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.
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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.
You can read more about the book by selecting the appropriate link…
http://tiny.cc/RHd9k – if you are in the UK
http://tiny.cc/Fsc6p – if you are in the rest of Europe
http://tiny.cc/KfzsD – for the rest of the world
If you have any questions about the book or buying it please do email Tony@hamilton-house.com or call me on 01536 399 013
Meanwhile over at www.blog.woolwicharsenal.co.uk you can read the daily blog about Arsenal’s world 100 years ago.
(c) Tony Attwood 2009
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