With the deadline for bids to be submitted to the receiver having passed on 15th May, we are ever closer to prospect of new ownership of Blackpool FC. During this period of receivership, there has always been the lingering threat, however remote, that if Owen Oyston was able to settle his outstanding judgement debt to Valeri Belokon, then the interim board’s tenure would come to an abrupt end and the club would remain in Oyston hands.
As it stands, and naturally not wanting to tempt fate, it looks like that nightmarish situation will not come to pass. The Gazette’s Matt Scrafton has reported that there are four serious bidders, with a takeover potentially complete by the middle of June.
Sadly, even a successful sale by the receivers does not completely rid us of the spectre of a fedora on the horizon. It’s a topic that has persisted over recent weeks and therefore warrants a closer look into exactly what that threat it is, and how we could possibly end up in a position whereby Oyston retains a shareholding in the club.
Understanding the structure
In order to fully grasp the circumstances, it’s helpful to begin at the start with some basics. Who were the owners of each company, and what do those companies own? Who’s currently in charge? And what could happen in the future?
Blackpool Football Club (Properties) Limited
This is the entity formerly known as Segesta Limited, which to complicate matters further, was called Blackpool Football Club Properties (no brackets) Limited prior to that. This is the parent company, the top company in the hierarchy of the club’s group of companies. It is this company that owns the land on which Bloomfield Road stands. It owns the stadium, the Travelodge, the training ground at Squires Gate, and for some baffling reason a country house / wedding venue near Lancaster called Quernmore Park Hall. This company owns 100% of the shares in Blackpool Football Club Hotel Limited, but perhaps most importantly of all owns 77% of the shares in Blackpool Football Club Limited.
For over 30 years, BFC (Properties) Limited has been 97% owned by Owen Oyston, with the remaining 3% belonging to over 100 different minority shareholders. It is this 97% shareholding which Justice Marcus Smith put into the hands of the receivers David Rubin and Partners and is now under their control.
However, it appears that some of BFC (Properties) Limited’s assets – namely, the Travelodge and Quernmore Park Hall – are being sold separately. This naturally lowers the purchase price for any of the bidders, but also means the loss of a key revenue stream in the Travelodge rental which is believed to be in excess of £500k annually.
Blackpool Football Club Limited
This entity is effectively the club itself. It is BFC Limited that holds the EFL’s golden share and the players’ contracts. In terms of tangible fixed assets, it holds very little of any real value. However, this is the revenue-generating entity, the company that receives television fees, season ticket money and gate receipts, merchandise sales, catering and sponsorship.
Since 2006 when Valeri Belokon invested in the company through his company VB Football Assets, the shares have been held as follows:
- 77% – Blackpool Football Club (Properties) Limited
- 20% – VB Football Assets
- 3% – minority shareholders
Therefore, any buyer will become the owner of 77% of the football club, as well as some of its key assets such as the stadium and training ground through their 97% stake in the parent company.
Scope of the judgement
Casting our minds back to 6th November 2017, the thing most people remember from Justice Marcus Smith’s judgement is that Valeri Belokon was to be paid £31.27m for the unfair prejudice he experienced. Crucially though, it was to be a payment in return for Belokon’s 20% share in BFC Limited.
In cases of unfair prejudice against a minority shareholder, it is a common remedy for the majority shareholder to be ordered to buy them out. The £31.27m is just the figure that the judged arrived at based on calculating what he deemed to be disguised dividends of £26.77m, as well as the return of Belokon’s £4.5m investment in the club.
Oyston ending up with Belokon’s 20% was always the intended legal outcome envisaged by the High Court; the problem being that Oyston has had significant problems paying the judgement in full. An initial £10m was paid in December 2017, but ever since it has been like getting blood out of a stone, which is why Justice Marcus Smith had to take the drastic step to place BFC (Properties) Limited into receivership earlier this year.
The sale of the Travelodge and Quernmore Park Hall, as well as the sale of BFC (Properties) Limited, will go a long way to reducing the outstanding debt, but is unlikely to eliminate it altogether. So for the short-term at least, we are likely to be in a position where there is a new 97% owner of BFC (Properties) Limited – and therefore 77% owner of BFC Limited – while Valeri Belokon notionally remains a 20% shareholder.
How long that continues to be the case is another matter. Once the sale of BFC (Properties) Limited is finalised, one would imagine that Belokon will continue to pursue settlement of the total debt. This may mean going back to the courts to assist with enforcement of the sale of other non-football assets, such as Oyston’s shares in Closelink Limited (which owns the Whyndyke Farm plot), his other business interests, (Natfarm, Zabaxe, Oyston Estates, etc) or his personal property including Claughton Hall.
There is a hypothetical point in time where the full £31.27m, plus interest and the cost of the receivership (an estimated £1.25m) and other enforcement costs will see the final balance settled. At this moment, in theory at least, Oyston completes his acquisition of the 20% shareholding previously owned by VB Football Assets.
What can stop this from happening?
