Here is the address that was given by the Chairman of the Swansea City Supporters’ Trust, Phil Sumbler at the Supporters’ Trust Members Consultation event that was held at the Liberty Stadium this evening.
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Good evening and thank you for taking the time to attend tonight. This Trust Forum is designed to be the start of the consultation process with our Members regarding the outcome of our discussions on the shareholding position of the Trust, and also providing an update on the Trust’s legal options arising from the recent sale of the football club. Overall, we hope this is an important step forward in resolving the issues that we outlined to you during the Trust Forum last October.
As a Trust board we are very aware that, from the outside, it can appear that these issues have dragged on for too long and it is indeed almost twelve months since the sale of the club was completed. As stated in previous Trust statements, it was agreed with Steve Kaplan and Jason Levien in December that we would postpone discussions on the Trust’s shareholding until the end of the season. At that time, it was key to all parties that everyone was focused on securing Premier League status for a seventh season.
As we all know, that status was secured back in May and it was almost immediately after the final whistle blew at Selhurst Park that we re-opened discussions, initially over the telephone and then, in person, immediately following the West Brom game when discussions took place between myself, Will Morris, Jason Levien and Steve Kaplan.
Before we go into detail on the result of those discussions, it is only fair that we bring you up to date on events since our last major Forum on this subject back in October.
In that address, I talked about how we had been excluded from the deal by the selling shareholders. Subsequently, we have talked about the fact that we have been trying to build relationships with the new owners and key personnel such as Chris Pearlman within the club.
It was also around that time that Stuart McDonald replaced Huw Cooze as Supporter Director, and Stuart has spent much of the last 8 months building on his role and ensuring that we – as an organisation – are involved in key decisions that affect the football club both on and off the pitch.
We have had some clear examples of our increased engagement over the last eight months which include, but are not limited to:
- The removal of Bob Bradley as manager and the subsequent appointment of Paul Clement;
- The much more successful January transfer window during which the club made some key signings who helped us ensure our Premier League status;
- An understanding of the process of scouting and signing players, ensuring that we continue to build on the most recent successful transfer window;
- Plans for future development of the club commercially and also regarding the discussions with the local council regarding the stadium lease;
This – for me – has shown that we have created and developed, with the will of all parties, a consultative approach to how the football club is run and I firmly believe that we have forged a strong working foundation which will continue to grow over the course of the coming months and years.
As a Trust, we have never shied away from any discussions with the owners or key personnel in ensuring the interests of our Members are represented, and also reiterating our feelings towards the sale, and indeed the passion of our membership towards the people who ensured that the Trust were kept away from that table for so long.
For their part, Steve Kaplan and Jason Levien have always acknowledged our feelings on it and have been true to their word in undertaking those discussions at the end of the season, as agreed back in December. I believe this serves to highlight that Steve and Jason wish to work with us and ensure that we can move forward with a solution that works for all parties.
Before I proceed it is key to understand that we cannot turn back the clock and be fully included in the sale that happened last summer. That would be ideal and I am sure that there are many of us, not just in this room, who wish that would have happened, as many of the problems of last season would never have arisen. What we have been focused on for the past twelve months, and especially so in the last 6 weeks, has been to work towards what is the best deal for the Trust, both now and in the future, to ensure that we are never talking about these situations again. I am pleased to confirm that I believe that both Steve and Jason are working to those same goals.
We have always been very open in informing everyone that we continued to seek legal opinion on the sale and that ultimately it is not myself or Stuart, or even the wider Trust board, but the Members that would make the final decision as to how we progress. It is merely the role of the Trust board and those of us in key positions to ensure that you are presented with facts and our recommendations as to what we believe is the best way forward for us as an organisation.
Over the last few months we have been engaged with a highly recommended QC, one of the foremost experts in the UK specialising in cases of unfair prejudice. It is his guidance that the Trust has a strong case for unfair prejudice, should the matter go to court.
