The Club notes that Red&White Holdings Ltd earlier this week purchased a further 4004 shares taking their investment in Arsenal Football Club to 21 per cent. Arsenal.com caught up with managing director Keith Edelman to gather his views on the recent transactions and allay some of the confusion surrounding takeover rules.
1. Red&White Holdings recently increased their shareholding in Arsenal. What is the position of the Arsenal Board?
The Board is steadfast in its view and we have maintained a consistent and clear position. We do not believe that outside investment is necessary for the long-term good of the Club.
Currently the Board controls 45.5% of the Arsenal shares. The Board entered into a lock down agreement on the 18th April 2007 whereby they agreed that they would not sell their shareholdings for one year and confirmed that they intend to retain their interests on the expiration of this period.
This is still very much the position of the Board today. Whilst shares may have changed ownership, it is very much business as usual here.
2. We keep hearing the phrase 'lock down
agreement', what does this mean exactly?
The Board made an announcement that they have all agreed not to sell shares for a 12 month period. The Board, therefore, cannot sell, nor indeed buy shares until April 2008. The reason for undertaking this option was that the Board stand as one and believe that a unified position is in the best interests of the Club. We believe that this approach underlines the stability that exists in the current structure of the Club.
3. Does the fact that Red& White Holdings made an official announcement about buying more shares mean that significant change is about to occur?
No. The Club continues to operate in the same way it always has done. However, any party buying shares in a company must follow the Disclosure and Transparency Rules. What this means is that if a party buys 3% of a company's shares they must notify the issuing company, in this instance Arsenal, as soon as possible, no later than two trading days after the transaction. Then if more shares are bought, they must notify the Club every time their shares surpass each1% threshold. This is what has occurred with Red&White Holdings yesterday.
4. This recent trading has taken Red&White Holdings to 21%. Everyone is talking about 30% being a trigger and a takeover bid is imminent. What is the process and how is the Club dealing with this?
The Takeover Code is clear. Any individual or company (offeror) could make a bid for all the shares in Arsenal at anytime. Even if you didn't own any shares in the Club you could make a bid, provided, of course, you had the money in place. However, that does not mean that the bid would be successful and indeed, as the Board is committed to retaining its shareholding, a bid would be expected to fail. You are correct that 30% is a significant threshold. If a party acquires 30% of the Club's shares, under the Takeover Code, they are obliged to make an offer for all of Arsenal's shares but to reiterate, members of the Board are resolute and wish to retain their shares. Therefore such a bid, as with the previous scenario would be unsuccessful. The case for Red&White Holdings is slightly different however, as when they made their first purchase of shares on August 30th, they publicly stated that they would not make an offer for shares in the Club. This statement effectively precludes Red&White Holdings from making an offer for all the shares of the Company for a six month period (subject to certain exceptions). So, if their shareholding were to increase to 30% at the end of February next year, they would be obliged to make an offer for all of the shares but again and sorry to be repetitive any such offer would not be successful.
5. So what would happen if Red&White Holdings acquired 30% or more of the Club's shares before the end of February 2008?
According to the rules, the Takeover Panel (which is the regulatory body) would make Red&White Holdings sell down their shareholding so that they were not in this position. Again, an offer could not be made until the end of February 2008.
6. There has been speculation about Red&White Holdings buying Stan Kroenke's stake in the football club. Do you have a view on this?
We cannot and will not speculate on someone else's shareholding. However, Stan Kroenke has a 12.2% stake in the Club and if Red&White Holdings were to purchase those shares at this juncture, it would take them over the 30% threshold which would mean that they would have to sell down part of their shareholding.
7. I recognise that the Board has no intention of selling its shares but there has been much said and written about takeovers and how they work and the responsibilities of the Takeover Panel. Can you explain some of the basics to supporters?
The takeover of a company, loosely speaking, falls into one of two categories. The first is where a company or individual can bid to buy all the shares in a particular company from its shareholders with the Board's recommendation, this is generally known as a "Recommended Offer". The alternative method is without the Board's recommendation, this is generally known as a "Hostile Takeover". A company is taken over when 50.1% of all shares in the company are held by the buying party (either in the form of shares purchased or acceptances received) and at that point the buying party, would be able to appoint directors to the Board and would effectively control the company.
However, it is worth noting that sometimes a higher percentage of acceptances could be required if that is what has been specified in the offer. Also, all other conditions of the offer must be met, for example, passing the "fit and proper person" test under the Football Association Premier League Rules.
8. So at present, the Club does not need to offer a seat on the Board to large investors, say Red&White Holdings or Stan Kroenke?
The Board is free to appoint whomever they believe to be appropriate directors of Arsenal and at present we are very happy with the individuals that represent the Club at Board level.
9. Will there come a time when Board members have to sell their shares? There are some suggestions that the longer the Board retains their shares, the less valuable they become?
The Board is resolute in retaining its shares. They are the custodians of this club and will be doing everything to safeguard its future. The only way that they would be obligated to sell their shares is, for example, if Red&White Holdings or another entity acquired 90% of the Club. Given that the Board has 45.5% of the Club's shareholding, this action is unlikely.
In terms of how shares are priced, that depends on the price that any party has purchased shares for in the last 12 months. Contrary to some reports, if a mandatory offer is made for all the shares of a company (by virtue of a person having gone through the 30% threshold) then the buying party has to offer the highest price that they have already paid for shares in the marketplace during the last 12 month period.
10. Where does the Arsenal Supporters' Trust (AST) fit into all of this?
AST is an independent stakeholder which gives a voice to the small shareholders of the Club. We have an open dialogue with them as we do with a number of supporters' groups. Where appropriate, we make amendments to our procedures to be of assistance, for example the format of the AGM. Should the Club become privately owned, the organisation would cease to exist.
11. Do you have a message to reassure supporters about the Club's stability?
It is with great pride that the directors preside over the Club's affairs. We are in great shape, as will be seen when we report our results next Monday. The stadium has been in operation for over a year now and on the financial front, we can compete with any club in the world. We believe that Arsène signing an extension to his contract reinforces our determination to challenge for top honours. At the end of the day, we are a football club that wants to win silverware. There is no better feeling than triumphing on the pitch. That is what gives us all the greatest of pleasure. As for the rest, yes, the exchange of shares may be a distraction and cause for speculation but we are unmoved in our position.
12. There has been talk in the media of Red&White Holdings acquiring a 'blocking stake' in the Club. What is that and would it effect or influence the running of the Club?
Basically speaking, a shareholding of more than 25% can block special resolutions for unusual matters, like winding up the Company or changing its name. For all usual business and operational matters, such as electing directors, appointing auditors, buying and selling players, contractual and commercial matters or approving the financial statements, the Club only needs a majority of votes in favour. Therefore if Red&White Holdings acquired 25% or more of the Club, they would not be able to block or influence any standard business decisions. Furthermore, a party that holds less than 50.1% of shares would not be entitled to a seat on the Board. In effect, a blocking stake in the Club has no material influence.
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