Foreign Tycoon investment ?

Only equivalent “preference” shares will carry a similar (or the same) rate. “Preference” shares behave a bit like a debt where you pay interest on your loan - the preference bit is usually that they get their return before other shareholders (unless there are other superior ranking preference shares). Depending on the terms/rights attaching to other shares they may get different returns or no designated returns.

What that means is that, for example, if the profit of the club is equal to 10%, the “preference” shares will get their dividend first, to the tune of 7%, and then the remaining shares will then get paid out. Those remaining shares may get all the rest (so if the total return is 10% they will actually get a higher amount as the preference shares are foregoing the profit above 7%) or it may just be distributed equally. By contrast, if the return is low - eg 3%, then the preference shares get paid out up to 7% and if anything is left over the other shares get it (and it will be lower than 3% because the preference shares have taken a lion’s portion).

The devil is in the detail.

I think the simplest way to understand it is just to acknowledge that it’s a way of changing the “risk” of being a shareholder in the same investment. These preference shares are effectively lower “risk” to the owner because they have a more guaranteed return. They still have the risk the club might go bust or turn no profit though. Going bust is a risk to debt holders or share holders in the company, turning no profit is a risk to share holders.

And of course it’s more complicated still because I don’t think Delia and co have tended to declare dividends, so in fact there have been no such “profits” to distribute (correct me if I am wrong), so that 7% may be notional or make actually pay out.

7% sounds quite high, but (while I am not a corporate debt broker) in the context of interest rates rising perhaps up to 4% and inflation well over 10% and set to rise, it doesn’t sound too bad to me. It would be better if there were no rate attached, but then as you can see from the garble I have posted above, it’s pretty complicated and difficult to know if it will actually remove money from the club.

 

According to last year's Annual Accounts, Foulgar holds 98,200 Ordinary shares and 4,400 "B" Preference shares. The 18% refers to the Ordinary shares. As I understand it, no Dividend is currently paid on Ordinary shares, nor are they interest bearing. A Dividend is paid on 'B' Preference shares, but I've no idea whether Attanasio is buying those as well.

 

It feels like we have an American leech slowly feeding off of our lifeblood without contributing enough to drastically improve our situation.

What bothers me with an ageing Delia is that this investor may attempt to take full control of the club with no love for the club other than money .

 

That's a pretty negative interpretation, Dunc, perhaps inspired by the Glaser brothers at ManUtd. Attanasio's record at the Brewers suggests something different. Why would he tie up millions of dollars for a return of £700k. If he was just buying the preference shares it still would be seen as a modest return on a £10m investment.

He could get far more by investing the £10m in blue chip stocks, but Attanasio is investing far more in the club by buying out Foulger's 18% holding in exchange for a seat on the board which Foulger previously held. Had Foulger pulled out without a new investor being available the club would have been in considerable uncertainty. As it is, it looks like a win-win situation to me. Why else would Delia and Michael be willing to accept it?

 

Is it £700k return annually ?

 

Yes, but after a few years the preference shares will be converted to ordinary shares, according to what was said above, and the 7% will stop. It's an incentive to attract that additional investment.

 

So he can't just get his original £10m back after 15 years guaranteed and still hold his stake ?

 

Devil is in the detail, but it sounds something like that.

 

Seems odd when you take into account how much we get from promotion and how close we have come from going bust when bumbling about in the Championship and League 1 .

We apparently just spent £10m on Sara with no guarantees we will recoup that money , Rashica cost similar and I don't see him worth half that now .

The American chap seems to have invested a modest stake when compared to All aspiring Premier league clubs money men , with absolutely zero risk.

Guaranteed to make £700k a year indefinitely whilst still holding his original stake .

My gut feeling is he will attempt some shenanigans to eventually take full control of the club , Delia and Co are no mugs but they aren't from a background in Corporate financial wizardry either .

I hope I'm just being pessimistic but I smell a rat

 

I think you’re being pessimistic, but not without some cause. Any takeover comes with risks, as well as opportunities.