However, there are a number of things to note at this time. If the Trust is successful in winning such a court action, the remedy would most likely be to compel the majority owners to buy out the Trust’s shareholding in its entirety. The clock cannot be turned back to before the sale. This could mean the Trust would have a significant amount of money in the bank for a rainy day. On the other hand, the Trust would have no stake and no say in the running of the football club. Also, there are no guarantees when it comes to court cases – they are expensive (the Trust has incurred fees of over £30,000 to date), can take months or even years to complete and are ultimately unpredictable. There would be no guarantee of victory. Our QC has also advised that legal action should only ever be a last resort after negotiations break down. This is a view the Trust board has always agreed with, as it understands the destabilising effect that legal action will have upon the Trust and the Club.
In terms of those negotiations, there have been numerous discussions over the last two months between myself, Jason Levien, Steve Kaplan, Stuart McDonald and Chris Pearlman in an attempt to make progress. Jason, Steve and Chris have all been aware that it has been our intention to communicate with members before the end of this month and they also know that any proposal would need to be presented to the members, and voted upon, before we could proceed further.
I am pleased to say that discussions have proven to be productive and I would like to outline the offer that has been made by our majority shareholders which we – as a Trust board – are recommending is an offer we proceed with, subject to further legal discussions. The offer is as follows:
- An immediate purchase of 47,500 of the Trust shares (5% of the total shareholding of the club) at the same price that was agreed with the sellers last summer. This includes an additional payment that was conditional on the football club retaining Premier League status in 2016/2017.
- A further purchase on an annual basis of 4,750 shares (0.5%) every year for the next five years at the same price, subject to the football club retaining Premier League status. In the event of relegation, the purchase option will start again when the club returns to the Premier League.
- A call option where Steve Kaplan and Jason Levien have the right, but not the obligation, to purchase a further 28,500 shares (3%) within the next 2.5 years, at the same price as above.
This is the basis of the offer that we have in front of us, however there are some other considerations to take account of, these being:
- We have been asked to consider a reinvestment of 20% of these sale earnings back into the club, in the event of any future stadium expansion. There are a number of open questions regarding this, and we do not have any further information at this time, however be assured that any proposal would require member approval at that time.
- The Trust has obtained tag along rights with regards to its remaining shareholding, as part of any future sale by the majority shareholders. This basically will protect the financial value of our shareholding, with any sale being on a par with that of all other shareholders and ensure that we cannot be left out of any future sale of the football club. However, as part of this agreement, we will need to agree to a drag along clause which will mean that we could be forced to sell our shares in the event of a sale.
- Part of the money to buy the Trust shares will be coming from Huw Jenkins. We are aware of the views of many of our Members regarding the position of Chairman, and have shared these viewpoints with Steve Kaplan and Jason Levien, however they remain very firmly supportive of him and the role that he has played in the development of the club. As part of this support he will participate in any share sale we undertake, over the next three years. As part of this we will work with Steve, Jason and Huw to ensure that the club continues to develop as it has done over the past six months, with appropriate structures and processes in place to ensure all parties are judged in terms of their performance. Between Steve, Jason, Huw and the Trust, this makes up over 90% of the shareholding of the club and it will be key to all of us to ensure that the club is successful and run properly.
- Accepting this offer means that we cannot proceed with legal action in relation to the initial sale.
Whilst there will be further legal contractual discussions if this offer is accepted by the members, the mentioned details of this offer will not change. It is the recommendation of the Trust board that we accept this offer as we feel that it is in line with our broader aims and provides some important benefits to the Trust and its members, which include:
- The Trust retaining a stake in the club. We have always stated that this is our ideal objective, although worth remembering we have never ruled out a sale in the right circumstances.
- We retain a director on the board who has formal meetings on a weekly basis with key personnel at the football club, including the COO and the Financial Controller, as well as regular communication with the Chairman. This also gives us rights to some key club information such as monthly management accounts and cashflow forecasts, so that we can ensure the club is not heading in the wrong direction off the pitch.
- In addition, we have an associate director position, currently held by Will Morris. Whilst being an observer role with no voting rights, Will continues to attend board meetings and provide a second Trust perspective to those meetings.
- Consultation on any and all key decisions relating to the football club. A good example of this relates to managerial changes as we saw this season.
