New Board Director Confirmed - Mark Attanasio

[MrBunce 245]

29 minutes ago, essex canary said:

As there is a Companies Act reference in Resolution 2 that in itself makes reference to conversion to ordinary shares, that assessment seems logical.

Yes that's right. Assuming the C shares are alike the A and B, they are not ordinary shares (as defined by section 560 of the Companies Act), that's because they only have a right to fixed return of capital (being the amount paid up plus accumulated dividends).

For those wanting a cure for insomnia, section 561 provides for pre-emption rights (i.e. must make the offer to other shareholders). Section 570 allows for the company to disapply the pre-emption rights via a special resolution. 

[PurpleCanary 5,553]

2 hours ago, MrBunce said:

I don't have the documents so I am also finding it rather hard to follow. 

Reading the resolutions, they are not, in my opinion, well drafted. My wife, a corporate lawyer, also thought the drafting could be improved. 

My interpretation of the screenshots in this thread is that the C shares can be converted into a maximum of 10% of the ordinary shares. That seems to now be the consensus. 

Three thoughts not covered by other posters. 

1. Resolutions 2 and 3 are special resolutions. These require 75% of ordinary shareholders to pass. If, as speculated, MA has bought Foulger's shares, then that makes passing these special resolutions a formality (like the general, 50% ones). It is much easier done with Foulger 'onside'. 

2. I'm disappointed that the club hasn't been more transparent and clear about the purpose and nature of the resolutions. Resolution 2 and 3 are very important. They remove a very important right of us shareholders (pre-emption right, i.e. The right to participate in the equity raise and thus avoiding being diluted, resolution 2) and a change to the articles (i.e. The shareholder rules, resolution 3). The reason that these require a supermajority is to protect shareholders as these changes are significant. In this case, the shareholders are fans and custodians (albeit as a minority) of the club. In my view, the club is a community owned company. There's no obligation for the club to provide such explanatory information. However, it would be, a good thing to do, with little downside. This is especially the case because most fans/shareholders are not corporate lawyers or accountants or businesspersons. Just because this is a legal procedure, it doesn't mean it can't be leveraged into an opportunity. The fans care deeply about the club and want to understand what these significant changes mean. Good communication can turn this into something quite exciting for the club's supporters. 

3. The wording in the screenshots suggest to me that only MA, and more specifically a company he controls, is the sole purchaser of the C shares. This is because the drafting says "the holder" (rather than the holder(s)) and "its" rather than "theirs". This is potentially sloppy drafting. However, if I was putting money on it, then I would wager a corporate entity of MA's will be the sole holder of the C shares. 

Thanks for that MrBunce. Just a question/observation on 1). The combined holdings of S&J and Foulger (or Attanasio if he has bought it by then) only come to about 69 per cent of the total rather than this 75 per cent supermajority. It will need others to vote in favour, unless of course Attanasio has by then, for example, also  bought the 23,000 ex-JimmyJones shares or perhaps the 10,000 old trust shares. Entirely agree with your comments in2).

Edited August 23, 2022 by PurpleCanary

[MrBunce 245]

Thanks Purple! As you have no doubt deduced, I'm not familiar with the various shareholding blocks (though I do recall you and Mr Tilson and some others(?) having a back and forth on who owns how much a while ago). 

[BigFish 1,986]

7 minutes ago, PurpleCanary said:

Thanks for that MrBunce. Just a question/observation on 1). The combined holdings of S&J and Foulger (or Attanasio if he has bought it by then) only come to about 69 per cent of the total rather than this 75 per cent supermajority. It will need others to vote in favour, unless of course Attanasio has by then, for example, also  bought the 23,000 ex-JimmyJones shares or perhaps the 10,000 old trust shares.

Reaching a point where we can't see the wood for the trees when analysing this. I suspect that buying out the old Trust is too legally fraught to be viable. We don't know what MA objectives are, we don't know what S&J objectives are and we can guess Foulger's was simply to get his money out of the club. All will have strategies & be managing the risks that those strategies bring. This is only a first step & there are various plausible outcomes. MA looks like he is buying a minority stake in a non-dividend paying private company which in certain circumstances is worthless. The Cshares looks like a hedging of the Risk. If it all goes pear shaped (assuming he buys all £10m) he can walk away with £4.9m and get his original stake back.

