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Steve Hayes' Proposed Acquisition of WWFC – Précis of Key Points

Below is an extract from the Calling Notice sent to Ordinary & Founder Shareholders of WWFC. This document is intended to provide supporters with some outline facts behind the proposal submitted by Steve Hayes. The full Calling Notice will be uploaded in the next few days.

Notice of General Meeting and Founder Shareholders’ Meeting

Delivered Friday 19th June 2009 to Ordinary and Founder Shareholders

General Meeting and a separate Founder Shareholders’ meeting scheduled for Monday 6 July 2009.

Extracts from Calling Notice

Background to this Letter

At an operating level the Club is currently losing an average of £1,400,000 per year as evidenced by the last 3 years’ statutory audited accounts. The solvency of the Club is due, in the main, to the support of one of the Company’s directors and your fellow shareholder, Mr Stephen Hayes. Without Mr Hayes’ support the Club would, in all probability, need to enter a formal insolvency arrangement due to a lack of other sources of financing and would soon find itself unable to meet its debts. Mr Hayes has indicated he will continue to financially support the Club and indeed has outlined a recapitalisation plan which will significantly strengthen the Club’s balance sheet subject to the shareholders passing the Resolutions contained in the Notices of General Meeting attached to this letter. Without the support of the shareholders Mr Hayes has informed the Board he will withdraw his support for the Club immediately should there be a negative decision in relation to the changes proposed in the Resolutions.

Re-registration as a private company

The Company intends to re-register as a private limited company.

Following the passing of the Resolutions, Mr Hayes will control 100 per cent. of the Company’s voting rights.

“Tagalong” provisions are included in the New Articles which ensure that Ordinary Shareholders are able to participate in any cash disposal of the Company by Mr Hayes at a price of £1.00 per Ordinary Shares held (being, the price originally paid for such shares).

New Articles of Association

We are also asking shareholders to approve a number of amendments to the Current Articles, primarily to remove the bar on any one shareholder owning more than 25 per cent. of the share capital of the Company but, there are further changes which are being proposed which are summarised below. However, it is important that you read the summary below in conjunction with the explanation above and the proposed New Articles themselves.

The main changes to the Current Articles are summarised as follows:
- Article 2.9 of the Current Articles provide that payments to shareholders on the winding up of the Company are made in a particular order of priority. It is proposed that this article be amended to delete the right of the directors of the Founder Shareholders’ Trust to apply any surplus assets in the manner set out in article 2.9, namely to set up a new football club in the High Wycombe Area, and to replace this article with a new article which complies in full with the Rules of the Football Association Limited.

- Article 2.10 of the Current Articles prohibits any shareholder from being interested in more than 25 per cent of the Ordinary Shares in the Company. The New Articles are drafted in such a way as to remove the Ordinary Shareholders’ rights to vote and to include a new class of Voting Shares which carry voting rights and which do not impose a limit on the number of Voting Shares which can be held by one person.

- Article 13 of the Current Articles prohibits the variation of any rights attached to the Founder Shares without the prior consent of the majority of the Founder Shareholders. The Current Articles detail seven events which are deemed to vary Founder Share rights and which, if such events were to be allowed, would require a majority of the Founder Shareholders to pass a resolution consenting to such actions.

Of these seven, the New Articles are drafted in such a way as to remove three of the restrictions so that the Company will be able to propose and carry out the following actions (without the need to attain Founder Shareholder consent):
- consider the passing of any resolution to dispose of the Company’s interest in the football ground known as Adams Park, Hillbottom Road, High Wycombe (“the Football Ground”) including any proposal involving a sale and leaseback of the Football Ground (Article 13.1 of the Current Articles);

- any action to sell, transfer, assign or dispose of a substantial and material part of the Company’s undertaking, property or assets otherwise than in the ordinary and proper course of the Company’s business (Article 13.2 of the Current Articles); and

- any steps to increase the maximum percentage level of interest that a member may have in the Ordinary Shares beyond the level set out in article 2.10 (Article 13.7 of the Current Articles).

The other rights of the Founder Shareholders to block certain actions being taken by the Club, which are contained in Article 13.3 of the Current Articles, will remain unchanged in the New Articles, namely: - the taking of any action to change the nature of the Company’s business from that of the operation of a professional football club together with related commercial activities;

- the convening of a meeting to consider the passing of any resolution to vary in any respect the rights attaching to the Founder Shares;

- the taking of any steps to voluntarily wind up or dissolve the Company; and

- the taking of any steps to relocate the business and playing activities of the football club outside a radius of 5 miles from the Football Ground.

- Article 17.1 of the Current Articles empower the Founder Shareholders’ Trust to appoint one person as a director of the Company and, where the Founder Shareholders’ Trust reaches a shareholding of 100,000 Ordinary Shares, a right to appoint one further person as a director. It is proposed that this article is removed and replaced with an article which gives the Founder Shareholders’ Trust the right to appoint two non-voting associate directors to the board of the Company, irrespective of the Founder Shareholders’ Trust’s shareholding in the Company.