- Retain the financial value of the Trust shareholding. A 21% stake in a Premier League football club can be worth a lot of money, and this sale allows us to realise part of that. This deal will also protect the value of that remaining stake.
These things are key to all of us here today and we should remember that these are some of the reasons why we were set up in the first place back in 2001. What this deal would also do is strengthen the financial position of the Trust, with millions coming into the Trust bank account (and potentially even more over the next few years) whilst retaining these key benefits. For many years we have been a flagship Supporters Trust and this would allow us to progress further and open up many other potential avenues for us as a Trust. Also, should the worst case scenario happen in the future, then a Trust with a huge fighting fund could also act as a safety net to ensure the continuation of football in our city in the future.
As a Trust board, we appreciate this is not an easy decision and we have discussed at length the pros and cons of this deal. We learned last summer that, no matter how close you can work with people, they can exclude you from things if they see fit, so agreeing the drag-along and tag-along provisions are key to ensuring that does not happen in the future. We accept it could mean that we end up being dragged into an inappropriate sale but the reality is we know we cannot legally prevent the other shareholding being sold anyway. We feel the benefits of protecting our shareholding value through these provisions significantly outweighs the potential downsides.
The issue of Huw Jenkins remaining as Chairman, and participating in this deal, has obviously been a major discussion point. The Trust board is well aware of the views of a substantial section of our members, in particular in relation to events during the sale. However, as we stated earlier, Steve and Jason are very firm in their backing of Huw Jenkins continuing in his role in the future. Adding that to the fact he already retains a shareholding in the football club, we do not see this as stopping us recommending this deal.
In terms of the staged payments, we have spoken to Steve and Jason about independent valuations of the club every summer should the 0.5% sale clause be triggered, however there are concerns that this would prove to be timely, costly and lead to further dispute. Whilst it is likely the value of the football club will increase as TV revenues rise, it is also possible that the fair value of the football club could decrease in the future, for example if we were relegated and then promoted. We should also remember that remaining 10%+ shareholding will remain, so if the value of the football club does rise, this will be reflected in any future sale.
One thing it has not been possible to obtain agreement on relates to protection against dilution. However, we believe this deal helps safeguard against that issue to some degree. With a substantial fund in the bank, we could use that to participate in any future share issue and retain our shareholding. As a Trust, we have grown to accept that investment in the football club may be necessary in order to take the club forward. Whilst both Steve and Jason have stated that they have no immediate plans to issue new shares, we have to accept that things like stadium expansion are unlikely to occur without equity being raised or debt being taken on.
As I have stated, it is the recommendation of the Trust board that we accept this offer. However, there are two other potential options.
As outlined previously, we have strong legal guidance that we could pursue a case for unfair prejudice which, if successful, would likely result in the sale of the entire Trust shareholding. As we said earlier, it is the view of the Trust board, and indeed our QC, that legal action should be a last resort if we cannot negotiate a settlement. This has already proved to be expensive for us – fees are currently in excess of £30,000 and growing and any subsequent legal case will cost many more times that, with no guarantees of success. Such legal action would also undoubtedly be distracting and harmful to the football club and would certainly impact heavily on all aspects of our relationship with the club. If it is the view of the members that legal action is the course to take then we will of course honour that, however it is the view of the Trust board that the offer on the table is a more attractive course of action.
A third option is the “do nothing” strategy – we retain our shareholding, but do not proceed with legal action. As a Trust board, we also do not believe this is the right option. Whilst it may be possible to protect the financial value of our shareholding, we would not gain any additional rights by doing this. We believe the option of obtaining a “rainy day fund”, whilst preserving our existing rights and relationships developed over the last 8 months, gives us the best of both worlds.
As I said at the start of this address, this is the start of the consultation period and there is no final decision we can make this evening without a full consultation and ballot of our full membership in the coming weeks. However we wanted to take this opportunity to outline to you our position and recommendations and would now like to take a short 10 minute break before reconvening with any questions that you will have for us.
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With this consultation process now underway, only members at the time it was launched – 29 June – will be eligible to vote in a subsequent ballot.