Liverpool Fans Revamp Buyout Bid
In January last year, ShareLiverpoolFC (SLFC) made a splash as a scheme launched by supporters to purchase the club. SLFC aimed to raise £500m from 100,000 Liverpool fans paying £5,000 for a single share. Eighteen months later, the original common criticism of this scheme — that the buy-in price was simply too high for most fans to participate — has been addressed, with the share cost cut from £5,000 to £500 in the new proposal SLFC announced on Friday. Is the revamped scheme likely to lead to a concrete bid this time?
Though SLFC have not come close to achieving their goal of 100,000 members purchasing Liverpool FC (and hence the revised takeover proposal), they have taken significant steps forward as an organisation in the past eighteen months, now guided by a Board and Steering Committee with impressive experience across a broad spectrum of professions.
In June of last year, the Financial Services Authority approved ShareLiverpoolFC as a not-for-profit Industrial and Provident Society. Shares would not be tradable, establishing a one-member, one-vote principle critical for ensuring the membership scheme will always be equitable.
The key for SLFC has been gaining momentum for the scheme amongst Liverpool supporters’ groups. Prominent SLFC figures such as Rogan Taylor have worked to push the scheme to overseas Liverpool supporters groups, especially in Ireland and Scandinavia. The registered SLFC membership certainly reflects Liverpool’s nationwide and global appeal, with only 21% of the members coming from Merseyside; 35% are from elsewhere in the UK and 44% are from overseas (particularly Ireland and Scandinavia).
And in the UK, SLFC have gained the support of the Spirit of Shankly (SOS), a prominent Liverpool supporters union, for their plans (unfortunately, you may only have heard of the SOS from this unpleasant incident).
The SLFC and SOS partnership is an important step, made at the behest of the government’s then Culture, Media and Sport Secretary Andy Burnham who “made it clear that one single voice was required if any action was to be taken by supporters in relation to ownership of the Club”, according to SOS’s EGM minutes. Burnham proved to be a strong supporter of the scheme, telling a large gathering of Liverpool supporters in August 2008 that “If we all believe, then this is achievable.”
In the eighteen months since its launch, SLFC has attracted close to 10,000 registered members. 6,000 of these said they were prepared to pay £5,000 for a share under the original proposal — and 40% of those said they would pay more than £5,000. The collaboration with SOS brings in another 2,500 members committed to ownership of the club.
SLFC have gained support from numerous prominent ex-Liverpool players such as John Barnes and John Aldridge as dissatisfaction over the running of the club by Hicks and Gillett has grown. Indeed, each misstep by the present owners only reinforces the original stance of SLFC against debt-ridden private ownership that the fans would ultimately be paying the price for.
Liverpool’s Debt Problem
The proposal aims to give fans control of the team and at the same time to remove the burden of debt on the football club that has resulted largely from the leveraged buyout of the club by Tom Hicks and George Gillett. According to the Telegraph, “Liverpool and its holding companies owe £350m to two banks, Royal Bank of Scotland and Wachovia. The football club is liable for £105m of the debt, with its holding company Kop Football Ltd responsible for the remaining £245m.”
Notably, Liverpool FC made a net operating profit in 2008-9 of £8.4 million, but significant losses totalling £42.6 million came from the holding company’s servicing of interest payments mainly thanks to the debt burden from Hicks and Gillett’s purchase of the club (the holding company, Kop Football Ltd, are currently renegotiating their loan with the Royal Bank of Scotland).
The New Share Liverpool Plan
In the new proposal, SLFC aims to raise £150 million from 20-25,000 fans, which would translate into a roughly 60% share of the club — the rest of the money needed for their takeover would come from a commercial partner. Here’s how the plan breaks down:
- £10 million to come from the sale of £500 shares in ShareLiverpoolFC on a one person, one share basis
- £140 million to come from shareholding fans acquiring SLFC Loan Stock which gives them a return of 2% a year
- A commercial partner to invest £100 million in return for a 40% interest in the Club, through a combination of loan stock and equity shares
This would raise in total £250 million to put towards paying down the current £350 million of bank debt. The scheme then proposes that the £100 million balance of current bank debt would be exchanged for convertible loan stock in Liverpool FC, “which SLFC would have rights to acquire from the banks in equal annual instalments over a 20 year term. Acquisition and conversion of the LFC loan stock would eventually raise SLFC’s equity interest in the Club to 71%.”
Importantly, SLFC has now provided avenues for profit for individual investors and has a plan to attract commercial involvement.
The new proposal, then, certainly solves several of the obvious obstacles that the original idea had built in. SLFC now need less people to sign-up for less money to get the scheme going, and the past eighteen months have shown that there are also thousands willing to pay more. By providing a small return on the larger investments in a separate Loan Stock, but retaining the one share, one vote principle for the ownership of ShareLiverpoolFC, SLFC have found a way to encourage fans to give more without sacrificing control to richer investors.
It suddenly seems a lot more realistic for this scheme to grow wings, though the sum of money needed remains enormous, and finding a commercial partner for a large share of the investment will be a challenge when it’s known they would always be a minority partner to supporter ownership — there is no precedent for this at the top of British football.
But the continuing viability of membership-ownership at peer clubs in Spain and Germany, along with the success of the Supporters’ Trust movement led by Supporters Direct at the lower levels of English football, provides plenty of precedent for successful supporter ownership, and the scheme matches the stated desires of the British Government and UEFA to encourage supporter control. Hicks and Gillett are continuing to dig a hole that one suspects more and more Liverpool fans will feel that only they can get themselves out of by taking control of the club.