- A new class of shares, known as Voting Shares, is to be created, and 100,000 such shares will be issued to Mr Hayes, immediately on the passing of the Resolutions subject to the terms of the capitalisation agreement (details of which are set out below under the heading “Capitalisation of Loans and Ownership of New Voting Shares”).

- The rights attaching to the Ordinary Shares will be removed save for holders of Ordinary Shares will be entitled to receive notice of general meetings of the Company and will on the cash disposal of the Voting Shares receive a return on capital arising in accordance with article 7 of the New Articles.

- The rights attaching to the Founder Shares will be removed save for holders of Founder Shares will be entitled to receive notice of general meetings of the Company and will retain the right to block certain actions as set out in article 14 of the New Articles.

- A new article is proposed whereby if Mr Hayes receives a cash offer from a third party for his Voting Shares then Mr Hayes will be obliged to procure that the prospective buyer of Mr Hayes’ Voting Shares will make a offer to each holder of Ordinary Shares at a price of £1.00 per Ordinary Shares held (being, the price originally paid for such shares).

Capitalisation of Loans and Ownership of New Voting Shares

Mr Hayes is currently owed, as at the date of this letter, £6,893,000 by the Club in the form of unsecured loans. In consideration for the issue of 100,000 Voting Shares and, subject to the shareholders passing the Resolutions, Mr Hayes has agreed under a capitalisation agreement with the Company to capitalize £3,000,000 of his loans at a price per share of £30.00.

By doing this, the debt burden of the Club would be immediately reduced by £3,000,000 making the Club’s balance sheet stronger and allowing the Club to move forward on an improved financial footing.

The capitalisation will result (following the Resolutions being passed) in 100,000 Voting Shares being issued to Mr Hayes, giving Mr Hayes, as the sole holder of the Voting Shares, 100 per cent. of the voting rights in the share capital of the Company.

Ongoing Discussions with Founder Shareholders’ Trust

As outlined earlier in this letter Mr Hayes has been in discussions with the Founder Shareholders’ Trust’s board to secure their backing for the proposals in this letter and to seek a formal recommendation to its members that the Resolutions be passed. If that support were to be given Mr Hayes has indicated he would offer (subject to contract and the Resolutions being duly passed) to provide for the following (in addition to the matters which have been explained above):
- that there would be a right in the New Articles empowering the Founder Shareholders’ Trust to appoint two voting directors regardless of the number of Ordinary Shares held by it;

- a personal undertaking to the Founder Shareholders’ Trust, whereby Mr Hayes would provide £1,500,000 in cash to the Founder Shareholders’ Trust in the event that the Company is dissolved by way of liquidation. Currently the Founder Shareholders’ Trust has a right to a distribution of £1,320,000 on the winding upon the Company if there are any surplus assets (as described above under Article 2.9 of the Current Articles), this provision is effectively worthless as the current debt levels mean that the Company would not have any surplus assets on a winding up;

- a ‘freeze’ on the ability of Mr Hayes to call for repayment of his post capitalisation outstanding loans (being £3,893,000) till at least 30 June 2014 subject to the Club being able to repay such loans prior to 2014 in certain circumstances (to be agreed);

- a right of first refusal to the Founder Shareholder’s Trust in the event Mr Hayes wanted to sell his interest in the Club subject to the Founder Shareholders’ Trust being able to match any third party offer which Mr Hayes had had for such interest;

- to undertake to use reasonable endeavours to procure the transfer of all rights in the Wycombe Wanderers name and other intellectual property rights and all memorabilia to the safekeeping of the Founder Shareholders’ Trust in the event of a liquidation of the Club; and

- to hold monthly operational meetings that will take place between two directors of the Founder Shareholders’ Trust and a director of the Company as well as quarterly financial reviews held between five directors of the Founder Shareholders’ Trust, Neil Patterson (the Company’s Head of Finance) and one other director of the Company. The Board feel that this will ensure information flows to the supporters, who in turn will have an active role in the financial governance of the Company.

Notwithstanding the backing of the Board for the proposals in this letter and for the Resolutions, and despite Mr Hayes’ willingness to provide the above incentives and a working structure for the Founder Shareholders’ Trust to work with the Board in affording protection to the Founder Shareholders’ Trust and the Club generally, as at the date of this letter, the Founder Shareholders’ Trust have not made a formal recommendation to its members to vote in favour of the Resolutions. However Mr Hayes and the Board are in discussions with the Founder Shareholders’ Trust to look for ways in which to accommodate the Founder Shareholders’ Trust and it is hoped that the ongoing dialogue will reach a satisfactory conclusion for all parties in the very near future.

posted in club-issues | 19.06.2009. 16:46

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