Window shopping at Sevco

When is a takeover not a takeover?

In the period running up to Craig Whyte’s purchase of Rangers many in the green and white internet made much hay with the term “fakeover”.

“Subject to paperwork” was the term coming out of the billionaire’s PR people as the delays seemed go on and on.

Despite having “wealth off the radar” Craigy boy seemed to having trouble raising the finance to close the deal.

Given that it was Rangers then the Glasgow hacks were, as always, gleefully gullible and they didn’t ask any difficult questions.

For the avoidance of doubt those are the ONLY questions that any journalist should ask.

Ultimately the takeover did go through and, as we know, Craig Whyte bought Sir David Murray’s shares and cleared the bank debt.

For the hacks this was proof of the billionaire’s net worth although some of us demurred.

Although only a single pound changed hands that is how you get control of a company.

You buy shares.

Now with Rangers International Football Club some things remain the same from the old club as we have some people who seem to want to buy the Clumpany without spending any money.

I spoke to a top sports lawyer in the UK. He has handled complex cases for the big boys in the EPL including takes overs-aggressive and otherwise.

He mercifully put it in simple terms for me:

“If you want to but a football club you buy shares to give you control, there isn’t another way of doing it”.

He reminded me that the 2006 Companies Act was the biggest act ever passed by the Westminster Parliament and that this takeover process was covered by statute.

He thought that the goings on around RIFC was “very odd”.

Moreover, he thought that the decision by the current regime to go to court about the attempt by the New Knights to get on the agenda for the AGM was, at best, a miscalculation.

Not surprisingly he didn’t criticise the lawyers involved.

He guessed-and it was just that, a guess-that focusing on the verification of signatures was a small print play to try and block something.

However, even if the RIFC board had been successful it would have been something of a Pyrrhic victory.

He told me if he were advising the chaps at the top of the Magic Staircase in Edmiston Drive that he would tell them to involve the Takeover Panel.

These chaps in London can order a “Put up or shut up” order.

He made the point that the ongoing speculation about the governance of the company isn’t doing their business prospects any good.

Moreover, the press campaign against the competence of the RIFC board could be commercially damaging and the Takeover Panel would essentially call the bluff of any pretender.

“You get control of companies by buying shares” he told me.

“If you have twenty five per cent then a Special Resolution can’t be passed without your approval.

“Thirty per cent is another key threshold. If you achieve this then you must make an offer for the other seventy per cent of shares. Moreover, it must be a genuine offer and, once more, the Takeover Panel  checks on this.

“At fifty one per cent you have, of course, total control. If you acquire seventy five per cent then you can pass Special resolutions on your own and if you’ve got ninety per cent you can force out the other minority shareholders.

“It really is that simple, if you want control of a company you buy shares and there isn’t another way of doing it.”

He pointed out that putting, say, Paul Murray on the board through this campaign was, in his opinion, “…just a recipe for instability…” precisely because they would not have a controlling interest in the company.

He reminded me that the only way that you can buy a company without spending your own money is to spend someone else’s cash.

The Leveraged Buy Out (LBO) is what happened to Manchester United with the Glazers from the USA.

However, a target for an LBO is a company that is making good profits and is cash rich.

The money for the takeover is borrowed and the profits then finance the borrowing, so the Old Trafford outfit was perfect for this move.

However, RIFC/Sevco is a loss making business with no credit line from a bank.

By their own admission the cash reserves will be down to the last £1 million by April.

My legal chap thought this was a very tight margin for a football club with 92% wages to turnover ratio.

The reality is that unless someone wishes to acquire Ibrox as a hobby farm then putting a new face or two into the Blue Room will not alter the trajectory of HMS Sevco away from the rocks.

He was quite clear that the decision in the Court of Session yesterday doesn’t change a thing.

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