Chairman holds the cards but Tom Hicks vows to come out fighting
• Texan ready to takle Liverpool chairman's claims in court
• NESV offer still the best on the table, says Broughton
David Conn guardian.co.uk, Thursday 7 October 2010
Tom Hicks, the embattled co-owner of Liverpool, maintained today that he will fight the high court action launched by the Anfield chairman, Martin Broughton, to force the American to sell the club to New England Sports Ventures, the owners of the Boston Red Sox.
In his fierce public onslaught against Hicks and the Texan's fellow 50% Liverpool owner, George Gillett, on Tuesday, Broughton said that by resisting, the pair had "flagrantly abused" undertakings they had given him and the Royal Bank of Scotland not to oppose a reasonable sale.
Broughton said they had abused the club's constitution, its articles of association, by seeking to sack the managing director, Christian Purslow, and commercial director, Ian Ayre, and replace them with Hicks's son and his assistant, to give Hicks a majority on the board. Liverpool's articles of association say only Broughton, as the chairman, has the right to appoint or remove directors.
Broughton has been advised of his legal rights at every step by Liverpool's solicitors Slaughter & May, one of the City of London's most highly rated law firms, and he took advice from them yesterday. On that basis he rejected Hicks's attempted boardroom coup. Broughton, Purslow and Ayre approved the sale, then the chairman launched his public attack on Hicks and Gillett. He is "confident" a high court judge will rule in the board's favour when the case is heard next week, although he added: "You can never be 100% confident when you go to court."
Hicks's spokesman in New York today set out the arguments which will form the basis of the Texan's legal defence. Of the undertakings, which Broughton says were given to him and to RBS, that Hicks and Gillett would not oppose a reasonable sale, the spokesman said: "There were no such undertakings given to Broughton."
He did not respond to a question about whether Hicks, as Broughton says, had given the undertaking to RBS. The spokesman claimed Hicks did have the right to sack and appoint directors: "The board has been legally reconstituted," he said of Hicks's attempt, "and the new board does not approve of this proposed transaction."
Broughton is relying on the articles of association, which give the chairman the power to appoint and dismiss all directors apart from Gillett and Hicks themselves. The key clause is paragraph 81a of the 30-page document, which says: "Each director appointed to the office of chairman of the board of directors of the company may appoint any person as a director of the company and may remove any director (other than George N Gillett Jnr and/or Thomas O Hicks). Any appointment or removal shall be made in writing and signed by the then current chairman."
Hicks's spokesman did not respond to requests to explain Hicks's claim that the Texan did have the right nevertheless to reconstitute the board, and whether he is contesting that the club's own articles of association are valid.
Broughton insisted, as a condition of accepting his appointment in June, that he be granted this power so that he could maintain a majority on the board over Hicks and Gillett. The articles of association were changed, introducing this right for the chairman, on 28 May, with the close involvement of RBS, which had agreed to refinance its £237m loans to Hicks and Gillett.
By law, changes to companies' articles of association require the approval of 75% of the shareholders. So they needed to have been approved by Hicks and Gillett themselves. Asked whether Hicks was arguing he never saw the articles, or approved the changes, and does not recognise them as having been legally introduced, the spokesman declined to comment.
A source close to the board said Broughton remains "confident" that the power contained in the articles of association will be upheld, and that, according to the undertaking with RBS, Hicks has no right to resist the sale, because it is reasonable. Broughton, Purslow and Ayre have agreed the deal by which NESV will repay to RBS the £200m Hicks and Gillett borrowed to buy the club, then loaded on to the club to service the debt. However, NESV will give the pair nothing for their shares, and Hicks and Gillett will lose the £144m they have loaned to the parent company, Kop Holdings.
Broughton justifies that deal as reasonable because after months of Liverpool, one of the world's most famous football clubs, being publicly up for sale, this offer, and another from a Singapore businessman the board decided was not as good, were the only ones presented.
"You needed to be on another planet not to know [the club] was for sale," Broughton said. "We have had inquiries as a result of that, we have made inquiries ourselves, but not until this week have we had a formal written proposal. We ended up with two, there weren't any others – so by definition that is the market price."
That is what Hicks is desperately fighting, although he will mount his battle on any of the details. He bought Liverpool with Gillett in 2007 believing that the growth, particularly, of Premier League television rights deals would increase the club's value and make him a fortune. He points in frustration to the $822m (£518m) valuation placed on Liverpool by Forbes, the US business magazine, placing the club sixth in its 2010 "soccer team valuations".
However, after a search for a buyer which Broughton must persuade the judge was as exhaustive as could be, NESV's is the best offer that could be found: to repay the useless debt with which Hicks and Gillett saddled the club and send them away, as Broughton put it, "humiliated".
Despite Liverpool's glorious heritage, no big pay day arrived, for a club burdened with debt, a struggling squad, appalled supporters and a stadium still to be developed. The legacy Hicks and Gillett will leave behind is one of decline and broken promises.
