How does the takeover work?

[calscot 0]

I've some questions about Rangers shares and how it works that a consortium can just pay the bank some money and then own the club.

 

We seem to be taking this for granted but for my brain it doesn't make much sense.

 

So the questions are:

 

How much are the shares actually worth? And if nothing does that mean the fans' shares are worth nothing?

 

How can the bank hand over ownership to anyone who pays the off debts without the permission of the share holders?

 

Do the shareholders still have shares in the club once the takeover goes ahead and what are they worth then? And what are SDM's shares worth then?

 

What's in it for SDM as it seems he leaves with nothing? Whereas if he stays and pursues an aggressive business plan which cuts cost and repays the debts in say 10 years from club earnings (maybe with the help of a share issue or two), while still subcontracting to his businesses and using his building companies for any works around the stadium, the club will eventually be debt free and his shares worth several million, if not say �£25M to �£40M. So why would he be interested in handing over his shares for free?

 

 

It makes more sense to my layman brain, if the takeover is treated more like a share issue. The book value of the club without debt must be about �£50M and so if investors come in with say �£25M they should probably be rewarded with say 51% of the shares. The rest of the shares are therefore diluted by half, meaning that SDM now owns about 45% with the rest owning about 4%.

 

Rangers then use the �£25M to pay off the debt and so the club is now worth that �£50M. SDM can then sell his shares at his leisure to anyone interested in them. This way he still may not have received any money but retains about �£23M of equity rather than zero.

 

 

I've made up the scenario and figures but the second premise seems more understandable to me than the first.

 

Sorry if it doesn't make any sense.

[Guest BdTS]

Our prospective new owners only need to agree a deal with Lloyds bank , which will be as close to the debt as Lloyds can get.

 

The club will be bought for between �£25m-�£30m, the new owners will own the club lock stock and barrel and we won't have a shred of debt.

 

Murray's shares aren't worth a feck - he's as gone as he possibly can be an isn't remotely involved in the running of the club

[Bluedell 5,679]

Our prospective new owners only need to agree a deal with Lloyds bank , which will be as close to the debt as Lloyds can get.

 

The club will be bought for between �£25m-�£30m, the new owners will own the club lock stock and barrel and we won't have a shred of debt.

 

Murray's shares aren't worth a feck - he's as gone as he possibly can be an isn't remotely involved in the running of the club

 

Do we know this for 100% certainty?

[Guest BdTS]

Do we know this for 100% certainty?

 

Pretty sure RBR could verify this, this came from someone within the trust and another source as well.

[calscot 0]

Our prospective new owners only need to agree a deal with Lloyds bank , which will be as close to the debt as Lloyds can get.

 

The club will be bought for between �£25m-�£30m, the new owners will own the club lock stock and barrel and we won't have a shred of debt.

 

Murray's shares aren't worth a feck - he's as gone as he possibly can be an isn't remotely involved in the running of the club

 

Would you care to explain that? You've just restated the first premise of my original post, which I've already pointed out, makes no sense whatsoever and haven't added anything to my understanding.

 

How can fans be forced to sell their shares for 0p? Same goes for SDM. What happens to the GersSave shares as well?

 

I get that premise but it needs some kind of explanation before I can understand it at all.

 

For example, Supposing my house is worth 200k and I still have 100k on my mortgage. Without foreclosing the bank cannot force me to sell the house for 100k. If I'm servicing my debt, I can either not sell until I have paid them off, or when I get a serious buyer at a higher price.

 

The only other scenario I can think of is that the bank have valued Rangers at say �£34M. Due to Murray's financial position they can twist his arm to sell his shares for 31M. As he or his companies are guarantors of the bank debt, they can then force him to repay the debt in full. The 9% of shares not in Murray's control should still be left untouched and worth about 3M.

 

As a limited company, shareholders who are not guarantors of the debt cannot be held liable for said debt and cannot be forced to sell their shares for nothing - in fact do they not have to be offered the same terms as SDM/Bank? The only way they can lose those shares for nothing is if the company is declared bankrupt and the assets are less than or equal to the liabilities.

 

But in this scenario, it there is nothing in it for SDM, so why would he agree unless the bank are giving him some leeway in the debt of his other companies in return?

 

Are the shares suspended on the stock exchange? If not, what are they trading for?

Edited January 21, 2010 by calscot

[calscot 0]

Pretty sure RBR could verify this, this came from someone within the trust and another source as well.

 

Can he also explain it?

[Guest BdTS]

Would you care to explain that? You've just restated the first premise of my original post, which I've already pointed out, makes no sense whatsoever and haven't added anything to my understanding.

