A rough guide to Morgan's proposals

[Rushian]

Steve Morgan held a press conference this morning outlining his proposal to inject £73m of new capital into Liverpool Football Club. We have produced another rough guide to what's going on. It's in two parts: the first covers the press conference and the second covers the nitty gritty of the facts and figures and we show how Steve Morgan could easily end up as the largest shareholder, or even more than 50% of the club.

The Press Conference

He confirmed that he had written to the LFC Board of Directors on Tuesday with full details of his proposal, which remains open for 7 days. He has asked the Board to provide a formal written response within that timescale.

The proposal includes a rights issue of new ordinary shares, open to all shareholders, which will generate approximately £61million of new money, together with a new share issue directed at the supporters of the club which could generate a further £12million. Both would be underwritten by Steve Morgan's company Bridgemere Investments Limited. The offer is a counterbid to the Thai talks and proposals.

He emphasised that these proposals would keep the ownership of the club where it belonged, with the supporters of the club, emphasising his lifelong support for the Reds. The funds would be used to subtantially strengthen the playing squad and partially fund the proposed new stadium.

He proposes to do this in three steps.

1) Firstly by having a 10 for 1 share split in advance of the rights issue, which would result in a revised number of shares in issue of just under 350,000 (there's 35,000 at present). He stated the share split is "designed to enable all shareholders of whatever means to participate, in some way in, the rights issue. The share split will also increase the liquidity of the shares in the club, which in the long run will assist those supporters wishing to become shareholders."

2) A 1 for 1 rights issue ranking equal to the existing shares at £175 per share which will generate just under £61m. This offer would be open to all shareholders.

3) A further 10% of totally new shares to be issued at £175 per share, with the intention that these would be sold directly to the supporters of the club. This would raise a further £12m.

These three steps would raise a total of £73m and both the rights issue and share issue would be underwritten in full by Bridgemere on a nil fee basis (the fee would normally be around £1.5m if the finance was coming from the City).

The two conditions attached to the proposal are that Steve Morgan is appointed to the board following the rights issue and that Brigemere has additional board representation proportional to the outcome of the rights issue. It is not a condition of the offer for the Chairmanship of the club to change, David Moores being able to participate in the rights issue and remain the largest single shareholder.

Morgan stated his proposal would allow the commercial rights to the Asian market to remain with the club, allowing LFC alone to benefit from these rights. He also believed the proposal would allow fans for the first time to participate in the fortunes of the club, the scarcity and price of shares having prevented this previously. He also emphasised "I have only one goal in all of this and that is to help Liverpool become the number one team in both England and Europe."

Two issues which have been of great concern to many fans have been Mr Morgan's views on a ground share with Everton, and taking LIverpool onto the stock market in a similar way to Manchester United's listing. Transcribed below are his answers at the press conference to both these questions:

What Morgan said about groundshare:

Reporter: There's some speculation that you'd be interested in groundshare proposals with Everton.

Morgan: Like any true Liverpool supporter, I would always always prefer us to have our own ground. And that would be the premise of it to start with. The only thing I have said and I've been misquoted on this, I'm glad for the opportunity to state the issue, is that if the offer is accepted, if I am on the board and if I have my ... I clearly would have my say, I think you have to always look at all options, but clearly and unequivocably my preferred option is definitely for Liverpool Football Club to have its own ground.

On the issue of the club becoming listed on the stockmarket:

Reporter: You've got about 5% of the club at the moment, if this is accepted can you say what proportion do you think you'd control and also what is the difference is between a rights issue and a share issue?

Morgan: Right I'll answer the second part of your question first. A rights issue is to existing shareholders, so all the existing shareholders will have a right to subscribe for new shares. Which is why we've offered to do the share split to make the shares more affordable cause otherwise if they didn't split them they'd be £1750 per share so at least somebody who has got one share for example at the moment, would have ten under this new structure and they may want to subscribe for two or three or four of those ten. So that's a rights issue. A share issue is brand new shares. But I've got to stress that this, we do not ... I have no desire, and it's been reported several times in the past that I want to take Liverpool Football Club public. That is not the case. Liverpool Football Club are already a public company and have been for many many years. All I want to do is make the shares available to a wider fanbase so that ownership is spread amongst the lads, like myself, who go to watch Liverpool every week.

Facts and Figures

Steve Morgan is effectively valuing the current issued shares at £1750 - they've been exchanging hands at £4000 via the stockbrokers Blankstone Sington. Morgan's proposal then has a three stage plan (all figures are approximates):

1) a 10 for 1 split of existing issued shares. Currently there are 35000 shares. This would become 350,000 shares with each shareholder getting 10 of the new shares for each one currently held. All shareholders would retain the % they currently have. The three largest shareholders would be:

Moores 178500 (51%)
Granada 34650 (9.9%)
Morgan 17850 (5.1%)

2) Next would follow a 1 to 1 rights issue. This would introduce another 350,000 shares, priced at £175 each raising £61m, which each shareholder invited to apply on a pro-rata basis according to their current shareholdeing. David Moores would be able to buy 51% of these shares if he so wished. Morgan has proposed to underwrite the whole issue and will take up the "slack" if any shareholder chose not to invest.

