A Guest blog by @heavidor:
Given The Takeover Panel’s success in procuring a Court of Session order to compel Dave King to make an offer for all Rangers International Football Club Plc shares not owned by the Concert Party it would be impossible for King to remain a director unless he complies with that Order.
The co-option of Barry Scott to the board and the elevation of Alistair Johnston as a person with significant control could be construed as repositioning, however it will be whether King makes an offer of 20 pence per share to all the shareholders not included in the Concert Party or not that will determine what happens next and we shall know later this month.
(King resigning) is the correct thing to do and should have already occurred. Instead, Rangers financial reputation has been dragged through the mud by association.
Irrespective of whether King complies with the Court Order or not this story is far from over, and it will continue to hamper Rangers’ prospects until it is conclusively resolved. A King resignation as a director of RIFC would reduce the prospect of contaminating the club, its directors and advisors from the full effect of cold shouldering should he decline to make an offer.
That would mean that King, as distinct from RIFC, had financial pariah status and not the club. That is the correct thing to do and should have already occurred but, instead, Rangers’ financial reputation has been dragged through the mud by association with King.
What should not be underestimated is the reality of cold-shouldering, not for just the offending party, but for those involved in business with the offending party. The consequences are dire for the individual or organisation who falls foul of the rules, making it impossible to carry out normal business activities within the sphere of influence of The Panel, and the same consequences face those who shelter the cold shouldered.
It should be appreciated that there are members of the RIFC that are members of regulated financial professions who would be further prejudiced through association with a cold shouldered non-resident King.
Perhaps unfortunately for a large slug of the mainstream media and football authorities, financial pariah status pursuant to cold shouldering in the UK coming on top of criminal convictions in SA would be impossible to spin in any positive way or to maintain continued fit and proper status. I mean, we could have the SFA cold shouldered, couldn’t we? All said though, the cognitively dissonant will carry on regardless.
If King does the right thing by resigning from the board, it is still important to appreciate that the ‘4 Bear’ Concert Party as determined by The Panel will continue to exist irrespective of how Kings deals with the instruction to make an offer for the shares. This is the elephant in the room that remains.
The Concert Party via their shares and loans will retain the same level of control they currently have, and therefore remain compelled to abide by The Panel’s rules.
King’s resignation would not remove that impediment.
It doesn’t end there. By challenging the authority and insulting the intelligence of The Panel and the Court, King has ensured all large share transactions in RIFC will be scrutinised and questioned and could additionally determine, for example, that the Concert Party is increased to include Club 1872 and Barry Scott on the basis they are working in concert with King and/or other concert party members.
There are some who think that The Panel has been slow to respond and impose sanctions and that they are all bark and no bite. It would be wrong to think so. The reality is that King has moved the whole dispute into uncharted territory. There has been no precedent for such continued brazen and naïve flouting of Panel rules. Accordingly, The Panel has chosen to move at its own pace, dotting the ‘i’s and crossing the ‘t’s and I suggest they’re being methodical rather than indecisive in dealing with the estimable Mr King.
The true value of RIFC shares was a key point in the recent court case with all kinds of claims being made. Some think that the lack of significant arm’s-length trades makes it impossible to arrive at a correct price, and others say that the price paid to Mike Ashley in recent trades is the benchmark. In my opinion, neither is correct. Current and prospective shareholders have the financial figures in the accounts to work with, and can determine the real worth from there. On that basis it is clear to me the shares are not worth anything like the last alleged trading price on Jenkins. Rather it seems that the shares only have nominal value given the business has never declared a profit, continues to lose money and is reliant upon ongoing shareholder loans to stay in business.
Any subsequent share issue – even with King gone – could muddy the waters further; The Concert Party members may expose themselves to another Panel instruction to make another offer should any of its members acquire more shares without coming to an arrangement with The Panel beforehand.
To illustrate such an arrangement, Dermot Desmond got Panel permission to increase his shareholding above 29.9% the last time Celtic had a share issue. This is preferable to trying to hoodwink the financial authorities with tall tales.
It should be clear to all followers of RIFC’s financial travails that the status quo is unsustainable. So, the question is ‘what’s next’? The chairman’s statement that accompanied the annual accounts once more talked about loan to equity conversion without reference to the impact of the existence of a Concert Party amongst the RIFC Board of directors and providers of loans. This is remarkable any such conversion cannot take place without the permission of The Panel and/or without dragging the other directors and lenders in the quagmire with another possible offer for the shares not owned by the Concert Party.
.. the shares only have nominal value given the business has never declared a profit, continues to lose money and is reliant upon ongoing shareholder loans to stay in business
So, what should happen and what is required for RIFC to rid itself of this terrible yoke? The answers are pretty obvious; King should make an offer of 20 pence per share to all those shareholders not included in the Concert Party. He has said the shares are worth more than that and that no one would accept. If he’s correct he has nothing to worry about and he would create a clear path forward for Rangers. He would also resolve the dispute with The Panel, creating the conditions for a debt to equity conversion.
So, why might that not happen? Because if the shares are worth 27 pence as the directors have suggested that means the loan to equity conversion would have to be at the same price and, of course, if the shares not worth anything like that there would be a rush to accept 27 pence and the ball would be on the slates, so to speak.
It appears to me the board is stuck between a rock and a hard place, that King will resign, and that there will be no offer.
If this happens the position would be precarious. The current board doesn’t have the credibility, money or experience to take Rangers forward. Being a true blue should not be the defining characteristic of what’s required to make Rangers competitive but it appears to be the preferred qualification of most of their customers.
I believe Rangers need a need owner with a controlling shareholding and deep pockets to sort out this mess, and I have reason to believe this view is shared by some of those with influence.
That is not to say that a solution is imminent, but the reality check is at least a start.