BSH: Not For Sale

The rumour season is once again in full swing on social media, with rumours not just of impending incomings and exits at Blues but talk of potential changes in ownership. None of these rumours have any basis in fact as it stands – I wrote this article to explain why Blues won’t be sold any time soon.

Hong Kong Stock Exchange

There has been a steady trickle of messages to my inboxes asking me if such and such rumour about someone coming to buy Blues is true.

Today it was the turn of Amancio Ortega to be rumoured to be buying Blues out, thanks to this message on

I get why people want rumours of the club being sold to be true, but having spoken regularly to my sources in Hong Kong I can confidently say that not only is the club not for sale, the actual sale of the club would be almost impossible right now.

There are three possible avenues for someone to invest in Birmingham City. I’m going to go through each one of them now to explain why it won’t happen.

The first and most important thing to point out is that there are three different companies involved here. Birmingham City Football Club PLC (BCFC) – which is in effect the club itself; Birmingham City PLC (BC PLC) which is the UK parent of the club and Birmingham Sports Holdings Ltd (BSH), which is the Hong Kong parent of that company.

To understand how these companies work, you can check out my details of ownership page.

The most obvious route anyone would think to buy Blues is to buy the club itself – Birmingham City Football Club PLC.

However, it’s not as simple as walking up to Paul Suen Cho Hung in the Wan Chai girlie bar of your choice and handing over a fistful of Hong Kong Dollars to take on the club.

It’s not about seeking out where the elusive Mr King is jetting off to next to give a bag of cash to either.

As the largest shareholder in BSH via his Trillion Trophy Asia (TTA) investment vehicle, Suen is answerable to the stock exchange of Hong Kong (HKSE) with respect to his dealings in BSH.

Suen has had to make guarantees to the Stock Exchange that he would not sell on his stake in anything until various conditions were met – among them that the company was at least somewhat profitable.

As it is, BSH has tanked hard the last few years thanks to some profligate spending at St Andrew’s, and the HKSE have told Suen he can’t go anywhere yet.

Selling the club would mean essentially forfeiting the HKSE listing – and for Suen the listing is the important part in this deal, not the club.

I’ve explained it before, but a listing on the HKSE main board is worth about £40-£50million on it’s own, regardless of the business.

This is because it’s the hoops to start a new listing on the HKSE are so hard to get through, most businessmen have to buy an existing one for their project.

Suen’s business is dealing with listings – he’s got at least four on the go right now – and he cannot afford to lose a listing because some football fans aren’t happy with the way things are going.

Therefore buying the club on it’s own is a no-go.

The logical next move would be to buy the listed company itself.

This is harder than it seems too – for a couple of reasons.

First off is the financial muscle required to do so. At close of business on Wednesday, shares in BSH are trading at around HK$0.05 each – maybe half a penny a piece.

That doesn’t sound like a lot, but with 17 billion plus shares out there the stock market capitalisation of the company (share price times total shares) is about £92million.

That means to buy every share at the price it is now (which of course would be impossible) would set you back £92million.

That wouldn’t be the price you’d need to pay to buy all the shares. With less than 1% of the shares traded on Thursday the price jumped by 33%, adding another £30million to the overall price needed to buy the shares.

Trying to buy them all would shove that up considerably higher.

However, let’s assume we’ve got a billionaire with more dollar bills than brain cells and an overriding passion to buy Blues – and he wants to do it.

The next problem he would have is buying the shares.

The rules in HK say that you have to have a “public float” of 25% of the shares in the company. That means a quarter of the company has to be in ordinary people’s hands – which is about where the company is right now.

With that in mind, the only place you’re going to buy a big chunk of shares is from one of the main players – and you better believe they ain’t going to let go without a fight.

Once you have an offer on the table that would take your shareholding above the 30% threshold, you have to offer the same price to every shareholder.

There has to be extraordinary general meetings, shareholder approval and all that noise – in effect, it’s going to cost a serious amount of time and effort to buy the listed company.

What that means in effect is the first time we’d hear about that, we’d hear about it in an official announcement to the Stock Exchange rather than tittle tattle from an anonymous account on Twitter.

The third option is the UK parent.

Some have seized upon a piece I wrote a while ago to ask if this isn’t a way of bringing in outside investment.

Sadly, that is not the case – and again it’s to do with that pesky stock market listing.

BSH could potentially sell a stake in Birmingham City PLC – say 15%.

However, to do so, because it’s such a large chunk of what the listed company is, that sale would require at minimum approval not only from the stock exchange but also potentially from shareholders too.

With most shares owned by Suen and King-related companies it would require getting their approval to get this done – and we already know that they don’t want to sell.

It’s my belief that if BSH did want to sell a piece of BC PLC, then it would be to a related party, to continue to keep it all in house.

So, no, that’s a no-goer too.

Of course, this leads to the wailing and gnashing of teeth that Blues are never going to escape the grasp of the Hong Kong Stock Market.

Happily, this is not true either.

The simple truth is that never is a very, very long time – and things do change.

For example, if BSH started making money – say their stake in the One Park project started bringing in the Cambodian Riels, then things would ease off.

As actual money flowed into the business that wasn’t borrowed or bought with shares, the company could reinvest in more projects to make the company more diversified – crucially removing the reliance on BCFC and in turn allowing BSH to spin out BCFC to a bidder.

Alternatively, for the gloomier types relegation could cause real change too.

I’m of the belief that relegation would cause King to cash in his chips and leave – however my concern there would be that he would cash in his chips to another Chinese businessman.

While Xia broke with convention and sold to non-Chinese as the mob over the expressway were going bust, King is nowhere near that desperate and even if Blues went down he would be calm enough to be able to find another Chinese bidder.

The nuclear option would be suspension in trading of shares of BSH.

We saw this when Peter Pannu indulged a bit too much wine one night and started posting comments on Often Partisan that broke Stock Exchange rules, with the consequence that trading in BSH shares was brought to a halt.

This impacted on the company being able to bring in any investment whatsoever and precipitated the civil war in the boardroom that caused the High Court to appoint Ernst and Young as Joint and Several Receivers.

Should Suen – who is already facing a Market Misconduct Tribunal over dealings in another company – or any other BSH major shareholder / board member fall afoul of the rules, then this could happen again.

That however could cause all kinds of mayhem; and realistically, is the last resort option.

If you’ve made it this far, well done. I know it might have been boring, but it comes down to this.

Right now, Blues are not for sale and in all likelihood any rumours of the club being bought are false.

Save your hopes until a Stock Exchange announcement says otherwise.

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