Birmingham City: Taken Over At Last
“Birmingham City takeover saga drawing to a conclusion” ran the Birmingham Mail newspaper headline. “A sale looks increasingly imminent,” the article claimed. “Blues…director Panos Pavlakis returned to Hong Kong…at the start of the week…that in itself is significant,” it added. “Sources” confirmed: “The fact he jetted back shows we could be coming down to the nitty-gritty.” And it was noted, with weapons-grade understatement, that: “The process has been drawn out a little longer than hoped for.” The Mail’s take on the takeover. On 15th May 2014. The saga has now drawn to a conclusion, leaving the two major clubs in England’s second city in Chinese hands but via very different takeovers. Villa’s was the nouveau-traditional rich individual with rich promises. Blues are quietly controlled by the unheralded Trillion Trophy Asia (TTA). “The Nominative Determinists’ choice,” tweeted fan Ed Higgs.
Another 2014 Mail article, from March 6th, was headlined “David Gold: Blues fans welcomed Carson Yeung takeover with open arms.” The ex-Blues and current West Ham co-owner was in justifiable “told-you-so” mood, recalling the “percentage of your readers that wanted us to sell to the Chinese. Was it 86%?” Birmingham fans should side-step a repeat. They could be well-educated on-the-go by the problems at the team “across the expressway.” And they have been well-educated by the remarkable Daniel Ivery, an ordinary Blues fan (well, he was) whose site Often Partisan has been the leading news source throughout the takeover process. Ivery has been increasingly called upon by the Mail to provide takeover analysis. From his monitoring of Hong Kong’s press and his productive trips there, where Blues’ parent company Birmingham International Holdings (BIH) are based, Ivery has told the takeover tale in more depth than the more desk-bound, Birmingham-based journos. The Mail/Ivery combination, with often important help from supporters’ organisation Blues Trust, has served Blues fans well.
Ivery recently referred to Blues’ takeover as “what must be the longest-running saga in football.” Yet it could have run longer still. On June 25th 2015, TTA signed a two-year exclusivity agreement with BIH receivers Ernst and Young (EY), having emerged as sole “Potential Offeror” for a vast majority stake in the panic and financially-stricken company after offering to lend it HK$153m in early May. EY ran BIH from February 2015, appointed after BIH boardroom battles, with Yeung and associates quickly making legal moves to remove them. The major issue was not the club but EY’s promised investigation into BIH’s recent past. As Ivery wrote on March 16th: “that lawyers are seeking to stop the investigation…suggests there is something Yeung (or possibly his legal advisors Peter Pannu & Isaac Sadiq) do not want (EY) to find.”
Veteran readers will recall Yeung’s sneeringly superior sidekick Pannu. That Birmingham and football are rid of him is a delightful consequence of the takeover. Pannu’s whiny voice irritated listeners regardless of what he whined. However, his words on the page WERE that bad. And he was an irritant to the takeover process and EY especially. Pannu claimed unpaid BIH salary and fees. On April 1st (yes…yes), Yeung’s lawyer William Wong Ming-Fung SC was quoted in the South China Morning Post newspaper claiming in Hong Kong’s “Court of First Instance” that “The appointment of receivers is immediately an adverse consequence, both financially & commercially, of the company…the soccer club had to show it had enough capital to operate next season by the end of May. If it failed, the club would be penalised 10 points from the English League Championship & this would likely cause its membership to be withdrawn from the league.” The “withdrawn from the league” stuff sounded like a misinterpretation of the relegation that the struggling Blues might suffer if divested of ten points. But the “adverse consequence” stuff was codswallop. Yeung was appealing a money-laundering conviction, for pity’s sake. As the SCMP’s Julie Chu, perhaps mischievously, noted: “The hairdresser retains a significant stake in the company” but had to “unilaterally call meetings…from his cell.”
