BSH: Clarification and Approvals

Birmingham Sports Holdings made a supplemental announcement to the Hong Kong Stock Exchange on Tuesday afternoon to clarify certain points about the deal that has been agreed to sell a stake in Birmingham City to Shelby Companies Limited. The four page announcement was designed to answer questions shareholders might have but has seemingly just caused more for Blues fans.


If you have not read it already, the announcement can be viewed at this link.

I have to admit, I find it actually ironic that this announcement was made yesterday.

Not an hour before it was released, I had posted a series of tweets in response to people fretting about the takeover citing the need for patience as it would be another week before we actually hear anything.

I’d even got as far as drafting the start of a new article for this website calling for calm, which will serve me right for starting it too early in the day.

The reaction to this announcement on social media has been interesting, to say the least.

While it’s fun to see the excitement generated by some of the names mentioned, I think there are some misapprehensions as to why they are named in the announcement and what their roles might be.

I think it’s important we understand not only what this announcement means for Blues, but also why this announcement was published.

While everything might be very quiet publicly, I can tell you without a doubt that things are very busy behind the scenes and this announcement is a chance to take a peek behind the metaphorical curtain.

What does this announcement mean?

The first thing to understand about this announcement is that it is a supplemental announcement to the one made on May 9.

It’s been published to give additional information which was missed out from the original announcement to clarify and explain things for shareholders in BSH.

There are three main sections of supplemental information.

The first section discusses the value that has been placed on Birmingham City, and how that value has been arrived at.

There is also explanation as to how the figures have been arrived at with regards to bonus payments should Blues be promoted to the Premier League.

According to this announcement, the value placed on the club as a whole is £22M.

This price includes not only the price of the club but takes into account the debts the club owes to Birmingham Sports Holdings.

That valuation of the club shouldn’t actually be a surprise to anyone, as the original announcement on May 9 said that BSH were selling their 24% stake for about £5.3M.

Simple maths says that (5.3/24) * 100 = about 22, which is the figure given in this clarification announcement.

However, there is once again confirmation in Tuesday’s announcement that in the year ending June 2022 the club lost £25M and in the six months ending December 2022 it lost a further £12.1M.

These figures lay bare the financial issues the club has and only goes to confirm that the club will have to do much better to comply with Profit and Sustainability regulations next season.

The second section talks about more of the background of Shelby Companies Limited and the companies that own SCL.

This is the part which I think has generated the most excitement – and the most misunderstandings.

While I think people have got excited at seeing the names of people involved, they’re not actually new.

A quick search of Companies House confirms that Shelby Companies Limited is owned by Knighthead Annuity and Life Assurance Company (KALAC) along with Knighthead Master Fund LP. The only new bit of information is we know the split between the two is 72/28.

A look at the KALAC website confirms the names listed in the announcement as being board directors of that company.

As they are large beneficial shareholders their names have to be given, as do the names of the people involved with Knighthead Master Fund LP.

However, there is no actual guarantee anyone other than Tom Wagner will be involved with the club.

Likewise, while it’s confirmed that there are 40 smaller investors, these are investors in either KALAC or Knighthead Master Fund LP and are to be expected due to the nature of those companies as being “hedge funds” or similar.

The final section is confirmation that an Independent Financial Adviser has been appointed to advise the Independent Board Committee of BSH as well as independent shareholders on the whole deal.

This section is probably the most important part of the whole announcement, as they will have a prominent role in the paperwork that is to be done in the next few weeks.

As most of what was published in this announcement isn’t massively new in detail, it’s important to understand why BSH published it on Tuesday.

Why was the announcement made on Tuesday?

To understand the reason for the announcement, it’s important to understand what is currently happening behind closed doors in Hong Kong.

As of this moment, Birmingham Sports Holdings are preparing what is called a “Circular” for their shareholders. This will be a big document containing the complete details of the takeover deal, as well as letters from their accountant and their board to confirm why they think it’s a good deal to vote for.

Before the Circular is published, BSH have to get that (along with the deal itself) signed off by the Stock Exchange.

BSH will have already put together a draft circular ready for publication and will have sent this off to the HKSE for them to ratify.

However, this deal is pretty complex with a delicate balance of ownership and control in place to satisfy both the requirements of the HKSE and the EFL.

On the one hand, the EFL will want assurances that after the deal SCL are the ones in control of the club and that there can be no interference from either BSH or by other people such as Wang Yaohui (aka the elusive Mr King).

On the other hand, the HKSE will want assurances that after the deal BSH has enough of a company left to be big enough to be listed on the main board of the Exchange.

This means that in this period of 20 business days while the Circular is “being prepared”, what is actually happening is those regulatory bodies will be ticking off questions they might have to make sure they’re happy with this deal.

From speaking to people who know more about this sort of thing than I do, this announcement has been made to satisfy the HKSE of some questions that they might have.

My gut instinct is that the HKSE have also told BSH to make this announcement to ensure that independent shareholders have as much info as they can ahead of any EGM announcement.

While a shareholder with 2,000 shares can’t really do much at an EGM, with this info they can make an informed investment decision as to if they want to buy or sell shares in the company.

The HKSE’s job is to ensure that the exchange works for all investors, and from my dealings with them it’s clear that there is some sense of duty to independent shareholders.

What does this mean for Blues?

While it’s definitely good news that the deal appears to be progressing properly, the fact that this announcement has been made six business days before the Circular is due to be sent out makes me believe that it is possible there will be a delay and it will not go out on time.

I don’t know this for definite, and I must stress that we won’t know until a further announcement is made if there even is a delay.

From past experience, I can say with certainty that if the Circular is delayed an announcement will have to be made by close of business next Wednesday to confirm that fact. That announcement will have to give a new date by which the Circular will be published by.

My feeling on this is if there is a delay it will not be a prolonged one; maybe no more than a couple of weeks.

This is because neither SCL nor BSH can afford for the deal to get bogged down in paperwork.

On the one hand, SCL will want the deal done as quickly as possible so they can get on with preparing for the new season.

The suspended points deduction hanging over the club due to the Maxco fiasco means that SCL cannot be seen to be anywhere near decision making until it’s done, and every day of delay is another day wasted.

On the flip side, BSH will want this done ASAP to remove the financial millstone from around their neck.

Every day the deal gets delayed, is another day that they have to fund the club. They have no choice but to have budget in place for the new season as there would be serious legal ramifications if they did not.

Likewise, thanks to the legal fine print of the deal that has been put together BSH will be well aware that they cannot take any money from the club, even if the Jude Bellingham deal is done before the EGM is completed.

While it’s possible that there may be a delay to the good news we’ve been hoping for, it’s important that everyone remains calm about the whole takeover deal.

I know that there have been rumours of there being issues with the takeover, but the truth is that there isn’t anything that is going to stop it getting ratified.

I can understand the cynicism that is out there, but unlike past experiences there is an actual paper trail that is visible to us all, with a timeline we can understand.

I have created a “Dates for the Diary” page on the website which will keep track of dates for the circular to be released and the EGM to be published.

If there is to be a delay, then so be it. What would a delay of 10 to 14 days be after 12 years of stress following the arrest of Carson Yeung?

The end of the road remains in sight – we just have to keep right on towards it.