Londonlisa2001
Tommy Hutchison
- Joined
- Jul 19, 2020
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- 1,145
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Some of you will remember that there has been an ongoing issue raised by a few of us re the Trust settlement and the rights of the Trust to tag rights in the event of a sale of the club.
At the time of the much trumpeted settlement, the Trust stated that as part of the settlement deal, they had received tag rights in the event of a sale of the club. That means they have the right if the club is sold to insist that their shares are also sold at the same time for the same price per share.
The ownership structure of the club (where a majority of shares is held by Swansea Football LLC) made it quite obvious that a ‘sale’ would be quite likely to occur by shares being sold in Swansea Football LLC (this changing club ownership) rather than shares being sold at Swansea City 2002 Ltd level (the entity in which the Trust has shares).
I raised this on several occasions when I was advising the Trust on financial matters. So it was an issue well flagged prior me leaving my involvement with the Trust and well before any settlement deal. Andy Godden also raised the point on a number of occasions prior to him leaving the Trust board and the settlement deal being announced.
Following the settlement deal being announced, the question was asked again, a5 the open forum, on the Trust Facebook site and also via specific emails.
To provide an example of this, these are excerpts from exchanges I had with Dave Dalton re the settlement deal - the question are me and the replies are Dave Dalton.
“ Q11. Are you able to provide any detail of the provisions in place that will allow the Trust to exercise its tag right in the event of a change of control event at Swansea Football LLC and also how the Trust will be able to find out if any change of shareholding has happened at that level given the company is registered in Delaware and the past difficulties of establishing details of ownership at that level.
A11. The Trust’s tag rights are dealt with in the new Articles of Association (as well as the Trust’s no-drag provisions). If B shareholders propose to sell a “Controlling Interest” (as defined in the Articles) to a bona fide third party purchaser, the Trust has the right (but not the obligation) to tag along in the sale, and sell its B shares at a price that is at least the same as the price proposed to the B shareholder, with defined notification periods. The Board will be involved in the registration of any new shareholder so the Trust will have visibility through its Director on the club Board and its Observer. “
I questioned this again in follow up (again this is me to Dave Dalton):
“ Your answer to Q11 doesn’t cover the point. The question was not about the tag at Swansea City 2002 Ltd level but at Swansea Football LLC level. It is a Swansea Football change of control issue for want of a better title. Has this also be covered in the Articles or in a new shareholders agreement with the Trust that cannot be amended by special resolution of the Class B shareholders? Have the Trust been furnished with a full list of shareholders of Swansea Football LLC in order to monitor changes from that ‘starting point’ as previously this information had been withheld?”
In response, Dave Dalton sent the following:
“ The new Articles of Associations and Shareholders’ Agreement contain provisions that define the existing shareholder majority and what constitutes a change of control transaction. Tag rights exist if B shareholders propose to sell a controlling interest to a bona fide third party purchaser.”
In addition, Andy also asked the question and was given an even firmer answer (with apologies to Andy for copying this from his Twitter feed):
Q. https://pbs.twimg.com/media/F2hy31eXgAAUShG?format=jpg&name=medium
For those unable to see the link (no idea how to display it here), the question asked if the Trust is protected against a sale at Swansea Football LLC level and the Trust state that it was careful considered and protections are in place.
So, today, the question has been asked again on Twitter by Paul Thomas and the reply received from the Trust Twitter account states:
“ Hi Paul, any changing hands within the LLC does not mean the club has been sold and so the Change of Control rights aren’t initiated in this scenario. Hope that’s helpful
We will look at forums, but they’ll be focussed on current and future concerns and not on the past.”
This is completely contradictory to the information given previously.
Now, it is possible that the Trust Twitter account today has given incorrect information and hopefully that is the case, but if that is not the case, the Trust need to urgently address the contradiction in answers given as it completely changes any notion of protection.
If there is no protection in place, the scenario that was envisaged, of the club being bought and sold at Swansea Football LLC level with the Trust’s shareholding remaining stranded in perpetuity at Swansea City 2002 Ltd level and therefore effectively worthless, has been completely ignored and the settlement deal is even worse than it appeared.