[chicken 2,604]

7 hours ago, Greavsy said:

agreed a couple of people from here have replied too - all very interesting. 

Personally, as im not a share holder, im leaving the grown ups to discuss this.  

I think you give too much credit to share holders... I think some may even come along and prove this at some point.

[littleyellowbirdie 2,503]

10 hours ago, BigFish said:

Reaching a point where we can't see the wood for the trees when analysing this. I suspect that buying out the old Trust is too legally fraught to be viable. We don't know what MA objectives are, we don't know what S&J objectives are and we can guess Foulger's was simply to get his money out of the club. All will have strategies & be managing the risks that those strategies bring. This is only a first step & there are various plausible outcomes. MA looks like he is buying a minority stake in a non-dividend paying private company which in certain circumstances is worthless. The Cshares looks like a hedging of the Risk. If it all goes pear shaped (assuming he buys all £10m) he can walk away with £4.9m and get his original stake back.

That's a really nice choice of turn of phrase. I think the C shares may be a sort of good-will gesture from Attanassio injecting a fairly modest no-strings sum/loan as part of being brought into the club's leadership positions given the sums you see associated with him elsewhere. 

This thing goes both ways: Smith and Jones are rightly protective of the club, but equally Attanassio is a very canny sports businessman, so becoming a Director is a great way for him to really get a feel of the inner workings of the club and the English sport, allow people in the club to get to know him better, and maybe even start to develop a relationship with fans before actually getting to the point of being either a major or even majority shareholder, which helps the prospects of it being more accepted by fans as well in the long-term through any potential ups and downs. 

 

Edited August 24, 2022 by littleyellowbirdie

[essex canary 490]

1 hour ago, littleyellowbirdie said:

That's a really nice choice of turn of phrase. I think the C shares may be a sort of good-will gesture from Attanassio injecting a fairly modest no-strings sum/loan as part of being brought into the club's leadership positions given the sums you see associated with him elsewhere. 

This thing goes both ways: Smith and Jones are rightly protective of the club, but equally Attanassio is a very canny sports businessman, so becoming a Director is a great way for him to really get a feel of the inner workings of the club and the English sport, allow people in the club to get to know him better, and maybe even start to develop a relationship with fans before actually getting to the point of being either a major or even majority shareholder, which helps the prospects of it being more accepted by fans as well in the long-term through any potential ups and downs. 

 

Fair enough but does that explain the 7 years or why the quality of the documents and supporting papers couldn't be much better and informative to minority shareholders?

[littleyellowbirdie 2,503]

3 minutes ago, essex canary said:

Fair enough but does that explain the 7 years or why the quality of the documents and supporting papers couldn't be much better and informative to minority shareholders?

If you explain the thinking to minority shareholders, then you're effectively making the thinking public. We know what we know so far because shareholders have made the contents of their letters public. So what I infer from the way it's done is either that they don't want the end game and timescale known at this point or that everybody's interested, but keeping the options open as things progress. If I was forced to choose, I'd say the latter theory, but I have no idea what the real reasons are; the fact that things are vague and uncertain in this is almost certainly by design. 

[essex canary 490]

11 minutes ago, littleyellowbirdie said:

If you explain the thinking to minority shareholders, then you're effectively making the thinking public. We know what we know so far because shareholders have made the contents of their letters public. So what I infer from the way it's done is either that they don't want the end game and timescale known at this point or that everybody's interested, but keeping the options open as things progress. If I was forced to choose, I'd say the latter theory, but I have no idea what the real reasons are; the fact that things are vague and uncertain in this is almost certainly by design. 

Agreed that with 6,860 shareholders there are no practical possibilities to ensure that information is restricted to shareholders. Could still be unfair to the shareholders hence the dilemma that has been created by having 6,860 shareholders aside from the maintenance costs of same. Which is more important, transparency or confidentiality?