This is far from an ideal set of circumstances. Surely there is a way to prevent this from occurring? There are a few different roadblocks in the way of Oyston’s return, so it’s worth examining a few of them in turn.
A revised court order
Perhaps the cleanest method of ensuring Oyston doesn’t get his hands on the 20% is to go back to the High Court and seek a new direction from Justice Marcus Smith. After all, the solution of having Oyston buy out Belokon’s minority shareholding is predicated on him still being the majority shareholder. If he no longer has any involvement with the club, does this remedy still make any sense?
Who has the authority to do this though? Clearly, as the claimant, Valeri Belokon is entitled to make representations to the court, but unless he emerges as an unlikely bidder for the 97% of BFC (Properties) Limited’s shares given his current EFL ban, then what incentive does he have to do so? It’s entirely conceivable that Belokon is happy to put his Blackpool experience behind him, and so long as he get his money, what should it bother him how it comes his way?
Would a new owner have any sway with Justice Marcus Smith, or even a legal means of initiating such a process? Arguably, by proceeding with the purchase with full knowledge of the potential 20% issue, they have accepted this as a possible outcome and thus the courts could rebut any complaints.
If the court is open to exploring a way of resolving the floating 20%, then the main questions are likely to come down to how it should be valued and who should acquire it. The sale of BFC (Properties) Limited will provide a handy guide to the fair market value of the shareholding and ultimately will probably result in a quite small figure.
In pure accounting terms, the value of BFC (Properties) Limited lies in its fixed assets – Bloomfield Road, Squires Gate, the Travelodge and Quernmore Park Hall. With the latter two assets reportedly being sold off separately, the asset values to look at are the stadium and training ground. As of the last published accounts to 31st May 2017, the book value of these assets was in the region of £18.5m but with another two years’ depreciation this will have reduced to around £17.5m.
Book values are fair market value aren’t always the same thing however, and it’s difficult to see the receivers getting this much for the 97% shareholding in BFC (Properties) Limited. Assuming the receivers do fetch less than £17.5m for the sale, then it’s hard to imagine a large valuation on the 20% shareholding of BFC Limited, whose only assets remember are essentially the players’ contracts and the EFL golden share.
Belokon paid £1.8m for his 20% stake back in 2006 and a valuation in that region is not unreasonable, and if anything is probably on the high side. Would the court agree to a solution whereby either the new majority owner of the club (or a third party) pays a fee in this region for the 20% in BFC Limited to reduce the judgement debt?
If Belokon is struggling to enforce against other Oyston assets, then this might seem like a quicker way to pay down the debt, and one would hope the courts would agree. It certainly seems the most simple resolution and would guarantee fans an Oyston-free BFC, but whether Owen Oyston would take this lying down is another matter. Past form suggests he would be very likely to fight this tooth and nail to retain at least a shred of relevance, at least in his own mind.
Application of EFL’s Owner and Director Test
Another possible way of avoiding an unwanted Oyston return is to hope that the EFL would block this outcome. It has been argued by Blackpool Supporters Trust that Owen Oyston should have already been disqualified under the rules of their Owners and Director Test (ODT) by the EFL due to his rape conviction.
Indeed, BST sought confirmation of this belief from Alan Maclean QC, an expert in sports law. He concurred with BST’s view, but Shaun Harvey and the EFL have continued to assert that Oyston’s conviction should not act as a disqualifying condition as it pre-dates the introduction of the rules and only new applicants would be banned, not existing owners.
Regardless of whose view is correct, if Oyston was to seek a return by obtaining Belokon’s 20% after his majority shareholding has already been sold by the receiver, there is an argument that he would need to pass the test all over again as a prospective new owner. Here, his status as a registered offender should restrict him from becoming “involved in or influencing the management or administration of a club” according to EFL guidelines.
It could be argued however, that if he is not given a directorship by the new majority owners, and has no influence or say in how things are managed, then he might not necessarily need to pass the ODT. The ODT applies only to those deemed a “relevant person”:
‘Relevant Person’ means in respect of any Club any individual Person (and not any Entity) operating the powers that are usually associated with the powers of a director of a company incorporated under the 2006 Act (as a Company limited by shares or by guarantee).EFL Governance – Appendix 3
It’s certainly unlikely that any of the 3% minority shareholders have been subjected to the test, precisely because they also have no influence or direct involvement in the running of the club. It’s unclear from the EFL’s regulations if the size of a minority shareholding has any bearing on this. It could be that a 20% stake is deemed high enough to warrant being examined under the ODT, but it’s not crystal clear.
Quite whether the EFL would want to deal with the embarrassment and scrutiny that an Oyston return would bring with it is another issue entirely, but it’s not 100% clear that they have the ability to prevent it, and given the questionable application of their own rules to date, relying on the EFL to save the day is a leap of faith.
Action from the majority shareholder
If Owen Oyston is able to raise the funds to settle the full debt and an Oyston comeback can’t be precluded by any of the two previous methods, then what to do if he does indeed obtain the 20% shareholding from VB Football Assets? Presumably any new owner will appreciate the difficult position a continued Oyston presence is likely to cause them and seek to bring it to a swift end, if they are able to do so.
