Making sense of nonsense
26/04/2011 96 Comments
The Scottish sports media has set new standards of incompetence and pandering over the proposed Craig Whyte deal to buy Rangers. The conventional story being fed by PR agencies working on behalf of both Whyte and Sir David Murray is that Whyte will pay off the bank debt (with the implication that the debt will stay at zero), that Ally McCoist will be handed a fantastic sum to rebuild the team, and that the tax bill will be “handled”. Of course, these stories never quite explain how a bill that could be £54-60m will be “handled”. These PR placement stories seem to treat the tax case as if it is a trivial issue which is not going to be a significant issue in Rangers’ future.
However, for all of the nonsense from journalists who earn a salary doing no more than typing their names on the by-lines of articles written for them by others, I am told that Whyte’s efforts to conclude a deal are gathering pace. Whyte is working hard to finalise financing that would clear the bank debt (£20m on 30 June 2010) and would allow Lloyds Banking Group to wash its hands of Rangers. It is understood that the amount that would be paid for Rangers’ shares is collapsing and approaching a price close to zero pence. This would allow Sir David Murray to be off-stage should the Grim Reaper appear on the scene. The tax liability would remain with Rangers FC.
The remaining issues centre on Dave King’s 5% shareholding. The combination of MIH’s 85% and King’s 5% (held through Metlika Trading) would meet the 90% threshold required to force all of Rangers’ shareholders to sell at the same terms offered to MIH and King. With 100% of Rangers’ shares, Whyte would be able to take The Rangers Football Club plc private. With a privately owned company, Whyte would be free to conduct business without the transparency required of a plc.
However, there are challenges to obtaining King’s 5%. King is still prevented by court orders in England and Scotland from buying or selling assets in the UK. The recent transfer of ownership of Rangers’ shares from Murray Sports Limited to Metlika Trading was permitted as it was seen as a ‘value-neutral’ administrative transaction. However, a sale of these shares, even for a very low amount, could be a legal minefield. The other issue is that a businessman like King is unlikely to surrender a keystone position for free. If his stake is essential to throw a dark cloak around Whyte’s plans for Rangers, then King will want to extract a fee. Of course, there are ways to structure such a transaction. King could take an equivalent value shareholding in whichever legal entity Whyte wishes to use as the vehicle for owning Rangers. That could again be considered a value-neutral exchange. (A “consulting-fee” paid from one obscure company in the Caribbean to another would be very difficult to trace too).
No doubt if a deal is concluded it will be accompanied by a media blitz celebrating a new era for Rangers and how nothing but blue-skies are ahead. Missing from these PR-agency articles will be the treatment of the tax bills. I am told that the tax bills will remain with Rangers. In effect nothing in Rangers’ financial position will have changed except that Lloyds and Murray, two parties that would have been dreading being seen to take tough actions will have managed to get off-stage. Rangers fans need to ask themselves about the new owner: is Craig Whyte a ruthless financial operator who will think nothing of maximising his personal gain or is he a lifelong Rangers fan taking on the burden to protect and rescue the team he loves?
Those who believe that Craig Whyte is simply a devoted Rangers fan with fathomless wealth who is prepared to use a lot of it for the betterment of his team should ask to see evidence of his devotion to the club. How many years has he been a season ticket holder? Where are the photos of young Craig Whyte in his Rangers top? Before the information age, Celtic fans were assured of Fergus McCann’s bone fides within a couple of days of his name being mentioned in the media. The Scottish media have been strangely silent about the result of the investigations into the affairs of Craig Whyte.
Is Craig Whyte a heartless asset-stripper who will not waste valuable resources on legal fees for further appeals if HMRC win against Rangers in the First Tier Tribunal? Or is he a scene-stealing hero arriving to save the day? Rangers supporters groups who have lined up to celebrate the arrival of Whyte have failed their members by not doing their own due diligence on this man. Of course, in the absence of anyone else, they may feel that they have no choice.
The recurring theme of this blog is “it is all about the tax case”. This has not changed. A Whyte takeover will not alter the fate that awaits Rangers FC. All that will be changed is that people who would have been reluctant to be seen to bring down the axe on Rangers FC have been replaced by someone whom few of us know much about.