Takeover talk: where we now standUpdated: May 26th, 2007
(originally published Apr 26)
Another frenzy of speculation and a flurry of briefing and counter-briefing - but as the dust settles we appear little closer to a takeover or new investment than we were in December.
The results of the numerous press briefings can be seen further down the page, but for now the following conclusions can be made:
~ The only serious prospect of a takeover comes from Ray Ranson and his backers. But the gulf between his position and the board’s, as well as personal differences, leaves Ranson with a mountain to climb.
~ The unnamed American consortium is the one favoured by the board, but a deal is some way off and the consortium has little interest beyond purchasing Wardle and Makin’s 29.95% stake.
~ Thaksin Shinawatra has so far shown no interest in buying the club.
~ Jerome Simon would be bad news for City.
Here is a more detailed look at the four parties in the frame:
Ray Ranson and his backers
Last month I wrote this story after being told by well-placed sources that Ranson had made a bid for the club.
The story contained two errors; the bid was an indicative one and not the formal offer I reported, and it was put in on Monday March 12th not Wednesday 14th. However, the information came from sources who have a good track-record for reliability (one tipped me off about the Le Coq Sportif deal in January while another told me about Barton’s unhappiness with a club a week before his BBC outburst) and after checking with them again I am confident that the main details of the offer are correct.
That offer was in the region of 40p per share, which valued the club at around £22million. The proposals also involved Wardle and Makin “taking a hit” on their £23m loans.
Ranson has not borrowed to fund his bid so any offer would be a cash one, meaning no extra debt would be loaded onto the club. The group have a five to ten year plan which would “go through the club from top to bottom”, strengthening the scouting network and reviewing the commercial activities and administration side. Their plan would involve a new board and manager.
Where the £90m figure comes from is anybody’s guess. In February the MEN mentioned a “£70m move for control” and it’s possible that sum has been added to the £20m figure for transfers being touted around. But the club’s official statement yesterday, which is subject to company law, put paid to the £90m nonsense.
Also unclear is whether the “£20m transfer kitty” is new money or the amount Ranson’s group plan to spend over an unspecified period. With The Guardian estimating his personal fortune at £30m we would also need to know who his financial backers are before we can make a proper judgement. One source tells me they are “a large private equity company with over £1bn of assets under management”, though this is yet to be confirmed.
It may be that Ranson is the man to take City forward. Although comparisons have been made with the “Forward with Franny” campaign there are two marked differences in this instance. Not only did Lee have no previous experience in football finance before becoming chairman, but the £10m needed to rebuild the Kippax - in order to comply with the Taylor Report - put an enormous strain on the club’s finances. The City Supporters’ Trust have said the “proposals are interesting and appear progressive”, while the fact that Ranson owns ProZone could also prove a major asset.
But with the MEN describing the board as both “sceptical” and “irritated”, Ranson certainly has his work cut out. The involvement of former director Chris Bird, whose Bird Consultancy is advising the bid, may be another stumbling block.
But the biggest hurdle of all is the money owed to Wardle and Makin. The £23m in unsecured loans represents a sizable chunk of the £102m they made from JD Sports (details), and it’s understandable that they would want that money back.
Reports that Ranson plans to “wipe out” the loans doesn’t give us any indication of how much the pair would actually receive. And with their 29.95% combined holding, Wardle and Makin have the power to kill any bid stone dead.
The American consortium
Although their identities are still hidden, their intentions have become much clearer.
The Daily Mail, the paper to read when determining the board’s position, claims the talks only involve the sale of Wardle and Makin’s stake and are “some way from conclusion”.
A couple of weeks ago I was told the Americans were Texans, though it could be that someone had heard the name Lonestar and jumped to that conclusion. More interesting is the name of Mike Woodward, a former executive director of the Co-operative Bank and former non-executive director at Chelsea, who helped broker Abramovich’s takeover. A reliable source tells me that he is advising the Americans on the deal.
Rumours that Alistair Mackintosh is involved in this bid have also re-emerged in the last couple of days. I’m told that a news agency picked up on the rumours though decided not to run the story.
Jerome Simon
A figure straight out of Oliver Stone’s Wall Street, Simon is the “manager and sole member” of hedge fund Lonestar Capital Management, which specialises in taking short-term positions in “distressed” companies.
Judging from his track record, it’s the fans who would end up more distressed should this shark ever make it to the City boardroom.
Simon cut his teeth at the notorious Drexel Burnham Lambert in 1989. The following year the firm went bust and employees Dennis Levine and “Junk Bond King” Michael Milken were both jailed for fraud.
In 2004 he became Millwall’s biggest shareholder after paying £500,000 for a 10.9% stake, but kept his hands firmly in his pockets when the club later hit financial problems.
The Daily Mirror might describe him as a “football fan”, but thankfully the Daily Mail believes the club “does not regard him as a serious potential new owner”.
Thaksin Shinawatra
My sources tell me that there has been no contact whatsoever between the club and Thaksin’s people.