EY, meanwhile, announced on April 8th that “seven indicative non-binding offers” were “being considered…from parties expressing an interest” in BIH “and/or Birmingham City Plc.” And on May 8th they further announced that “an offer from one of the potential offerors expressing its interests in the shareholding of the Company has been shortlisted.” A very shortlist. Crucially for the short term, “the proposed lender has agreed to grant a revolving facility of HK$153m to the Company and provide a cash collateral…of £880k to assist Birmingham City FC Plc to obtain a banking facility in the UK” (HSBC withdrew the Plc’s £7m overdraft facility when Yeung was arrested in August 2011). Crucially for fans, “Trillion Trophy Asia Limited” were identified as the lenders. And perhaps with Yeung’s lawyer’s court claims in mind, they announced that they had: “reviewed the Group’s financial & liquidity position and the obligation to meet funding requirement of the EFL has been taken into consideration. Should the (money) be made available by the proposed lender, the Group’s liquidity & financial resources would be significantly enhanced.”
The money was not the “transfer war chest” of tabloid newspaper fantasies, although Ivery reported on June 26th that an email from EY said “the ‘majority of the loan’ would come to Birmingham to be spent on the ‘football team’.” The Mail’s Brian Dick counselled “cautious optimism” because “what we know is far out-weighed by what we don’t.” And club vice-president Michael Wiseman, an ex-director whose family links to Blues stretch back decades, told the Mail: “the outlook is a lot clearer now” and that “Birmingham City on its own is being run very, very well.” The HK$153m loan was secured against Birmingham’s St. Andrews stadium, which worried the Blues Trust supporters’ body, who had successfully registered it “as an Asset of Community Value.” This ensured that any sale process gave them or other community groups the opportunity to bid. “However,” the Trust noted “that these rules do not apply if the land is sold by a person having the power of sale by way of security for debt.”
Worries also persisted over the identity of TTA’s beneficial owners, despite assurances from the Hong Kong Stock Exchange (HKSE) that they were “third party(ies) independent of and not connected with the Company” and from BIH’s presence in Birmingham, Panos Pavlakis, that they had “nothing to do with past or existing shareholders or past or existing directors.” Dick noted the “widespread belief, but no proof, that the people behind TTA are Chinese,” which might “set some supporters on edge.” But whoever they were, TTA gave EY valuable financial breathing space to get to work on Pannu and co. On July 15th, EY told the HKSE that they were “pursuing legal action” against Yeung, plus Pannu’s companies, Asia Rays (AR) and the modestly-entitled Amazing Top International Enterprises, for “breaches of fiduciary duties.” Pannu/AR received “consultancy fees” from the club (BCFC) despite being its “acting chairman” and a BIH executive director.
The sums involved topped HK$110m, with BCFC also “claiming for £1,248,482 from AR &/or Mr. Yeung for payments” by BCFC to AR. “The timing is brilliant too,” chirped Ivery, as EY’s announcement was two days before Pannu was in court with his salary/fees claim. On August 28th, Hong Kong’s Court of First Instance quashed Yeung’s attempts to remove EY as receivers, the full judgment a terrifyingly-detailed account of all BIH-related legal machinations in 2015. And TTA’s beneficial owner was revealed as Paul Suen Cho Hung, known, in as much as he was known at all, as the “King of the Penny Stocks.” Suen was a saviour of “distressed” companies with financial and regulatory issues…BIH to a T. And Ivery believed Suen was at BIH “precisely for this reason…to get BIH restructured and sold on (at) a nice (personal) profit.” So Suen seemed an ideal “caretaker owner,” if fans were patient and didn’t expect a wealthy benefactor.
On October 2nd, BIH released their 2014/15 accounts, revealing improving if still troubled finances. Losses plummeted from nearly £12m to under £700,000, thanks partly to reduced players’ wages. “It’s also possible that the removal of some directors on high pay and the subsequent forfeiture of their Spearmint Rhino Gold Card contributed,” noted Ivery, with Pannu very possibly in mind. Yeung and associates continued to be obstructive, defeating proposals to advance the takeover, at BIH’s December 29th AGM. However, EY’s strategy of legal action against Yeung/Pannu worked. On March 14th, they told the HKSE Yeung would discontinue his obstructionist strategy if EY dropped their actions against him. Pannu, to no-one’s great surprise, was less amenable. But on May 11th, he followed suit, and ended his previously unknown interest in Birmingham City Ladies FC. He was the sole shareholder and director of the company which owned the team’s “golden share” in the Women’s’ Super League, although he unsurprisingly never funded the operation.
