Liverpool up for sale – but who owns the club?

October 12, 2010

Liverpool football club is up for sale. But the dramatic story has an unusual twist to it. Who actually owns the club?

The developing story moves today [September 12th 2010] to the High Court for a partial answer. The putative owners, Tom Hicks and George Gillett, [H&G as we will designate them in this post] are in dispute with their own legally instituted board.

American sports entrepreneurs H& G bought the club in March 2007, in a deal which results in debts to the Royal Bank of Scotland of £240m. H&G are blocking the proposed sale of the club to New England Sports Ventures (NESV) for some £300m. A Board of Directors has responsibility to its shareholders, which usually means in practice that the will of the shareholding owners prevails. Which makes this a very interesting business case.

So what’s the problem?

Well, the usual principles become more complicated if the club is massively in debt. Liverpool is massively in debt to its bankers. Repayments of its loan are due this week. The club will have trouble repaying the loan. So it does not take too great a leap of imagination to suggest that in one sense the bank ‘owns’ the club. Not ‘owns’ legally, but at very least owns the right to exert influence. With or without any major shareholding.

The bank’s influence

The influence of the bank was shown in the terms of its financial dealing last year when it demanded (and got) the appointment of a ‘neutral’ chairman and a board structure which removed absolute power from the owners The need for such financing illustrated the weakness of the H&G position (comparable in principle the arrangements surrounding the Glazer takeover of Liverpool’s deadly rivals in debt, Manchester United.

Opportunities for a sale

The circumstances were ripe for a takeover. But the ripeness also permitted opportunities for further entrepreneurial actions, timed to take advantage of the uncertainties. The board indicated willingness to accept one of the offers, by New England Sports Ventures (NESV). The owners attempted a few weeks ago [September 2010) to sack the members of its ‘own’ board. consisting of the ‘neutral’ clairman Broughton, managing director Christian Purslow and commercial director Ian Ayre who had gone against the wishes of their American owners.

Confusion reigns

On the brink of the court hearing, and the deadline for repaying the bank loan, confusion reigns. The possibility the FA deducting points from Liverpool’s league tally has appeared to be a possible deal-breaker for NESV. There is even a second would-be buyer, Peter Lim, claiming he had been unfairly discounted by the board.

What has become clear is that the question “…but who actually owns Liverpool Football Club?” is not a straightforward one to answer. Also clear is that the Football Association’s ‘Fit and Proper Person’ criterion for club ownership will have another urgent test of its credibility in the months ahead.

A more interesting question for students of leadership: what advice would you offer the Football Association through lessons learned from the case of the board which rebelled against the owners of the organization?

And stop press

Sporting Intelligence reports high court ruling in favour of RBS and Liverpool

Cadbury Kraft takeover: More than meets the eye

January 20, 2010

Global Issue analysed by Susan Moger and Tudor Rickards

Updated: The integration of Cadbury into the Kraft Empire continues. Vince Cable, the highly respected financial figure imported from the Liberal Democrats, had made this one of his first interventions since the election to the Coalition Government, calling for a review of takeover practices.

Irene Rosenfeld made her first visit to her newly-acquired asset in October 2010.

The visit of Kraft CEO to Cadbury’s main Bournville cite in Birmingham, England continued the integration of Cadbury into the Kraft empire. The chief executive of Kraft Foods has not ruled out further Cadbury plant closures beyond the two years the firm is already committed to. Irene Rosenfeld said she was unable to offer further commitments after a visit to Birmingham’s Bournville factory. But she said it would remain “the heart and soul” of its chocolate business. Ms Rosenfeld had recently come second in Forbes magazine’s annual rankings of the world’s most powerful women, beaten only by US first lady Michelle Obama.

Asked what she was expecting with the merging of the companies, a net loss or gain in jobs, Ms Rosenfeld said: “I think it’s hard to say. It will vary area to area… We certainly understand that Bournville will remain at the heart and soul of our chocolate business and we are delighted about that. I think the key for us, though, this is a global business. We need to ensure that we are competitive on a global basis. As we bring together the combined company and we can share best practices we have the opportunity then to take the business to a new place.”

When it was suggested she was not able to make more of a commitment than at least two years, she said: “That’s correct.”

According to the Telegraph at the time of the takeover ,

The issues the review will look at include the “50pc plus one” minimum voting requirement for takeovers to go ahead; whether voting rights should be withheld from shares bought during an offer period; whether the 1pc disclosure threshold for dealings and positions in target companies should be reduced; and whether inducement fees and other deal protection arrangements should be restricted.

The review was launched by Business Secretary Vince Cable who said: “We welcome foreign investors but we want all shareholders to be empowered.” Last week [May 2010] the Panel took the rare step of publicly criticising Kraft over its acquisition of Cadbury. Its objections focused on assurances from Kraft that it would reverse Cadbury’s planned closure of its Somerdale factory. A week after winning the battle to buy Cadbury, Kraft reversed its position on Somerdale. The Takeover Panel concluded the US company should never have made its assurances on the Somerdale plant. It also criticised Lazard, Kraft’s adviser on the deal, saying the investment bank had “failed to discharge fully its responsibilities”. The Takeover Panel said it would take comments on the review of the code up to July 27.

An ealier post noted:

So the mighty Kraft finally hunted down its prey and swallowed up poor little Cadburys. Howls of protest from the UK. Nostalgia and affection for the taste of Diary Milk swept the land. One caller to a (BBC Five Live) phone-in said Cadburys was her favourite chocolate but that she would never buy any again.