[BigFish 1,986]

21 minutes ago, essex canary said:

Fair enough but does that explain the 7 years or why the quality of the documents and supporting papers couldn't be much better and informative to minority shareholders?

Bottom line is what will be shared is the legal minimum. What is occuring with the club is being worked through by the major players and the minor shareholders are totally unimportant, probably less than that in that they are more of an encumbrance than a help.

[PurpleCanary 5,553]

Thanks to GMF I now have the two documents. As said before, I am an amateur in this, and posters to take more account of are such as GMF, Essex and MrBunce, with professional expertise in  the law/company law, as evidenced by the latter’s revelation that two of the resolutions to be voted on need a 75 per cent supermajority.

Having read through, very much with the help of their explanations (and assuming from this point on that all four resolutions are passed, and that Attanasio does then buy at least some of the new C Preference shares), I only have one question.

As has been established, the £10m figure is nominal. C shares with a nominal value of £1 will be created up to a total nominal value of £10m, so up to 10m shares. But it is impossible to know how much Attanasio will spend. It might be £10m but it could be any amount. For example, he could buy 1m shares at £50 a share, so spending £50m. Or it could be 1m at £5, so only £5m. However in talking about redemption rights the Articles seem to treat £10m as an actual rather than nominal figure. I may well be missing something here.

That particular point apart, I do have some observations, in what I hope is reasonably plain English, and bearing in mind’s this is an amateur’s view. And apologies for the length.

Firstly, the basic story here is that a means is being created to potentially allow Attanasio to put money into the club as well as into Foulger’s wallet, answering the worry that fans had that there was no practical benefit, apart from expertise. That is the hard news story the editor of the EDP/EEN could and should have had published on Monday within an hour of the documents being made public.

Secondly, in terms of the longer-term future, if I have this right, this really doesn’t change much, at least legally. There is for example no pathway here by which Attanasio can force** a takeover of the club. The potential allocation of 1m Ordinary shares is immediately scrapped (though it can always be brought back) and the redemptive trigger events (which mainly seem to be change of ownership*** or financial catastrophe!) only grant Attanasio 10 per cent of the existing Ordinary shares.

So S&J keep control, including control over the allocation of new Ordinary shares, by way of their 53 per cent holding. This doesn’t give Attanasio first refusal on buying their shares and if they sell to someone else he cannot stop that.

Thirdly, by the same token nothing in this helps or hinders S&J allowing Attanasio to take over. If they want to they can sell most or all of their shares to him, or allocate enough new Ordinaries for him to buy.

In terms of the future, this all seems neutral, which is understandable. Fans want to know what this means for ownership in the long term but this is a legal process with necessarily convoluted language, concerning the here and now, with only required caveats for the future.

As I understand it the club’s view is that shareholders now have all the information they need to make an informed decision and there is no intention to explain further. I think that is true and not true. Certainly a Plain English guide could and should be provided, since not all shareholders will be able to get a professional assessment of the proposals, but the club is not going to speculate/explain on how this might eventually pan out.

Fourthly, I do not see this as at all likely but the chances of Attansio launching a hostile takeover are increased by this. Takeovers of companies not listed on a stock market, such as Norwich City, are more difficult than those of listed companies, but not impossible. In fact S&J, with their promises to hand over the club to the right person, have actually opened the door to someone who could use that to get fans onside. Provided they proved beyond a reasonable doubt that they would be good custodians of the club then S&J, their majority holding notwithstanding, would not be able to defy the pressure of public opinion.

Imagine that Attanasio has been a director for four or five years, has put significant money into the club, with the promise of more, and has generally impressed fans with his expertise and community spirit. If S&J then refused to hand the club over he would be already be well on the way to winning the backing of fans. But I repeat, this is not likely.

