a leveraged buyout, it happens all the time. It is true that interest rates and the credit markets are not so great, but at some stage it will happen. The sad fact is that such large holdings as F, K and U can only really be cashed in to a larger holder who will take ultimate control. H & G (Liverpool) thought they could have turned a big profit by now but have been exposed and also hit badly by the credit crunch.
The big problem is the nature of share company structure and (weak) rules that allows all of these (leveraged buyouts) to happen.
Another thought provoking and informative article ,Tony ,and the regulars have all updated with their insights and knowledgable comments.Good show yer’all .As with the majority ,I hope common sense prevails and the status quo is maintained s0o that AW will be able to guide us to further glory.
Sadly I agree with you, jbh, though I hope we’re wrong. Please please someone anyone stop this from happening if it’s true. I don’t know, FA? The Queen? Prime minister? New laws? Justice? Divine Intervention? The power of the mass? Save Arsenal.
eduardo: As long as the Media are Backing him surely that will mean he will stay. And we should welcome that with open arms lol. The man is a terrible manager if you ask me. He built a team of two Players (gerrard n Torres)in 5 years. dear oh dear.