The Bangkok Post dismissed the story as a publicity stunt, while Thaksin’s lawyer Noppadol Pattama told Reuters: “I talked to my boss and he said it’s just a rumour. There’s no substance in it.”
While the speculation will no doubt rumble on, the need for new investment becomes ever more pressing.
There’s an excellent analysis of City’s finances at the City Supporters’ Trust, following the release of the half-year results. It’s written by a chartered accountant and City fan, who believes the club are facing a shortfall of £10m - £12m this season. With reports that season ticket sales are currently 7,000 on last year the deficit could be even bigger - and will need to be plugged by new investment or player sales before the end of the financial year on May 31.
Unless events take a dramatic turn the sale of our one major asset, Micah Richards, looks like the only option currently available to the club.
~ With so many doubts hanging over his future, Stuart Pearce hardly helped his cause after incuring this rap on the knuckles from the club. After Pearce’s comments to the MEN on April 10th that “there may be a takeover” in the summer, the Takeover Panel told City’s advisors, Investec, to remind the club and its employees not to speculate in the media about a takeover. Despite Investec’s Stefan Borson warning him on Tuesday night before the Arsenal game, Pearce - fast becoming Bloomberg News in a tracksuit - announced two days later that a takeover was “looking more likely”. The Takeover Panel, which was notified about the breaches by a City shareholder, is now livid and has approached Investec to investigate.
What the papers said
Blues sceptical over Ray offer (MEN - Chris Bailey)
Ranson has made it clear that the Blues can expect a fresh proposal in the next few days.
Simon “not considered a front runner by the Blues”.
Club “sceptical” about Ranson and “have clearly been irritated” that offer became public knowledge after a period of time without contact.
Thaksin Shinawatra “believed to be among those also mulling over an offer”.
Ranson makes debt pledge (MEN - Chris Bailey)
Ranson poised to improve £90m bid, but won’t plunge club into further debt.
Wardle “believed to favour a proposal from an American consortium”.
Ranson undeterred as City refuse to enter takeover talks (The Guardian - Stuart James)
“Sources close to the 46-year-old claim he will not be deterred by City’s obstructive stance”.
American consortium interest not believed to stretch beyond purchasing Wardle and Makin’s stake.
Ranson worth an estimated £30m and would wipe out £20m debt owed to Wardle and Makin.
City cast ‘doubts’ over Ranson proposals (Daily Mail)
Despite their obvious concerns, City did offer Ranson the chance to inspect their accounts in order to carry out due diligence.
A £20m transfer kitty and repayment of loans has not been proposed, and club is irritated with latest suggestions.
Thaksin Shinawatra believed to be mulling over an offer but American consortium is favoured. American deal “some way from conclusion” and is expected only to involve purchase of Wardle and Makin’s stake. Current management structure would be kept.
Jerome Simon not regarded as a serious potential new owner.
Ranson’s ‘inadequate’ bid leaves City cold (The Independent - Nick Harris)
“Little enthusiasm among the hierarchy” for Ranson’s proposals, which are “felt to be inadequately detailed”. There seems to be particular confusion about how his bid would clear City’s debts and also provide fresh money for players.
American group are front-runners, but no concrete developments are expected in the coming weeks. One potential bidder waiting for mathematical certainty of safety before talks move forward. A second American group is “hovering on the periphery, its credentials unproved”.
Ranson raises the stakes (Daily Telegraph - Mark Ogden)
Foreign consortium, believed to be American-led, is understood to be the one with the heaviest financial backing.
While any Ranson bid will be viewed seriously, the opportunity to put the club on the strongest financial footing will ultimately decide where Wardle and Makin sell their stake.
Ranson: I’ll take City into Europe (Sky)
“My business is football. The timing of any takeover has to be right. We are keen to conclude a deal as soon as possible,” Ranson says.
Team-building funds will be available and investment in the academy would be a key policy.
Ranson has big plans to be something in the City (The Times - James Ducker)
“Ranson is thought to be willing to wipe out the £23 million in loans that the club owe Wardle and Makin, as well as providing a healthy transfer kitty to the manager, although it is unclear whether Ranson would persist with Stuart Pearce”.
Wardle and Makin are understood to favour an unnamed consortium from North America.
Thaksin Shinawatra still thought to retain a serious interest in buying City.
Ranson archive
April 24 2007: Ranson’s statement
April 21 2007: Interview with the Telegraph
Feb 26 2007: Ranson an outsider in Blues bid (MEN)
Feb 26 2007: Ranson’s plan to keep City in British hands (The People)
Jul 05 2006: PFA feature on Ranson and Villa
Sep 01 2005: Ranson ends Villa interest (MEN)
Mar 07 2004: Special investigation on Leeds & Ranson (Observer)
Jan 29 2004: Ranson wants to join the Blues (MEN)
Oct 2003: Brief Independent profile
Dec 05 2006: Transferring football’s profits
Oct 2006: Director magazine article
Oct 2006: Bloomberg article on Ranson and football funds