Fifthly, I can bang on about my hobby-horse from a decade and a half ago of the need for a supporter-director with some limited golden-share veto rights on key heritage issues. As it stands fans no idea not so much what is being discussed privately, since a supporter-director would probably be bound not to reveal that, but no idea whether their interests are being  sageguarded.*

A supporter-director is not the answer to everything but certainly a step forward, and one Norwich City should take anyway, irrespective of what happens with Attanasio.

*I meant of course to type ‘safeguarded’ but ‘sageguarded’ seems to imply wisdom as well as security; so I left it.

**I used 'force' advisedly. There is no irrevocable steam of events here that Attanasio could use to end up as owner no matter what. There is an obvious way in which he could take the club over, but in effect it would requite S&J's blessing in the form of the sale to him of enough shares to create a majority. 

***Of course if it was Attanasio becoming the new owner then he would be entitled to 10 per cent of the existing Ordinaries on top of those he had acquired to gain majority control. But although this has been prompted by Attanasio becoming a director these Articles cannot assume that if there was a new owner it would automatically be him.

Edited August 24, 2022 by PurpleCanary

[Mark .Y. 351]

9 minutes ago, PurpleCanary said:

So S&J keep control, including control over the allocation of new Ordinary shares, by way of their 53 per cent holding. This doesn’t give Attanasio first refusal on buying their shares and if they sell to someone else he cannot stop that.

Agreed, but if they do sell their full shareholding, that becomes a "Trigger Event" which potentially changes everything.

[shefcanary 2,377]

12 hours ago, PurpleCanary said:

Thanks for that MrBunce. Just a question/observation on 1). The combined holdings of S&J and Foulger (or Attanasio if he has bought it by then) only come to about 69 per cent of the total rather than this 75 per cent supermajority. It will need others to vote in favour, unless of course Attanasio has by then, for example, also  bought the 23,000 ex-JimmyJones shares or perhaps the 10,000 old trust shares. Entirely agree with your comments in2).

To just add to the above point, in light of your excellent reading of the information, if Attanasio converts the C shares we assume he is buying and thus acquires a further 10% of the issued ordinary shares, which would be triggered by acquiring S&J's shares (the a) Trigger Event as Mark.Y has just pointed out), that is all he needs to get past 75%. So in theory, once he has passed Smith & Jones' period of good propriety test (I can't see it requiring the full 7 years set out in the legal documents) then it is done and dusted - Attanasio will be practically 100% in charge. 

So, still need to know what Attansio is actually acquiring; be it Foulger's or any other person's shares, and how many C Shares and at what price to see what is being injected into the club.  Also, will others also be allowed to buy any C Shares (they are attractively priced so I'd be interested) - I doubt it given the ability of the Board to pick and choose, but clarification is required.

Edited August 24, 2022 by shefcanary

[PurpleCanary 5,553]

12 minutes ago, shefcanary said:

To just add to the above point, in light of your excellent reading of the information, if Attanasio converts the C shares we assume he is buying and thus acquires a further 10% of the issued ordinary shares, which would be triggered by acquiring S&J's shares (the a) Trigger Event as Mark.Y has just pointed out), that is all he needs to get past 75%. So in theory, once he has passed Smith & Jones' period of good propriety test (I can't see it requiring the full 7 years set out in the legal documents) then it is done and dusted - Attanasio will be practically 100% in charge. 

So, still need to know what Attansio is actually acquiring; be it Foulger's or any other person's shares, and how many C Shares and at what price to see what is being injected into the club.  Also, will others also be allowed to buy any C Shares (they are attractively priced so I'd be interested) - I doubt it given the ability of the Board to pick and choose, but clarification is required.

Indeed, shef, but as I understand it there are potential trigger events that don't necessarily involve Attanasio - for example S&J selling their 53 per cent to me rather than him - and in that case then he would only entitled to 10 per cent of the existing Ordinaries. To be serious, those trigger events do not specify Attanasio as buyer, and indeed refer to other events apart from a takeover.

[Robert N. LiM 4,222]

42 minutes ago, PurpleCanary said:

That particular point apart, I do have some observations, in what I hope is reasonably plain English, and bearing in mind’s this is an amateur’s view. And apologies for the length.

