Rollin’, Rollin’, Trollin’

That Sevco-Sports Direct commercial deal expressed via the medium of people on a hill: ROLLING
That Sevco-Sports Direct commercial deal expressed via the medium of people on a hill: ROLLING!

Good Afternoon

The Daily Record has declared yet another “War.

Any more, and it could find itself subject to UN sanctions.

This time it’s Sevco squaring up to His Big Mikeness after “discovering” that Sports Direct’s commercial deal with Scotland’s newest club is a seven year rolling one.

The prevailing view in Clumpany Towers is that “discovering” = “knew ages ago, but spinning it now for dramatic effect”.

After all, the new regime has been in place – and privy to commercial information – since early March.

Heading into its Fifth Season. Not a boast that Sevco can make…

In terms of the rhetoric being used, there are no surprises in Keith Jackson’s piece.

HMB has apparently “turned his guns on the new regime”, the commercial deal is described as “crippling” and “astonishing”, the notice period on it is “massive”, and the new regime is “outraged” .

I guess it can’t possibly be the case that the Record has been briefed by ‘sources close to Sevco‘ to run a story about Big Bad Mike the day after they announced the EGM he requested.

No. Because the Scottish media doesn’t work like that.

Has anyone seen a mysterious Caped Crusader around the Record offices?
Has anyone seen a mysterious Caped Crusader around the Record offices?

As we discovered yesterday, the RIFC EGM  has been set for 12 June.

Unless of course the Board suddenly decides to render unto Caesar beforehand.

Or HMB caves in, releases security over all those assets, writes off the £5m loan and sends the Komedy King flowers and a box of chocolates to ensure they are all good friends.

I suspect that the EGM will go ahead, but I doubt that we will learn anything substantive.

Notwithstanding the Dignified spectacle of Sevconians shouting down any Ashley representatives, it could be something of a damp squib.

Dave King and Paul Murray rehearsing for the EGM?
Dave King and Paul Murray rehearsing for the EGM?

And here’s why.

The main formal business of the EGM will be to ask shareholders to call on the Board to repay the Sports Direct loan. However, the statement on the Sevco website  makes it clear that

“advice from a senior QC is that the Requisitioned Resolution, if passed, would not create a binding legal obligation on the Board or the Company”.

I wonder if HBM has his own QC willing to offer a view on that?

In any case, I suspect that the resolution won’t be passed, but if it was (and as a matter of principle and courtesy), it would seem odd not to repay him. Assuming that the funds are readily available.

Incidentally, I notice that the “Company Statement” mentioned above was made by “Rangers Football Club”.. So much for the separation of club and company eh?

“Ltd.” eh…?

As I have suggested previously, despite the tabling of a Resolution, the main purpose of the EGM would seem to be to make the Board squirm, obtain clarity about the resources available to them, and cause discomfort about the lack of a Nomad and recent de-listing.

The EGM still promises to do that.

But we also now have a second resolution, tabled by the Board:

“2. THAT, the shareholders support the Directors of the Company in their desire to ensure that the contractual arrangements between the Club and various members of the Sports Direct group of companies are renegotiated on a basis that is fair and reasonable for both parties and will deliver best value to both the Club and Sports Direct. The shareholders agree that these negotiations need to address the whole relationship between the Club and Sports Direct in order to achieve that goal.”

If the Ashley resolution is (in the Komedy King’s words) ““a non-event, then the Board’s resolution is even more pointless. We know – and have been repeatedly told – that the Board is seeking a renegotiation of contracts with Sports Direct. The resolution is little more than a restatement of King’s call for a “holistic approach” towards Sports Direct. i.e. not just repaying the £5m without also considering the commercial contracts.

The passing of the resolution would be no more than a nod of approval for the Board.

And would probably not even register on HBM’s radar…

Nothing registering
Nothing registering

What WILL pique HBM’s interest however, is the Board’s apparent intention to

“provide shareholders with a breakdown of the income received by Rangers Retail Limited (“RRL”) since its incorporation and the payments made by RRL to the Club”; and 

“advise shareholders on certain of the terms of the shareholders agreement relative to RRL and the effect these terms could have if valid and enforceable”.

I could have hazarded a guess that shareholders (and the watching media) will be invited to see that HMB has Sevco ‘over a barrel’ in the commercial arrangements that they both signed up to. And somehow conclude that “it’s not fair”.

And sure enough, Keith is right ‘on message’!

“But, in an aggressive move, he [King] then revealed his plan to call Ashley’s bluff by exposing the truth behind his iron-fisted grip on the club’s retail wing”.