To maintain his current 51% holding David Moores would have to invest £31.1m . He can chose to invest anything up to this amount. Any rights not taken up by Moores will be bought by Morgan. Looking at the two extremes of no investment and full investment by Moores, the Morgan v Moores picture would look like:

Moores invests fully:

Moores 357000 shares (51%) at a cost to him of £31.2m.

Morgan would have a minimum of 35700 shares (5.1%) at a cost of £3.1m, rising to a maximum of 189350 shares (27.05%) at a cost to him of £30m. This maximum figure depends on the take up of the rights issue by shareholders other than Moores and Morgan himself.

Moores doesn't invest at all:

Moores 178500 shares (25.5%).

Morgan would have a minimum of 214200 shares (30.6%) at a cost of £34.4m, rising to a maximum of 367850 shares (52.5%) at a cost of £61.3m. This maximum figure again depends on the take up by shareholders other than Moores and Morgan himself.

3) An issue of 10% new shares would then follow, directed at the fans. These 70,000 shares, priced at £175 each would raise £12m, and would take the total number of shares to 770,000. We're assuming current shareholders would be ineligible for this and David Moores would not be allowed to invest in the scheme. Again Steve Morgan will underwrite this issue and buy any shares not taken up.

Of this final total of 770,000 shares:

David Moores would have 178,500 (23.2%) if he hadn't invested in the rights issue. If he had invested fully he'd hold 357000 (46.4%) and would thus lose overall control whatever the share buying pattern under Morgan's proposals.

Steve Morgan could now hold anything from 17850 shares (4.6%) to a maximum of 437840 shares (56.9%, costing him £73m), again depending on the take up of the rights issue and the share issue.

What would David Moores need to invest to absolutely guarantee he'd remain the largest shareholder?

He'd have to own 308200 shares (40.0 %). Steve Morgan could then have a theoretical maximum of 308140 shares (39.9%). This would entail an investment by our present chairman David Moores of £22.7m in 129700 shares.

The Reality?

If Steve Morgan's proposal was accepted, we'd expect David Moores to invest in shares to try and retain his largest % shareholding position. The question is how much would he need to invest? It is hard to predict the uptake in the rights issue to existing shareholders however Granada are unlikely to invest any more money in the club, so Steve Morgan would mop up their shares in the 1 for 1 offer.

We believe the £12m share issue to fans would be extremely well supported and Steve Morgan may not need to underwrite this. So David Moores may be able to stay as the largest shareholder by investing around £12m, but correctly predicting that figure is like picking the winner of the National. You get it right more by luck than judgement!

So that's the bare bones of the case - we haven't touched on whether the two men could successfully work together in the board room or press speculation of the manager's future. We believe both lie outside the scope of an impartial analysis of the current proposal.

If you have any questions you can email us at:

lfc_isa@hotmail.com

Independent Liverpool Supporters Association
http://www.ilsa.org.uk/

[Ros]

Nice post Rushian. The £73M will not come from Morgan himself, but from other shareholders and fans. This a simply an attempt to increase his shareholding and dilute the other shareholder's share. To maintain control of the club, the biggest contributer of the money would be Moores himself.

Too money people were believing that all the money would come from Morgan which isn't the case. I have no doubt that Moores will go for the Thai offer now.

[Nunavut Patrick]

Rushian, can I send my retirement plans over to you so you can break them down for me? Good post, breaks it down well.

I read the Echo piece, and the Thai PM, or his company, said that they believe it is 50-50, and if they don't get the Liverpool deal they can always get another premiership team. If Kenwright reads that, (can he read?) he'll be off to Bangkok toute de suite.

And another thing, will all this be a distraction on Saturday if the match matters? I'm sure Geds head is spinning, thinking about the baht/pounds/francs/euros he'll be able to splash about.

[Rushian]

Basically Morgan's valuing the club at £175 x 770,000 = £134.75m
The Thai deal values the club at (50,000 x £65m)/15000 = £216.7m

So Morgan is trying to increase his shareholding on the cheap (which may be no bad thing for the future of the club) as he knows the uptake will be nowhere near 100% and he'll effectively be buying the present shares at £1750 instead of the £4000 the Thais are offering, and the price shareholders have paid in the last few of years. I know quite a few shareholders are not too happy on that front.

It's almost a no brainer to Moores - have to cough up 20-odd million of his own money to remain the largest shareholder and see £73m pumped in and Morgan in a much stronger position in terms of shares and a place on the board; or he doesn't invest anything, remains as the largest shareholder and marginalises Morgan with it, and sees £65m pumped in from the Thais who'll be kept at arms length in comparison.

