17th November 2004: I thought
the club had gone a little quiet on the subject of Frank Burrows.
He was offered a coaching position but has opted to leave the club
and, I guess, look for a management position elsewhere. He's obviously
done a good job along side Gary Megson, and I wish him all the best.
Speaking of Mr Megson, he has applied for the job at Wolves due to
the terms in his contract. It's certainly unusual, but I guess that
Peace has agreed to pay him for as long as he is out of work providing
he applies for every job in the top two divisions - not a bad idea,
I suppose. It's better than paying him the remainder of his contract
only for him to walk into a job within a couple of weeks.
The other major news to come out of the Hawthorns this week was the
results for the year ending 30th June, together with an announcement
that the club are seeking to return to private ownership. The results
themselves aren't bad, a very small loss once plaer amortisation is
taken into account, but the issue of de-listing the shares raises
some quesiotns.
In summary, ordinary shareholders will be given the opportunity to
exchange their existing shares for an equivalent number in the new
private company, WBA Holdings Ltd, or take a cash alternative of £72.50.
Premier shareholders essentially get the same deal but retain their
existing rights as a Premier shareholder in terms of season tickets
and prioritised ticket allocation. There is also an indication that
the club will introduce a method to trade shares early next year.
So for those that want to retain an interest in the club, they can,
but there is also an option to take a fair value cash alternative.
From the minority shareholders point of view, there would be little
change. In fact, my understanding is that the number of shares in
issue will be reduced should any existing shareholders take the cash
option, meaning that each share would be worth a greater percentage
of the company than at present. For example, if you hold 10,000 shares,
that currently represents 7.16% of the company. If 50,000 shares are
repurchased, that 10,000 shares would represent 11.16% of the new
company.
So why are the directors doing this? The official reason is that,
because football clubs are no longer considered attractive investments
in City circles, the likelihood of raising additional capital by means
of the AIM listing is much diminished. There are costs associated
with being listed, so with little advantage being gained from that
listing, it makes sense to cancel the listing.
So where's the downside? For a start, the club's debts are likely
to increase. The club will have to provide the funds to repurchase
the shares of any holders who wish to reduce or liquidate their holding
- this will be done by means of a loan from Barclays Bank. Secondly,
without a listing, there isn't a recognised market for those who want
to trade in the shares. WBA plc shares have never been particularly
liquid, and the club have indicated that they will provide a trading
mechanism in due course, so that's a moot point in reality. Perhaps
a more sinister effect is that changes in shareholdings by directors,
which currently have to be reported due to the rules of the London
Stock Exchange, would be able to take place in secret. Although a
list of the shareholders of limited companies is available at Companies
House, deals could be done quickly and secretly to drastically change
the ownership of the club. I don't believe that any of the major shareholders
would seek to bring this about, but the risk would be there. The risk
that it could happen is there today, particularly with the chairman
in effective control of 60% of the shares, but any deals would have
to be announced immediately.
As for the reasons behind the move, the officially stated ones are
plausible. But it could also be that the directors want some cash
which they could effectively get from the club through this deal,
in return for a reduction in their shareholding but without introducing
another major shareholder.
Whatever the reasons are, sinister or otherwise, minor shareholders
like myself have little choice. The directors, who control in excess
of 60% of the shares, have given an undertaking to accept the offer,
be that of shares or cash, which means that the offer should become
unconditional. We can all only watch and wait to see if this turns
out to be anything more that a simple restructuring.
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