The most obvious approach would be simply for the new owner to make an offer to buy the 20% stake. Yet if Oyston has gone to the trouble of paying the full debt, one would imagine that is because he wants to return, however limited his powers may be. Only by massively overpaying for the 20% might a new owner be able to encourage Oyston to go on his merry way, and it would be seriously unpalatable to see him make a tidy return out of it.
Oyston would be under no obligation to sell however, and one can easily imagine a scenario where he digs his heels in. After all, at this stage of his life the privilege of being a shareholder may take precedence over any financial reward. His actions over the last couple of years certainly don’t point to someone focusing primarily on their financial situation.
If Oyston can’t be persuaded to sell, it puts the majority owner in a tricky position. During the last few weeks there have been plenty of solutions bounced around as to how Oyston could be sidelined, but all of them carry with them one notable, and ironic, risk – a claim of being unfairly prejudicial against a minority shareholder.
This is, of course, the same claim which brought a world of pain upon Oyston in the first place and therefore any new owner would be all too aware that they need to tread carefully. There has been talking of just transferring the assets to a new company or undertaking a rights issue to force Oyston to part with more cash to maintain his same level of shareholding or see it diluted.
Putting aside the viability of either of these, or any other methods that one might care to dream up, if the sole purpose of any plan is to attack Oyston’s shareholding, then it’s likely the courts would take a dim view of it. The same company law that punished Oyston for his behaviour against Belokon could in the future protect him from similar treatment.
If the worst happens…then what?
A future whereby Oyston returns as a 20% shareholder is still only hypothetical right now. It assumes:
- The court doesn’t foresee such an issue and amend the terms of the judgement to deal with the 20%
- Owen Oyston is able to clear the total remaining balance of the judgement debt, which prior to the sale of the club likely stands at well over £25m
- The EFL do not block Oyston’s return under the terms of the Owners and Directors Test
- The new majority owner is not able to negotiate an agreeable buyout cost with Oyston for the 20% shareholding
- The new majority owner is not able to find an alternative legal solution not explored above
“If ifs and buts…”. An Oyston comeback is by no means certain. In fact, one would argue it’s even unlikely. Yet that doesn’t make it impossible – far from it. What happens next? It’s like an episode of Question of Sport in your nightmares.
A natural instinct might be to resume the Not A Penny More campaign. Who could bear the sight of Oyston at Bloomfield Road, or even just the knowledge that he is a 20% shareholder? To have fought a long battle to get the Oystons out, only to know he has a small foot back in the door would be galling to say the least.
We have to consider what a renewed boycott would set out to achieve. Last time around, the aim was simple. In the wake of the Premier League parachute payments coming to an end when the club were relegated to League One, the NAPM campaign helped to starve Oyston of income at a time when he needed it most in the midst of his court battle with Belokon. It put a strain on resources and while the High Court judgement was clearly the decisive factor, NAPM certainly had its part to play.
Now, however, what would be the point of throttling the turnover of BFC Limited? New majority owners would no doubt agree with fans that they want to see the back of Oyston, but if they are powerless to do anything about it, what is the purpose of punishing them for it? If a new boycott makes the club unsustainable, it could have some unintended and unwanted consequences.
Selling the club on is one potential effect, but who would want to inherit those kind of problems? One would have to seriously question the motives of anyone willing to take on such a poisoned chalice, perhaps even suggesting that they are open to working in a partnership with Oyston in an active role (EFL regulations permitting). If they’re unable to find a buyer, then the club could find itself back in the hands of an administrator.
Going back to boycotting might be the moral stand that some want to take, and the prospect of Oyston involvement would be an extremely bitter pill to swallow, but one has to wonder if staying away and depriving new majority owners of revenue might be self-defeating. A case of throwing the baby out with the bath water?
A pragmatic approach
As we’ve experienced over the past few years, nobody is obliged to follow any single course of action. Just as an overwhelming majority made the choice to boycott over the last few years, around 1,500 fans opted to carry on attending regardless of the criticism that came their way.
If some people cannot live with an Oyston return, it’s difficult to question their ethics. Yet in this increasingly divisive world we all live in, we all have to make a decision on where we will draw our individual line. It might be that a compromise on our morals is the most effective way we can help forge a better future for our club.
If Oyston is able to return as a 20% shareholder, then…
- It could still be some time away, likely years
- He is unlikely to be made a director
- He is unlikely to have any power
- He would not be entitled to a salary
- New owners do not have to pay out dividends from which he can benefit
To all intents and purposes, the full extent of Oyston’s involvement could be his name on a bit of paper identifying him as a 20% shareholder. When we think about the situation five years ago, it’s a massive improvement. And most importantly, it may never even come to that. Is it a worry? Of course. Should it stop us supporting our club in the meantime? That’s for everyone to decide for themselves, but we shouldn’t forget the great strides made. It would be a shame for this progress to be discarded.