Thanks so much @PurpleCanary. As a layman in these matters, I found this really helpful. Would urge anyone who was put off by the length of the post to make a coffee and take the time to read it. Very clear and interesting.

[BigFish 1,986]

15 minutes ago, PurpleCanary said:

 for example S&J selling their 53 per cent to me rather than him

Go on @PurpleCanary, buy yourself a trainset

[shefcanary 2,377]

24 minutes ago, PurpleCanary said:

Indeed, shef, but as I understand it there are potential trigger events that don't necessarily involve Attanasio - for example S&J selling their 53 per cent to me rather than him - and in that case then he would only entitled to 10 per cent of the existing Ordinaries. To be serious, those trigger events do not specify Attanasio as buyer, and indeed refer to other events apart from a takeover.

Indeed.  What is their "plan"? If we knew we could all just get on with more important things, like just when will they increase the number of pieces of scampi in a meal in the Gunn Club? 🙂 

[nutty nigel 7,506]

Thanks for your insights @MrBunce👍

[GMF 735]

Just to add to the debate, let’s presume for a moment that the c-preference shares aren’t redeemed for cash in seven years, or sooner by a trigger event, but the conversion option is exercised up to the maximum 10% threshold for the ordinary shares issued, assuming I’m reading the documents correctly, that’s an additional 61,691 ordinary shares.

So what, I hear you say - well, if all the c-preference shares are actually issued at the notional £1.00 value, equivalent to £10,000,000, that’s the equivalent to just £162 a share! While that may get existing shareholders excited, especially if there’s subsequently an offer to purchase existing shares, it also seems ridiculously expensive!

Upon future reflection, maybe the second paragraph of the first resolution needs revisiting and shouldn’t be dismissed so quickly. There’s still an opportunity for the pre-existing option to be exercised, not necessarily in full, but, maybe in part? 

As always, the views of others are welcome.

[Mark .Y. 351]

1 hour ago, PurpleCanary said:

Indeed, shef, but as I understand it there are potential trigger events that don't necessarily involve Attanasio - for example S&J selling their 53 per cent to me rather than him - and in that case then he would only entitled to 10 per cent of the existing Ordinaries. To be serious, those trigger events do not specify Attanasio as buyer, and indeed refer to other events apart from a takeover.

I think the trigger events are just for his safety, are they not ? It looks like the plan is that he works with D & M for a period and then gains full control of the club. So his purchase of the C shares will provide a cash injection for the club and I guess at that stage he is still vulnerable to D & M selling the majority shareholding to somebody else - who he may not want to work with. So this particular trigger event provides him a safe, non-costly exit from the club.   

[BigFish 1,986]

On 05/06/2022 at 13:35, BigFish said:

Nice one @PurpleCanary.

With the caveat that I am a FPA not a expert I think there are two quibbles. One is the must in the 90% paragraph, I think this gives the majority shareholder the right to buyout the >10% whether they want to except or not but this is not an obligation.

Secondly, if the club was valued at £100 million this would value each share at more than £162. So the US team could buy a quarter of a million unallocated shares at that price, remain under the 30% threshold and the club would be £40 million better off.

 

On 05/06/2022 at 22:50, GMF said:

“£162 a share!”

Looks like the guild of fag packet accountants has well and truly returned.

Where’s Tangie when we need him? 😉😜

 

1 hour ago, GMF said:

Just to add to the debate, let’s presume for a moment that the c-preference shares aren’t redeemed for cash in seven years, or sooner by a trigger event, but the conversion option is exercised up to the maximum 10% threshold for the ordinary shares issued, assuming I’m reading the documents correctly, that’s an additional 61,691 ordinary shares.

So what, I hear you say - well, if all the c-preference shares are actually issued at the notional £1.00 value, equivalent to £10,000,000, that’s the equivalent to just £162 a share! While that may get existing shareholders excited, especially if there’s subsequently an offer to purchase existing shares, it also seems ridiculously expensive!