My read is that this level of complexity suggests no-one is rushing to do a deal. Yes, he gets £700k return, but that’s not so bad - I would be willing to bet it’s cheaper than bank debt. It’s not so big as to risk the club in any way. And it’s not totally risk free for him, because if Norwich goes bust he loses his £10m because this is shares. Plus if it’s true preference shares rather than quasi debt, he won’t get paid out while we are making a loss in the Championship, it would rely on promotion for him to get paid and then £700k wouldn’t really be noticed.

It’s a tentative commitment from him, which is obviously what Delia etc want, and presumably the flip to normal equity will involve him taking a greater risk once he’s comfortable with how it works. It allows him and his team to learn the ropes at Norwich and work out if they really do see a potential takeover working, while not leaving Norwich with any serious risks (in terms of jeopardising the club’s survival) if he pulls out in the next few years.

There are obviously risks and rewards both ends, but as it goes this isn’t some wealthy family who just want a plaything who pay a price and then decide later whether they actually have a plan for the club. This is a serious investor, doing their due diligence.

I could well be wrong because we are well short of facts and detail, but I don’t see anything which contradicts that interpretation and plenty to be positive about.

 

There's going to be a change of ownership at some point. This seems to me a cautious first step which allows either party to pull out without major damage if they develop misgivings. What would Duncan's preferred alternative be?

 

Last time I checked Norwich were run by the second poorest owners in the top 2 divisions with fan owned Luton at the bottom.

Mr Attanasio & his investment haven't changed that .

Investment in football clubs is more risky than a Casino so it's usually just mega rich foreigners that treat the club like a play thing to slosh their ill gotten gains about .

I'm sure I'm missing something but I don't want to become another Watford style franchise.
Or cash cow where the owners seize control and mortgage all the assets to pay for it like the Glazers another New York family that own the Tampa Bay Bucaneers & Manchester United.

Fenway Sports that own the Red Sox Liverpool & Pittsburgh Penguins with mega money investor's like LeBron James are a different story , but Liverpool is just a global brand now like Disney land.

 

Is there a question hidden in there somewhere ?

 

Mr Attanasio is worth an estimated USD700m (though that seems to have originated in 2012, so could be way out of date). It’s not a takeover right now, but if it does crystallise into a takeover, then that will most definitely change the valuation of Norwich’s owners…

The point is that this changes nothing really huge. So there’s not really that much to be pessimistic about. But there’s plenty to be positive about:
- Delia and Attanasio are not rushing into a deal
- He’s going to make a small investment at low risk to everyone to see how it works out
- If it’s successful then it means a handover to what would appear to be a prudent investor
- The guy has extensive experience of managing a sports club, so the Fenway Sports example is an excellent one - but it’s good that he recognises that maybe football is a different game so learning the ropes now is wise
- He’s very wealthy, enough to make meaningful investments, but not so wealthy that a takeover wouldn’t matter too much if he pulled the plug

 

For me it would be selling our soul in the hope of joining other foreign owned clubs trying to finish 17th place or better.

I would seriously consider supporting Cambridge United if we became just another franchise play thing for a Globalist hedge fund manager .

But that's me

 

To me it sounds as if this were an interest free loan of £10m to be paid back over 14/15 years at a rate of £700k annually. Don’t get much better rates than that

 

Agree with all of that Rob. If it's true that Foulger has business problems and needs to get his money out this seems to be a win-win situation. Attanasio buys those shares and £10m preference shares giving him a 20%+ share in the club and a seat on the board and an opportunity to get regular involvement in board discussions and decisions. He'll hear Webber's reports on both football issues and budget decisions. Delia, Michael and Tom still hold a majority shareholding and thus the controlling votes on decisions made. The more I see, the more this feels like controlled evolution rather than traumatic takeover.

 

I'd be surprised if the "C" Preference shares made any difference as regards percentage ownership of the club. As Rob says, preference shares and ordinary shares are different animals.

 

True, but it only really matters when it gets near 50%.

 

...