In the wake of the takeover, LWD sought out an expert on Corporate Reputation for his views. Professor Gary Davies of Manchester Business School came up with several points that had been overlooked by other commentators in assessing the likely winners and losers of the takeover. He also added a more surprising comment based on his research into Corporate Reputation …

Students of Leadership

There are lessons to be learned from the Cadburys Kraft story from several perspectives. With the benefits of hindsight we might wish to consider what might have been done differently by the main parties involved. For the politically-minded, what ideas might be worth submitting to the Takeover Panel? How well do you think Irene and Vince Cable are operating?

Alcatel-Lucent: Fact and Fiction in Latest Stories

September 9, 2009

Alcatel-Lucent logo

This week, two stories about Alcatel-Lucent hit the business headlines. Both suggest further leadership challenges facing the organization. In each, it is hard to separate fact from creative fiction

Since the merger of American and French telecommunication firms, there have been a series of boardroom squabbles and upheavals in the merged organization.

Today [September 8th 2009], disturbing news over the AFL agency news-lines reported that five employees of French/American company had occupied its Italian factory at Battipaglia, near Naples, overnight and were threatening to set fire to themselves to protest restructuring at the plant

“They have jerry cans of petrol and are threatening to immolate themselves and set fire to the factory. They’re preventing anyone from getting in,” Giovanni Sgambati of the local branch of metal workers union UIL. [was quoted by News Agency AFP as saying]

He said the five employees of the telecommunications equipment giant entered the factory at Battipaglia, near Naples, overnight.

They want Alcatel-Lucent to abandon its plan to suspend production at the site,” where around 100 people work in research and another 100 in production, Sgambati said.

Alcatel-Lucent said in a statement that it was “managing the situation very attentively along with the local authorities. While we understand the concern of workers at Battipaglia, Alcatel-Lucent is working continuously with local authorities and employees’ representatives to ensure a lasting solution for the employees.”

Alcatel-Lucent, which employs around 2,000 people in Italy, announced several months ago its intention to restructure the Battipaglia factory by giving up production activities and keeping the research facilities. Italian Economic Development Minister Claudio Scajola has announced a meeting to discuss the matter Sept. 15.

The group has been through a long period of cuts and boardroom upheavals since the groups merged.

That alarming story did not have an immediate and violent end [as of September 9th 2009] and the longer term challenges to the company’s leaders regained the headlines.

The rationale for the 2006 takeover was the creation of effective competition for rival Chinese telecommunications accessory manufacturers Huawei and ZTE. But the hoped-for results had not followed the takeover, and rumours developed that a takeover was imminent.

It is not out of the question that the financial markets, especially Wall Street, are using a bit of creative license to promote stories and stock market bullishness.

Update [Sept 16th 2009]

The rumours and denials continue. Huawei’s denials fail to convince:

DALIAN, China (Reuters) – China’s Huawei HWT.UL, one of the world’s top makers of networking equipment, on Thursday denied a report it was in talks to form an alliance with Franco-American rival Alcatel-Lucent (ALUA.PA).

French magazine Challenges said the two companies had begun preliminary tie-up talks, envisioning making a certain number of products together, but had ruled out a merger.

Alcatel-Lucent shares rose slightly in Paris on Wednesday.

“The reports are inaccurate. Huawei is not in discussions with Alcatel-Lucent,” said Huawei spokesman Ross Gan. A spokeswoman for Alcatel-Lucent declined to comment to Reuters on Wednesday.

This is not the first time Huawei has scotched speculation of a linkup with Alcatel-Lucent.

Late last month, the Chinese company declared it had no plans to buy a stake in Alcatel-Lucent, two days after the latter’s stock surged 16 percent in a single session partly on market talk it could be bought by a Chinese rival.

There have been instances though where a Chinese company has said something and later done quite the opposite


Woolworths woes continue

August 17, 2008

Troubles come not singly but in battalions. The adage might be applied to Woolworths at present as it faces financial decline, a hostile take-over bid, and a new leader due to arrive next month

In June, [2008] Leaders we deserve reported on the enthusiasm with which Mr Trevor Bish-Jones took his golden handshake and departed the company.

Since then, the company has seen further deterioration in its trading position reported in July

The replacement for Mr Bish-Jones former Focus DIY chief executive Steve Johnson was recently announced as joining the firm in September

But before Mr. Johnson could get his feet under the table, the company faced its latest challenge in the shape of a takeover bid. Which it promptly rejected.

Troubled retailer Woolworths says it has rejected a bid for its network of 815 stores, calling it “unacceptable”.
Woolworths confirmed reports that the boss of the Iceland frozen food chain, Malcolm Walker, had made an offer to buy its retail division.
However, the company’s board said the proposal undervalued its assets and involved a complex restructuring, which was not achievable.

What happens next?

In the various posts on leadership reported here, there have been a number of stories of takeover attempts. The case for takeover is easier to make if the target company is demonstrating leadership problems together with financial difficulties.

The arrival of a new leader may help signal a fresh approach. It worked magnificently in the famous case of Stuart Rose arriving at Marks and Spencer to thwart to attention of predator Philip Green.

Will the arrival of Steve Johnson increase the survival chances for Woolworths in its present form? In the M&S case, Rose quickly helped put an imaginative new strategy in place.

Maybe Mr. Johnson will also provide creative leadership at a time of Corporate crisis. The initial statement from Woolworths (according to the BBC) suggests that such a possibility is the hope of the organization.

Mr Johnson said he would be focusing on “value creation for all stakeholders” when he joins the firm in September.

The retailer said it was “delighted” that Mr Johnson was joining the company.
“His strong background in both retail and consultancy, together with his particular experience in achieving a turnaround at Focus, he brings the strategic and operational skills that the Group needs to help it move to the next stage of its development.”

But what will happen between now and September? Will the battalion of its woes be successfully kept at bay?