Upon future reflection, maybe the second paragraph of the first resolution needs revisiting and shouldn’t be dismissed so quickly. There’s still an opportunity for the pre-existing option to be exercised, not necessarily in full, but, maybe in part? 

As always, the views of others are welcome.

I thought that figure rang a bell

[GMF 735]

@BigFish Impressive digging. Me thinks that are are conflating two completely different points and those figures are, as a consequence, coincidental!

If (and if is doing a lot of heavy lifting) the investment in c-preference shares is £10m and, if the conversion to ordinary shares is 10% of the allocation shares, then that’s the equivalent of £162 a share.

[BigFish 1,986]

9 minutes ago, GMF said:

@BigFish Impressive digging. Me thinks that are are conflating two completely different points and those figures are, as a consequence, coincidental!

If (and if is doing a lot of heavy lifting) the investment in c-preference shares is £10m and, if the conversion to ordinary shares is 10% of the allocation shares, then that’s the equivalent of £162 a share.

Agree, it is most probably a massive coincidence but at £162 per share what does that actually value the club at and is that unreasonable for a debt free Champs club?

I take it that you and the Trust got a bargain out of Archant for their shares?

 

[The Raptor 1,196]

Chase still has a few shares doesn't he? Chase out!!!!

[GMF 735]

18 minutes ago, BigFish said:

Agree, it is most probably a massive coincidence but at £162 per share what does that actually value the club at and is that unreasonable for a debt free Champs club?

I take it that you and the Trust got a bargain out of Archant for their shares?

 

Two points; if you refer to my initial comment, my observation was that I thought £162 a share was ridiculously expensive. I still stand by that comment.

Second, the shares are unlisted securities, they’re worth whatever someone is willing to offer for them. There’s no real time pricing information readily available, which also makes valuation somewhat difficult.

Whatever personal presumptions you have regarding a possible bargain, the auction process (which included two rounds of bidding) was conducted by the Court appointed administrator. Are you really implying that they didn’t do their job properly?

[shefcanary 2,377]

3 hours ago, BigFish said:

Agree, it is most probably a massive coincidence but at £162 per share what does that actually value the club at and is that unreasonable for a debt free Champs club?

 

£162 x c. 620,000 shares would put the value at a little over £100m. I don't know, I'd think that was a bargain in relative terms.

[GMF 735]

The valuation of football clubs is notoriously difficult, not least because many are perpetually loss making.

I’ve seen examples quoted of comparative analysis (usually linked to annual revenues) discounted cash flow analysis, or, if you want to go full on Kieran Maguire, a bit of MMM, Markham Multivariate Model. All are different forms of valuation, all typically giving a range of answers (probably depending on whether you’re buying or selling!) 😉

[PurpleCanary 5,553]

6 hours ago, Mark .Y. said:

I think the trigger events are just for his safety, are they not ? It looks like the plan is that he works with D & M for a period and then gains full control of the club. So his purchase of the C shares will provide a cash injection for the club and I guess at that stage he is still vulnerable to D & M selling the majority shareholding to somebody else - who he may not want to work with. So this particular trigger event provides him a safe, non-costly exit from the club.   

Mark Y, I am sure that is all true. The point that may slightly have got lost is that although of course this is only all happening because of Attanasio, those drawing up these rules concerning the C Preference shares and conversions and redemptions and trigger points cannot assume that only he will be involved, or even that he will be involved at all. The likelihood is that it will be all or mainly about him, and as you say about a safe exit route, but in theory it could be anyone.

[Midlands Yellow 3,920]

Wait until he sees the flight and bar bills. 

[essex canary 490]

11 hours ago, BigFish said:

Bottom line is what will be shared is the legal minimum. What is occuring with the club is being worked through by the major players and the minor shareholders are totally unimportant, probably less than that in that they are more of an encumbrance than a help.

In many ways I suspect minority shareholders are an encumbrance. They were useful though when S&J didn't have enough money to buy the Club outright. Perhaps they are useful now as a kind of meat in the sandwich in the ownership percentage game? Perhaps some of us aren't impressed?