Members of the Swansea City Supporters Trust and the rest of the club’s supporters will no doubt be aware that a consortium of US investors, led by Jason Levien and Steve Kaplan, are interested in acquiring shares in Swansea City football club. The consortium have been negotiating with some shareholders of the club for a number of months and have also been looking at the club’s books and records – a process that is called due diligence.
The primary objective of the Supporters Trust has always been to act in the best interests of the football club and its supporters. That objective remains. The Trust represents the voice of the supporters in the boardroom and in shareholder meetings and ensures the views of the club’s most important asset, the supporters, are heard in those meetings.
As we made clear in our statement on Saturday 9 April, the Trust has not had much opportunity to consider the opportunity and the merits of this potential transaction. Unlike some other shareholders, we were not aware of the interests of this consortium until 2 weeks ago. However, media coverage is correct in their reporting that negotiations have been going on in secret for a number of months.
As you would expect, the Trust Board and its professional advisors are doing that now. We understand that our members and supporters may be anxious during this period of uncertainty and we will endeavor to communicate with members and supporters as much as possible.
If appropriate, we will hold a consultation with members and if you wish to be part of any such consultation you need to ensure that you are a full member. You can join the Swansea City Supporters’ Trust online.
As part of our ongoing commitment to transparency and openness, we have put together below a Q&A based on what we already know. The Trust has also been engaging with supporters via social media and are putting in place arrangements to host a Q&A forum (full Trust Members only). Details to follow.
What is the Supporters Trust’s view in principle of having new shareholders?
To reiterate, the Trust recognises the importance of investment in order to progress the activities of the football club, both on and off the field. Fresh investment in both the squad and the infrastructure of the club is vital to continue the amazing progression we have enjoyed over the last 15 years.
The Trust also supports any effort that will increase the ability of the club to generate revenue from commercial activity to develop the club, an area where we have historically underperformed compared to our peers in the Premier League. The Trust therefore looks at every opportunity with an open mind, considers each opportunity on its merits and regularly looks to consult with its members for their views. This situation is no different.
What has been achieved in the last 15 years is extraordinary. We have enjoyed multiple promotions, culminating in promotion to the Premier League. We have experienced domestic trophy success and memorable nights playing against some of the biggest teams in Europe. We have celebrated memorable wins over Manchester United, Arsenal, Manchester City and most recently Chelsea, the last securing our continued presence in the top tier for next season.
These things will stick in the minds of supporters for a long time. But we are not naïve enough to believe that the status quo can remain forever – 15 years is a long time.
What do we know about the current deal?
We are still in very early stages of evaluating. As reported in the media, negotiations have been ongoing for a number of months. Preliminary “Heads of Terms” were signed between some of the club shareholders and the interested consortium in December 2015.
Heads of Terms is a legal document that summarises the areas of agreement between parties. It uses broad terms to set out the basis of a future contract between buyers and sellers and precludes the sellers from entering into negotiations with any other parties.
The Supporters Trust are not a party to those Heads of Terms and were not aware of the existence of this document until 2 weeks ago. No offer has been made to acquire the shares that the Trust holds in the football club and no such offer is expected at this stage.
Who are the people included in the consortium?
The two individuals leading the consortium are Jason Levien and Steve Kaplan. The Trust were invited to meet with Jason Levien on Saturday 9 April, prior to the game against Chelsea. We have not had any engagement with Steve Kaplan.
Jason Levien is a New York businessman who initially trained as a lawyer but over the last decade has been extensively involved in a range of American sports. He has acted as the representative for a number of high profile sports stars and been actively engaged in a number of deals to acquire a range of US sporting franchises. This included a consortium that acquired the Philadelphia 76ers and the Memphis Grizzlies. Jason is currently General Managing Owner of DC United, a Washington DC Major League Soccer franchise.
Steve Kaplan also has a legal background, and is a founder of Oaktree Capital Management. Oaktree Capital is a very large alternative asset management firm in the USA and holds around $10bn of assets under management for its clients. Mr Kaplan continues to hold a leadership position in the firm, but also has an interest in a number of US sporting franchises.
The two have worked together before as part of a consortium to acquire the Memphis Grizzlies, and more recently on a bid to acquire a stake in the Minnesota Timberwolves.
During our meeting with Mr Levien, he indicated that they would also be inviting other people to join the consortium, but declined to provide any further details at this stage.
Since the potential deal was announced, the Trust has been contacted by a number of US-based supporters of some of the sports franchises above. We will be following up with them over the coming days.
Is this a takeover of the club?
To all intents and purposes, yes. The terms of the deal as we currently understand it requires all the shareholders in the club, other than the Trust to sell some or all of their shares to the consortium. Following the transaction, the consortium will own approximately 70% of the shares in the football club.
Some of the current shareholders will retain a small, residual holding. However, the precise number of shares to be transferred by each party is not yet agreed.
