Swansea City Supporters' Trust

Trust Forum Address

Here is the address that was given by the Chairman of the Swansea City Supporters’ Trust, Phil Sumbler at the Trust Forum that was held at the Liberty Stadium this evening.

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Good evening everyone and welcome to this open forum hosted by us at Swansea City Supporters Trust. For those of you I have not met before my name is Phil Sumbler, Chairman of the Supporters Trust.

The purpose of being here this evening for this open forum is to discuss primarily the potential sale of shares of Swansea City Football Club to any outside interest which at the moment comes from American businessmen John Moores and Charles Noell. You will note that I have not used the word investment which is widely bandied about in the media and there is a specific reason for that, in so much as the sale of shares for the reported sum of £30 million will not be an investment for our football club but a sale of shares by the private individuals who sell them. It is important as we go through the evening for everyone to remember that particular statement as it is so often misconstrued when discussions on the subject take place.

I will shortly open the floor to questions for any of the Trust board that you wish to ask, but before I do that I would like to take this chance to talk to you about our role in this proposed transaction and where we currently stand as a board and an organisation that – at the start of this week – had a total e-membership of around 12,000 but a paid membership of 1,133.

What is a paid membership you may ask and you would of course be right to do so. We have tried to convey in our newsletters of the past two years that we have two levels of membership. An e-member is enrolled as part of their season ticket package and will receive our regular e-newsletters and our main newsletter at the start of every season. A paid member will pay a subscription of £10 per year (less for concessions) and be entitled to a vote on anything on which the membership needs to vote. That is important for people in here to be aware of, as if or when this deal comes to the point where we need to consult with our members then it will be the paid membership that we consult with.

Please do not be alarmed if you are not a paid member at the moment – we have the facility here this evening for you to join and I would ask that you see Jim or Duncan at the end of the night, who will help you through the process. Please share this information with those that you go to games with as well because – with the greatest will in the world – we cannot speak to all 12,000 of our e-members individually so it is important that you all spread the word where possible. You can pay for your Swans Trust membership online.

That is my plea for the evening over and done with, so now onto the sale of shares and the Americans. At this point it is right to say that we have no formal offer that we can discuss with you in terms of what it means for us – both as a club and as a trust – and it is also fair to say that things have very much gone quiet in terms of getting a deal on the table. As an organisation – and also a large shareholder in the club – we are not pushing to draw it to a conclusion, the sale is being sought and encouraged by other shareholders in the club, so we sit and wait for things to move at their pace. This is not to say that the potential purchasers of these shares have gone away because they have not, but it certainly is not moving at quite the pace that it was prior to Christmas, when events started to gather some momentum.

It is probably worth saying here that the comments attributed to Huw at the start of the week were taken out of context in the way the questions were answered, and we are of the opinion that we will probably not have a deal to report on in the next month, but that is not to say it is not possible.

I first met Charles Noell – one of the potential share purchasers – earlier this season when we played Southampton at the Liberty. Again here I am being careful with my phrasing as I said “Share purchasers” – they are at this point not buying a majority share in the club but will become the biggest individual shareholder if the deal comes to fruition. Again, we have seen much discussion about the ‘club being purchased’ which is not true, although it is fair to say that they could end up with a majority share if this deal goes through on the potential terms that we have seen. Anyway, they were in Swansea that weekend as guests of our football club and were well aware of our set up and the importance of supporters in the makeup of the club. It is worth remembering here that only Martin Morgan and Brian Katzen (the latter to the tune of 1 share) have a bigger shareholding in the club than we do as an organisation.

This was very much the first connection for many of the shareholders with the potential share purchasers and led to – around 6 or so weeks later – a shareholder meeting where we were presented by Brian Katzen with a heads of term sheet that detailed what was being proposed, which was namely:

  • A 30% share purchase in the football club on a pro rata basis from the shareholders who wished to sell for the sum of £30m.
  • A further right to purchase future shares which could mean over 60% of the club ending up in the hands of these potential share purchasers – that is on the assumption that none of our shares will be sold.

The deal as it was presented would mean that no current shareholder would sell out in their entirety, although that could change. It would also mean that once the first 30% tranche was sold then we would comfortably be the second biggest shareholder in the football club.

It is worth noting here that there was no further equity investment proposed at the outset but possibly a loan for capex which was assumed to be at commercial terms, but the detail of that has yet to be confirmed.

The heads of term sheet was signed on behalf of the selling shareholders (as agreed at that meeting) by Brian Katzen, and as a Trust we then requested a meeting with the potential share purchasers to make the points that we have already made in the press but also privately to the other shareholders which are:

  • We have no intention to sell or dilute our shareholding;
  • We wish to retain our position of having an executive director on the board of the football club;
  • For us to be able to agree to the deal we would be looking for certain protections for the organisation;
  • The proposed new purchasers need us ‘on side’ because whilst we have no power to veto the deal we do have a powerful voice in those 12,000 e-members and 1100+ paid members.

We then held a meeting with Charles in Heathrow prior to Christmas and alongside Huw Cooze and myself were Dai Little – the Trust’s legal affiliate and adviser. Dai is a partner in Magraths – a niche commercial legal practice based in London’s West End and is a lifelong Swansea fan originally from the City. Also present was Richard Major, a Trust member who is also a partner at PricewaterhouseCoopers and a long term Swans fan to boot. Both of them unfortunately send their apologies this evening – David had business commitments in London this afternoon and Richard has headed to South Africa to get married. However, they are a vital that they are part of our advisory team in this regard and you will hear more from them should this deal progress. Prior to that meeting, we had taken two steps that it is key that you all know about:

  • Due Diligence checks on the potential share purchasers;
  • Advice from Counsel in regards to what our ultimate best position should be.