 

How can fans be forced to sell their shares for 0p? Same goes for SDM. What happens to the GersSave shares as well?

 

I get that premise but it needs some kind of explanation before I can understand it at all.

 

For example, Supposing my house is worth 200k and I still have 100k on my mortgage. Without foreclosing the bank cannot force me to sell the house for 100k. If I'm servicing my debt, I can either not sell until I have paid them off, or when I get a serious buyer at a higher price.

 

The only other scenario I can think of is that the bank have valued Rangers at say �£34M. Due to Murray's financial position they can twist his arm to sell his shares for 31M. As he or his companies are guarantors of the bank debt, they can then force him to repay the debt in full. The 9% of shares not in Murray's control should still be left untouched and worth about 3M.

 

As a limited company, shareholders who are not guarantors of the debt cannot be held liable for said debt and cannot be forced to sell their shares for nothing - in fact do they not have to be offered the same terms as SDM/Bank? The only way they can lose those shares for nothing is if the company is declared bankrupt and the assets are less than or equal to the liabilities.

 

But in this scenario, it there is nothing in it for SDM, so why would he agree unless the bank are giving him some leeway in the debt of his other companies in return?

 

Are the shares suspended on the stock exchange? If not, what are they trading for?

 

 

Lloyds can do what they want with Murray's companies.

 

If he challenges it, they will put the lot into administration.

 

He has shares in Rangers worth tens of millions, he also has �£800 of debt with Lloyds, the terms of which have already been broken.

[Bluedell 5,679]

Calscot, as BdTS has said, there is a belief that Murray is in so much trouble financially that the bank have effective control over the Murray group and they just want rid of the financial exposure that Rangers give them and therefore are happy just to get rid of the debt at cost presumably and the shares for nothing.

 

It should be remembered that Murray owns very few shares himself and if the bank have control over MIH then they could easily try and get rid of Rangers. they may not want the club owned with the risk of not winning the league, and the financial chaos that would bring.

 

The last set of MIH accounts would certainly back up this argument, but the property market is improving and theyt have realised some cash from the sale of their Glasgow and therefore it MAY lessen the hold that Lloyds have over Murray.

 

In your example, I guess that you are saying that the club is currently worth �£25m including the debt, so would someone not just buy the whole club for the �£25m and not just 50%?

[Guest BdTS]

So to summarise.

 

MIH has �£800m-ish in borrowings with Lloyds.

 

They have breaches the covenants of the borrowings, therefore, to recover their loses, Lloyds have appointed Muir to Rangers and Premier Property, hence why costs are drastically being cut at Rangers, the club is being sold and PPG are selling valuable commodities years earlier than the intended sale date.

 

MIH can't trade their way out this debt, the recession has hit so bad that their debt exceeds the value of their assets.

 

So Lloyds can pretty much run roughshod over the MIH empire to recoup their losses.

 

PPG and Rangers are two of the easiest ways to do this.

[Bluedell 5,679]

Would you care to explain that? You've just restated the first premise of my original post, which I've already pointed out, makes no sense whatsoever and haven't added anything to my understanding.

 

How can fans be forced to sell their shares for 0p? Same goes for SDM. What happens to the GersSave shares as well?

 

I get that premise but it needs some kind of explanation before I can understand it at all.

 

For example, Supposing my house is worth 200k and I still have 100k on my mortgage. Without foreclosing the bank cannot force me to sell the house for 100k. If I'm servicing my debt, I can either not sell until I have paid them off, or when I get a serious buyer at a higher price.

 

The only other scenario I can think of is that the bank have valued Rangers at say �£34M. Due to Murray's financial position they can twist his arm to sell his shares for 31M. As he or his companies are guarantors of the bank debt, they can then force him to repay the debt in full. The 9% of shares not in Murray's control should still be left untouched and worth about 3M.

 

As a limited company, shareholders who are not guarantors of the debt cannot be held liable for said debt and cannot be forced to sell their shares for nothing - in fact do they not have to be offered the same terms as SDM/Bank? The only way they can lose those shares for nothing is if the company is declared bankrupt and the assets are less than or equal to the liabilities.

 

But in this scenario, it there is nothing in it for SDM, so why would he agree unless the bank are giving him some leeway in the debt of his other companies in return?

 

Are the shares suspended on the stock exchange? If not, what are they trading for?

 

In your house example, if your house was worth �£110K and you had �£100K of a mortgage, but the bank thought that the value of the house was goping to fall to �£60K then they may take action.

 

In respect of the question about non-MIH shares, they are currently not for sale. The offer is presumably only for the shares owned by MIH.