Oct. 13 (Bloomberg) -- A group led by the owners of the Boston Red Sox moved closer to a 300 million-pound ($475 million) buyout of Liverpool soccer club after a judge blocked an attempt to stop the sale.
Liverpool’s lender Royal Bank of Scotland Group Plc argued that the current owners couldn’t fire board members and appoint replacements. Tom Hicks and George Gillett, who have two days to pay back RBS a 237 million-pound loan, were trying to stop the sale to Tom Werner and John W. Henry’s New England Sports Ventures LLC. The new purchase agreement pledges to repay 200 million pounds of the debt on completion of the takeover.
Hicks and Gillett “do not have the absolute right to veto a sale,” Justice Christopher Floyd said in his judgment at London’s High Court today. “If I were to grant an injunction, the potential damage to the club and RBS would be substantial.”
Hicks and Gillett on Oct. 5 tried to fire directors Ian Ayre and Christian Purslow hours before a sale agreement was reached. Floyd ruled today that the board must be reconstituted, and Chairman Martin Broughton has called a meeting for 8 p.m. London time. During that meeting, which Hicks and Gillett have been told about, the deal with the Red Sox owners is likely to be confirmed.
“NESV has a binding agreement in place with the board of Liverpool Football Club and we are looking forward to concluding the deal,” the baseball team owner said in a statement. “We are ready to move quickly and help create the stability and certainty which the club needs at this time. It is time to return the focus to the club itself and performances on the pitch.”
Hicks and Gillett failed to block the sale in a separate lawsuit, which alleged the deal was invalid because they were “kept in the dark” during negotiations.
“We’re obviously disappointed by the judgment,” their lawyer Keith Oliver told reporters outside the court, where large numbers of Liverpool supporters celebrated the verdict. “Mr. Hicks and Mr. Gillett will consider their next step.”
The businessmen have faced a supporter backlash for the majority of their tenure, which started in February 2007 after a 219 million-pound leveraged buyout. Costs associated with the takeover have ballooned to 280 million pounds.
Hicks and Gillett were granted a six-month extension to repay by lenders RBS and Wells Fargo & Co. in April, with the agreement that the club be put up for sale and Broughton appointed.
Rights as Shareholders
The terms of the refinancing prevented the owners from making any changes to the board or damaging the prospects of a sale, RBS attorney Richard Snowden said in court. The Americans also waived their rights as shareholders to have the casting vote on any deal.
In a witness statement, Hicks acknowledged the breach of contract, but claimed it was done to prevent the club being sold too cheaply. The current owners would lose about 140 million pounds at the price now under agreement with Henry’s group, Broughton has said.
Another investor, Singapore businessman Peter Lim, yesterday increased his offer to 320 million pounds. It’s unlikely to be considered because of the existing agreement with the Boston group.
“I think you’ll find we considered all bids very appropriately,” Broughton told reporters today. “We said right at the outset we’d find the right owners for Liverpool and that’s what we set ourselves as a target. I think we’ve done that.”
Lim said in a statement issued after the judgment that the board must reconsider all the offers it has received.
“I’m asking the board to run a full and fair process that enables all of the offers to be considered on their merits before the future of the club is decided,” Lim said.
Liverpool faces a nine-point penalty if RBS puts the club into bankruptcy protection by calling in its debt. That would drop the team into last place in the Premier League. Relegation to the second-tier Championship can cost millions in revenue. Thousands of supporters have marched in protest against the current owners before and after recent matches.
“The last three years have definitely been the worst in the history of the football club,” said Andrew Blakeman, a 27-year-old supporter, after traveling 200 miles (320 kilometers) from Liverpool to attend the hearing. “They’re history, now we can move on.”
The case is: The Royal Bank of Scotland Plc v. Thomas O. Hicks, George N. Gillett, Kop Football (Cayman) Ltd., Kop Football (Holdings) Ltd., Kop Football Ltd.; HC10C03206; High Court of Justice, Chancery Division.