[Tom R]

I'd rather have Morgan, apart from this:

“Morgan: Like any true Liverpool supporter, I would always always prefer us to have our own ground. And that would be the premise of it to start with. The only thing I have said and I've been misquoted on this, I'm glad for the opportunity to state the issue, is that if the offer is accepted, if I am on the board and if I have my ... I clearly would have my say, I think you have to always look at all options, but clearly and unequivocably my preferred option is definitely for Liverpool Football Club to have its own ground”

Spoken like a proper politician that. Unless he just says, “No, I do not want a ground share with Everton”, then he can keep his fucking ideas to himself.


If all of the above is spot on then there's no way on earth that Moores is going to go for it. He'd have to be a complete idiot to even consider it...

oh, hang on.... ;-)

[Liverpoolway]

If you are right Rushian then there is no way in hell Moores will accept Morgans bid. It's not morally right of him either, as it would dillute the value of the shares to those who have bought shares but can't afford buy more. It's Morgan stealing from other supporters.

[Paul]

With major negatives surrounding both bids, I wonder if there's a possibility this could flush out a third party to take over the club completely. I have to say I'm not sure about us having our own Abramovich, but there are people like that out there with stupid money to spend and Moores isn't cash rich. Maybe the right price would persuade him to sell.

[Agent Smith]

As has been said already, if this is how the deal is broken down, there is no way Moores would accept. Either on his behalf or for the other shareholders. Morgans got no chance with this proposal, unless the board are complete morons..........hmmm.........

[dave u]

I still say Morgan's deal is better for the club, but given the implications to Moores I'd be amazed if the club went with the offer.

Thing is though, isn't this exactly what Moores did to get his majority shareholding?

Moores has to act in the best interests of the club, not himself. Be interesting to see just how much of a 'good red' he really is when the outcome of today's meeting is announced.

[DT]

This may sound really really stupid, but if Morgan's offer is accepted, will we then be able to buy shares at £1750 each? Is that a cert - or can the price change?

Will only be British based shareholders be allowed to buy etc?

Just curious.

[Ros]

As the Chariman of the club, Moores also have to act in the best interest of the shareholders. In Morgan's bid, they will be short changed for Morgan's gain. The club's shares would be devalued, making it easier for a take over. If the deal would to go through and Moores did part with lots of his own money, some of the so called fans would want to make a quick buck out of the deal. Selling the shares to someone else at a price slightly more than the £175 paid for to someone like Morgan. With enough of these shares, Morgan would be able to complete a full take over of the club.

[Moo]

I'm wondering how anyone can think that the Morgan offer is in the best interests of the club? (not sure that this is what you're saying anyway Dave U?)

He's clearly trying to undermine the current board and wanting to gain control on the cheap. He's undervaluing the club and potentially ripping off genuine fans who currently hold shares.

I am not in favour of the Thai bid cos, again, we don't know the detials.

But I am very much against the Morgan bid.

If he was a good Red himself who's primary concern was to keep the club local, he'd be offering to put in his own money without all these strings attached and would be appalled at the thought of his alleged/proposed actions.

Alas, he's sat up there on that podium taking the piss out of the lot of us.

[Rushian]

The way I see it is this is a takeover bid by Morgan - Moores has to invest £31m to maintain a stake of 46% (it's impossible for him to stay at 51% under the scheme). If he puts in nothing his stake drops to 23% and Morgan is guaranteed to be the largest shareholder.

Of course this may be no bad thing if you want Morgan in the boardroom (he talks a lot of sense). And the club gets an injection of capital under this scheme however the Morgan/Moores ratio ends up.

Does Moores stick or twist?

[sammya]

Originally Posted by Moo

Alas, he's sat up there on that podium taking the piss out of the lot of us.

is right. He's making mugs of us and the press is joining in

[Walk On]

The media need someone like Rushian to help them understand the deal! On the face of it, I was bang up for the Morgan deal ahead of the Thai's, but having read (and tried to understand!) the above, it does seem like Morgan is on a bit of a wind up mission!

No way will Moorse accept the deal in that format.

So it looks like we'll all be having green curry at half time! No bad thing!

[Nunavut Patrick]

Is the support split between pro-GH Thai and anti-GH Morgan? If Morgan gets in GH will be defo gone, but the Thai bid will be status quo, so GH will more than likely stay.

[Cath]

Originally Posted by Walk On

So it looks like we'll all be having green curry at half time! No bad thing!

That's sold me on the Thai offer.
Now if we can just get a few million off Cains and a French Vineyard me and the fella would find our matchday experience much improved.

[Mark P]

"Wok on, wok on..."

Taxi....

[Ros]

No matter which offer we take up, it does not affect the position of GH unless Morgan takes control. GH's position is vulnerable regardless of Morgan gets a seat on the board or not. Moores still calls the shot. Next season will still be make or break for Houllier.

[DT]

"Next season will still be make or break for Houllier."

Now where have I heard that one before?