With the old guard gone, the complex BIH EGM to approve the takeover loomed. Numerous issues, dating back to BIH’s 2014 accounts and an alleged misappropriation of funds, needed resolving to the HKSE’s satisfaction for BIH shares to be relisted and the takeover to proceed. But an HKSE announcement on June 7th confirmed their resolution. BIH was to be restructured via an “Open” share offer. TTA and now-confirmed beneficial owner Paul Suen would gain 62.45% ownership (60.38% of the club) to help pay off the May loans. The Offer aimed to raise HK$120m “to satisfy the annual working capital requirement of BCFC for part of season 2016/17 and the entire season 2017/18” and HK$120m to pacify fans…erm…“when considered appropriate, acquire additional talented players who are expected to…enhance the competitiveness of the team significantly” (no pressure on manager Gary Rowett there) and “reach the goal of…the Premier League.”
The process was timetabled to finish by October 31st. And despite minor EGM delays, this was met with a fortnight to spare. The EGM passed the necessary resolutions overwhelmingly and approval was obtained from the “Grand Court of the Cayman Islands,” as BIH is registered there (well, it’s there or the British Virgin Islands for such things). The importance of TTA’s funding was sharply exposed by BIH’s 2015/16 accounts, Blues’ first year without the annual post-relegation parachute payment, which contributed hugely to a £6m drop in turnover and a £5.02m pre-tax loss, after a £1.32m profit in 2014/15. The modern football club/company mantra was there again, “the existence of a material uncertainty” casting doubt on the “ability to continue as a going concern.” But the “loan facility agreement” with TTA allowed the directors to be “of the opinion” that BIH “will have sufficient working capital to meet its financial obligations.”
Rowett revealed sensible ambitions, telling the Mail: “We’ve seen too many owners go into clubs, blow a fortune and three years later be in a completely different position. But I’m led to believe quite strongly that (TTA) want to progress with real sustainability and a bit of continuity.” Especially with managers, he surely hoped. EY’s statement to fans emphasised what a “complex undertaking” the takeover was and that they did “everything in their power” to ensure it “brings stability (and) scope for a better future.” Their part in what Brian Dick called “unpicking Pannu from the fabric” will certainly be remembered. The official club statement was, naturally, upbeat-and-a-half, suggesting that TTA’s “expert hands” will “allow us to progress from a very serious position.” Pavlakis likened the takeover to “going to the dentist to fix a toothache,” after “a lot of conflict” was sorted out, not least his own conflict with Pannu, whose role as BIH’s public UK face Pavlakis took in January 2014. “We no longer have that toothache, we no longer have that pain,” he claimed, with Pannu very possibly in mind.
And Mr. Suen eventually spoke. Amid the standard stuff/guff often coming from new owners wearing new scarves, he struck a vital chord: “We (will not) make outlandish promises or implement decisions that could cause upheaval to the detriment of the club or team,” he said, possibly to the sound of Rowett and Pavlakis breathing sighs of relief. And he expressed faith in “our acumen and the way we go about our business in a professional manner.” With TTA’s shareholding above 30%, they are obliged to make an offer for all shares, including the 3.36% of the club they never owned. And the offer document confirmed both TTA’s HK$120m funding commitment, “approximately £12.72m,” and “settlement arrangements” with Yeung, Pannu and associates for a combined c15% BIH shareholding. Arguably a small price to pay for divesting them of any future influence on Blues’ affairs.
If you were to script the ideal next two years for a club which has suffered Birmingham City’s traumas, TTA’s/Suen’s publicly-declared intentions would be about it. Because when BIH were embroiled in their Pannu/Yeung battles, they left the club to its own devices, with Pavlakis as its link and representative. And this worked, leaving Pavlakis with a higher reputation among Blues fans than someone who has simply done his job properly…and is not Pannu. It is time for all concerned with Birmingham City to take supportive and patient delight in competence at the club’s highest levels. What little is known of Suen’s business past suggests that he can, and wants to, deliver just that.
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