Liverpool FC’s outcome is all about possession
There is little connection between football and business but the decision by the Liverpool FC board to sell the Premiere League club to the owner of Boston Red Sox illustrates one of the fundamentals of takeovers – bids are decided by the shareholders, not the directors.
Plenty of public company boards have found that to their cost. Cadbury’s directors bitterly opposed the bid from Kraft but the shareholders were happy to ignore them and accept: in the end, the UK board saved face by backing the Americans – and following their investors.
Liverpool FC’s owners are the Americans Tom Hicks and George Gillett and it is their shares the board, chaired by Martin Broughton, thinks it is selling. If owners think their directors are not acting in the shareholders’ interest they can replace them - and Hicks and Gillett have done just that, replacing two Broughton supporters with two of their own fans.
Yet the football club has complications not seen in most public company takeovers. Broughton claims the owners told him that only he could make board changes and that he had the right to decide Liverpool’s buyers. The courts will decide if that is so.
And there is another complication. Are Hicks and Gillett really the owners? For the moment, yes, but it seems they have pledged their shares in Liverpool to the club’s bankers as security: if the bank declines to refinance the debt it can take possession of those shares and is thus in a position to sell them to the owner of the Red Sox baseball team.
The courts may well decide that too. Repossessing the shares is not automatic. At a normal company the bank could put the company into administration, become owner of the assets and sell them to another party to recover its debt. It can do that at Liverpool, but League rules would mean the club suffering a nine-point penalty – nine points Liverpool has not got and which, if it led to relegation, would, severely damage its sale value. The Red Sox group will not want to pay £300m for a non-Premier club.
Even though this is a football club, perhaps we will see a rare outbreak of common sense and compromise, but this game is about possession and for the moment, it is Hicks and Gillett who have the ball.