For those that are unsure, legal counsel are largely the same as barristers. They are specialists in particular areas of law and they provide advice on what the law says, the strengths and weaknesses of any particular case and, where needed, undertake legal research. The advice they give is in the form of an opinion.

We have now received counsel’s opinion on what this deal means for the Trust. We felt that getting this opinion was needed due to the unusual legal status of a Supporters Trust – to make sure the interests of the members of the Trust were properly protected.

There are two key points from this opinion that is worth everyone being aware of:

  1. That it is against our interests in the longer term to sell some of our shares. We had discussed this amongst the Trust board as one of our options but Counsel was of the opinion that it would weaken our influence, and also weaken any chance of success should we have to take litigation further down the line against any new owner on the grounds that our rights as a minority shareholder were being unfairly prejudiced.
  2. They also advised that were we to sell, the funds are not to be distributed amongst membership – we need to retain them within the Trust for future use. They are not to be distributed amongst members – the only other options we would have would be to wind up the Trust at which point we would have to distribute funds to a charity or local Supporters Trust. A partial sale is an option to be considered but goes back to the first point raised by counsel. I think it is fair to say that I am not imagining the option to give up our shareholding gaining much support, although that will be one of the options to consider when it comes to any consultation.
  3. It is worth noting here that Counsel were also of the opinion that the decision on how to progress with regards to our internal shareholding could be undertaken by the Trust board. However, this is not something that we feel is fair and right and we have decided to proceed with a member consultation as previously advised.

The other thing I think that is worth mentioning is that the only fees we have paid out to date are in relation to seeking the opinion from Counsel and the due diligence checks carried out via an American firm. In terms of Dai Little’s legal fees he has reduced his usual charge rate by 50% and has assured us that if at any time he could not devote the necessary attention in terms of dealing with any transaction then he would recommend another firm of London solicitors for us to use. Richard has waived all his professional fees to date.

We have also looked at (and have been doing so since I first joined the Trust board back in 2005) the possibility of getting our shareholding above 25%. This has been prevented beforehand by a gentleman’s agreement to stop any one shareholding going above 25% (although this would be superceded by any new shareholders agreement should this deal go through) and we have made two fresh offers to get to that level since the first indications were that an offer could be imminent. Both offers have been rejected out of hand by our fellow shareholders. We can only summise the reasons for this but it is right to say that it could reduce the value of the remaining shares, as a potential buyer may be reluctant to work alongside a 25.01%+ shareholder.

In terms of the due diligence we have of course read many of the articles that have been linked to online plus:

  • Searches of specialist and subscription databases not available from the internet;
  • The instruction of 3rd party due diligence firms in the USA to search local registries;
  • Use of local human intelligence sources (thanks to Richard Major and his contacts).

The purpose of this is to identify any significant legal or reputational matters which could see them fail the fit and proper test or even any other issues which could bring into question their suitability as shareholders of the football club we fought so hard to protect back in 2001 and ever since.

We firmly believe that the due diligence we have undertaken is far superior to anything that the other shareholders have undertaken and, as such, have retained this information outside of the public eye and will leave it that way until we deem it appropriate to share.

When we met with Charles at Heathrow we asked for the motivations and intentions for wanting to be part of Swansea City and even now we are not completely clear. They are sports guys and they are interested in ‘soccer’ (as he kept referring to it) but we could not see – and have not seen since – a clear rationale for why they wanted to buy these shares, but their intentions were seemingly aligned with the ongoing success of the club and they stated that they wanted to work with us as an organisation to ensure that success happened.

The final point to note is that Dai Little met with the selling shareholders legal representatives – a company called Fladgates – but there has been no follow up since and – as stated earlier – we are not pushing that any further. This has led Dai to form the assumption that it is unlikely that the original proposal is continuing in its original form but that is not to say that they will not make an alternative offer down the line. Dai is also of the opinion that there is yet to have been a full legal and accounting due diligence exercise carried out on the club by the Americans. The final point worth noting is that for us to see any way of not being hostile towards the deal is for a new Shareholders agreement to be drawn up that reinforces our rights as a 21% shareholder and we would like to see protections that:

  1. Prevent our percentage interest ever being diluted.
  2. Maintain our right to have at least one director on the board of the club.
  3. Give us the right to veto certain decisions where we feel it is wrong for the football club (as an example excessive borrowing).

And it is the potential terms of this shareholders agreement that will form part of the consultation process with our members when it comes around.

Finally, we know that some shareholders have also been looking at potential alternative deals given the fact that maybe, at £100m and given the value of the new Sky and BT deal, the valuation could have been undepriced.

I appreciate that I have taken a reasonable amount of time to go through where we are at the moment but I felt it important to do just that and I suspect it will have answered some of the initial questions of the evening, but I would now like to open the meeting to the floor and invite questions from you around this or anything else you would like to discuss.

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You can listen to the full address as well as the rest of the Fans Forum event thanks to the following podcast kindly produced and recorded on the evening by ‘The Jack Cast‘.


Remember, you can become a Swans Trust member by buying your membership online.

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