However, some of the current shareholders have also agreed to transfer the voting rights that are attached to their residual shareholding at the time of the transaction to ensure that the Consortium has 75.1% of the voting rights from day 1.
Why is 75.1% important?
A shareholder that holds 75.1% of the voting rights would have, effectively, complete control over the important and significant decisions that are made regarding the future direction of the football club. There are a number of decisions that can only be made when over 75% of shareholders agree.
Because of the way the shareholder structure of the club is currently set up, it is more difficult for the consortium to buy sufficient shares to deliver that level of control, whilst also maintaining continuity of involvement from both the Supporters Trust and Huw Jenkins as chairman. The consortium have indicated this continuity is important to them.
However, we have to presume that acquiring 75.1% of the voting rights is also important to the consortium, in order for them to deliver their plans for the future of the club. It is a pre-condition of the deal that some of the shareholders who retain a small shareholding in the club will effectively transfer to them a proportion of their remaining voting rights immediately, which will deliver them that level of control.
The Supporters Trust are not being asked to transfer any of their voting rights.
But there is a lot of press coverage that talks about continuity?
This is true. As we say above, the Trust is not being asked to sell any shares and immediately after the deal takes place, we will still hold 21.1% of the shares in the football club. We have received assurances from Mr Levien that the Trust will continue to have a representative on the Board.
Mr Levien also emphasised the importance of continuing supporter engagement. It was an important condition for the consortium before making the offer that Huw Jenkins continued to have a leadership role at the club. Huw Jenkins has been a tremendously effective Chairman of our club and we fully support his continued involvement.
Could the new owners forcibly remove the Supporter Director later if they wanted to?
Not at the moment.
A Shareholders Agreement currently exists between the current shareholders that entitle any shareholder owning 5% of the shares in the football club to appoint a director to the board. This shareholder agreement binds the current shareholders and their successors (ie anyone who subsequently acquires their shares).
We understand from our meeting that the new owners wish to enter into a new shareholders agreement should they acquire shares in the club. However, at this stage we have not been provided with any details of what the proposed terms of such an agreement will be.
As you would expect, our professional advisors will review any such agreement before we agree to enter into it.
Will all of the current directors remain on the board after any transaction is complete?
We believe this is unlikely. Some shareholders are expected to sell their entire holdings and therefore it would be inappropriate for them to remain on the board.
Some of the shareholders are choosing to retain a smaller residual holding after the transaction is completed. Inevitably, some will end up owning less than 5% of the shares, in order to allow the new consortium to acquire the number of shares they require.
It is not clear at this stage whether it would be appropriate for those who hold a small future shareholding to remain as directors of the football club.
How is the purchase being funded?
As reported in the media, the deal currently values the whole of the club at about £100m.
The Trust understands that Mr Levien and Mr Kaplan will be providing the majority of the funds for the purchase of the shares they are looking to acquire themselves. There is no suggestion at this stage that the consortium would try to subsequently transfer the costs of the acquisition onto the football club after completion – for example in the form of debt.
However we have not seen anything in writing (for example in a legal document) that either confirms this to be the case or would prevent them from subsequently choosing to do so.
Can the Trust do anything to prevent the takeover if it wanted to?
No. The other shareholders are entitled to sell their shares to whomever they wish.
Under the Shareholders Agreement, the sellers must first offer their shares to the Supporters Trust (under so called “pre-emption rights”). However, the Trust does not have the funds to acquire any meaningful amount of shares from the current shareholders on the same terms being proposed by the Consortium.
To date, none of the current shareholders have made any offer to the Supporters Trust to satisfy our preemption rights and the Supporters Trust has not waived those rights.
The Supporters Trust made an offer last year to the current shareholders to acquire 25.1% of the shares in the football club, but that offer was declined.
Are the Trust being asked to sell any of their shares?
So what happens next?
We will be arranging a Q&A forum for full Trust Members on Thursday 14th April. As mentioned previously there is no offer on the table for the Trust’s 21.1% stake so there is no decision for the Members to make, however we appreciate that our Members will have a lot of questions at this time.
As with the previous American interest, we will also be performing our own due diligence on those looking to take over the club. This will take many forms, part of which will be following up with supporters groups from Mr Levien and Mr Kaplan’s other clubs in the USA.
As a Trust we have an open mind on the interested parties and investment in general so we will also seek to engage with Mr Levien and Mr Kaplan in order to more fully understand their plans regarding our football club.
Ultimately we will only ever seek to ensure that anyone interested in taking over our football club has the long term interests of our club at heart and will help continue the remarkable success story we have enjoyed in recent years.
You can keep up to date with further statements and announcements on this website or on social media by following the Swans Trust on Twitter, Liking the Swans Trust Facebook page or joining the Swans Trust Facebook group.