At the time of the much trumpeted settlement, the Trust stated that as part of the settlement deal, they had received tag rights in the event of a sale of the club. That means they have the right if the club is sold to insist that their shares are also sold at the same time for the same price per share.
The ownership structure of the club (where a majority of shares is held by Swansea Football LLC) made it quite obvious that a ‘sale’ would be quite likely to occur by shares being sold in Swansea Football LLC (this changing club ownership) rather than shares being sold at Swansea City 2002 Ltd level (the entity in which the Trust has shares).
I raised this on several occasions when I was advising the Trust on financial matters. So it was an issue well flagged prior me leaving my involvement with the Trust and well before any settlement deal. Andy Godden also raised the point on a number of occasions prior to him leaving the Trust board and the settlement deal being announced.
Following the settlement deal being announced, the question was asked again, a5 the open forum, on the Trust Facebook site and also via specific emails.
To provide an example of this, these are excerpts from exchanges I had with Dave Dalton re the settlement deal - the question are me and the replies are Dave Dalton.
“ Q11. Are you able to provide any detail of the provisions in place that will allow the Trust to exercise its tag right in the event of a change of control event at Swansea Football LLC and also how the Trust will be able to find out if any change of shareholding has happened at that level given the company is registered in Delaware and the past difficulties of establishing details of ownership at that level.
A11. The Trust’s tag rights are dealt with in the new Articles of Association (as well as the Trust’s no-drag provisions). If B shareholders propose to sell a “Controlling Interest” (as defined in the Articles) to a bona fide third party purchaser, the Trust has the right (but not the obligation) to tag along in the sale, and sell its B shares at a price that is at least the same as the price proposed to the B shareholder, with defined notification periods. The Board will be involved in the registration of any new shareholder so the Trust will have visibility through its Director on the club Board and its Observer. “
I questioned this again in follow up (again this is me to Dave Dalton):
“ Your answer to Q11 doesn’t cover the point. The question was not about the tag at Swansea City 2002 Ltd level but at Swansea Football LLC level. It is a Swansea Football change of control issue for want of a better title. Has this also be covered in the Articles or in a new shareholders agreement with the Trust that cannot be amended by special resolution of the Class B shareholders? Have the Trust been furnished with a full list of shareholders of Swansea Football LLC in order to monitor changes from that ‘starting point’ as previously this information had been withheld?”
In response, Dave Dalton sent the following:
“ The new Articles of Associations and Shareholders’ Agreement contain provisions that define the existing shareholder majority and what constitutes a change of control transaction. Tag rights exist if B shareholders propose to sell a controlling interest to a bona fide third party purchaser.”
In addition, Andy also asked the question and was given an even firmer answer (with apologies to Andy for copying this from his Twitter feed):
Q. https://pbs.twimg.com/media/F2hy31eXgAAUShG?format=jpg&name=medium
For those unable to see the link (no idea how to display it here), the question asked if the Trust is protected against a sale at Swansea Football LLC level and the Trust state that it was careful considered and protections are in place.
So, today, the question has been asked again on Twitter by Paul Thomas and the reply received from the Trust Twitter account states:
“ Hi Paul, any changing hands within the LLC does not mean the club has been sold and so the Change of Control rights aren’t initiated in this scenario. Hope that’s helpful
We will look at forums, but they’ll be focussed on current and future concerns and not on the past.”
This is completely contradictory to the information given previously.
Now, it is possible that the Trust Twitter account today has given incorrect information and hopefully that is the case, but if that is not the case, the Trust need to urgently address the contradiction in answers given as it completely changes any notion of protection.
If there is no protection in place, the scenario that was envisaged, of the club being bought and sold at Swansea Football LLC level with the Trust’s shareholding remaining stranded in perpetuity at Swansea City 2002 Ltd level and therefore effectively worthless, has been completely ignored and the settlement deal is even worse than it appeared.