Woah! Hold your horses Keith! Just in case anyone was intending to “expose” anything too enthusiastically:

“The Directors note that MASH Holdings Limited through its solicitors has written to the Company advising that the Company (and its subsidiary undertakings) are subject to various confidentiality agreements”; and 

“…that the RRL Shareholders’ Agreement (and related agreements) contain confidentiality provisions, which MASH Holdings Limited will seek to enforce”

So I suspect we won’t learn anything too detailed about the commercial relationships between RIFC and MASH/ Sports Direct. Although a couple of tasty morsels would keep me happy!

“Mmmm mmm mmm mmmmmmmm!”

Similarly, the RIFC Board notes that

“the meeting will have to be mindful of these confidentiality provisions and of the confidentiality provisions agreed between the Company and prospective Nominated Advisers and required by AIM. Any questions from shareholders will be required to respect the obligations placed upon the Company and the Directors’ own comments will be similarly respectful”

So we can expect questions about discussions with potential Nomads and the circumstances that resulted in de-listing to be met with the response of “sorry, that has to remain confidential”.

“We’d love to tell you, but…”

It’s going to be great, isn’t it?!

By far and away the most interesting part of today’s announcement was the Board’s declared intention to

“raise with shareholders the recent penalties imposed on the Club in respect of the Scottish FA disciplinary rules 1 and 19. As a result of these penalties and to prevent a situation where further breaches of these rules could trigger severe sanctions on the Club, the Directors are considering incorporating disciplinary rule 19 into the Articles of Association of the Company and disapplying voting rights in respect of any shareholding(s) which breach these rules”.

Bow before the awesome might of the Rule Book
Bow before the awesome might of the Rule Book

In short, this is raises the possibility of taking away HMB’s shareholder voting rights on the basis that exercising them might cause the club to face further ‘undue influence’/dual ownership charges from SFA.

Aye right.

For a start, HBM and Sevco may have been found guilty of breaching Rule 19 in respect of undue influence/ dual ownership, but neither were told to ‘cease and desist’ the status quo.

HBM still has his 9% shareholding as agreed with the SFA. It would seem an odd thing to do to retrospectively disenfranchise a shareholder who bought his shares in good faith and with certain rights, and who is now doing nothing wrong.

HBM will doubtless form a view on whether he wishes to challenge such a move, or simply work round it, should it ever occur.

But the proposal raises a few wider issues.

Firstly. What kind of message would it send out to potential investors if a company is prepared to single out and disenfranchise individual shareholders because they might cause difficulties?

Secondly, under the terms of the loan, Sports Direct could nominate two RIFC Directors today. Where is the Board’s strategy to combat the risk of SFA penalties arising through that influence? They seem in no rush to pay back the loan, so what is Plan B?

Thirdly, it seems pretty disproportionate. HBM and Sevco received fines that were most definitely ‘on the radar’ and which would struggle to convince anyone that the ‘club’ is at risk of anything like “severe sanctions” should HBM decide to flex his muscles.

Fourthly, the proposal seems to be based on the assumption that there aren’t other tools available to Sevco and its directors to avoid further rule breaches. Like for example saying to the SFA, “We/ Mr Ashley would like to do x. Is that OK?”. Or finding a way to working together sensibly like adults, rather than grandstanding in public…

Radical suggestions, eh?

It is worth noting that Sports Direct could nominate Mike Ashley himself as a RIFC director today. How perverse would it look if the company was then to initiate a process to strip him of voting rights as a RIFC shareholder?

You might be disenfranchised, Your Big Mikeness
You might be disenfranchised, Your Big Mikeness

Roddy Forsyth entered the fray this morning. Also sounding suspiciously ‘on message’, he provided some further commentary on the suggestion that RIFC might incorporate the SFA’s dual ownership rules into its Articles of Association.

“Mike Ashley’s failure to contest a Scottish Football Association verdict on dual ownership rules has opened the door for Rangers chairman Dave King to ambush the Newcastle United owner over his demand for a general meeting of Ibrox shareholders, The Daily Telegraph can reveal”.

“King and his allies accepted the sanction with alacrity because it offered them the opportunity to investigate the possibility that contracts for Sports Direct deals with Rangers might have been agreed while the company’s owner and the club were both infringing SFA regulations.”

This might help to provide an argument for changing the Company’s rules to limit the influence of someone who owns another…err… ‘club’, but I find it difficult to see how it could do much more. For example, it would seem a bit of a stretch to use infringement of the football rule book to unravel commercial contracts.

We shall see.

So how do things stand this morning?

Well aside from learning about Sports Direct’s 7-year rolling contrast, we aren’t much further on. There is posturing a-plenty from the Sevco and MSM side, and the usual silence from HBM and team. But that’s about it.

Should it go ahead, the EGM promises to be an interesting side-show. But I suspect that the real drama will be played out behind closed doors and away from the courtroom for the foreseeable future.

With a large amount of excitable guff from the Daily Record and others.


Plus ça change as they say at the Clumpany’s French offices.



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