Writer: J P Fear
Date:Monday July 24 2006
Today a letter was delivered to Doug Ellis, with copies to his seven Board colleagues. I have done this because I am sceptical that a successful takeover will be concluded in the current circumstances.
I dearly hope that I am proved totally and utterly wrong by making such a prediction. One that many will see as "gloom and doom" However, for those of you who think that way at present, you may perhaps think differently when you understand where I personally stand regarding Villa`s future.
My proposal for radical reform is not unique or experimental; and without doubt, it is the best possible solution for Aston Villa in the present age.
My letter therefore proposes an alternative strategy to be pursued, either instead of, or in addition to selling the club to consortium or private bidders. In short, I wish see an end, once and for all, to all the hostilities and "ballyhoo" so that we can concentrate on the main goal - which is simply to become a Top4 Club again`, competing for and winning both UK and European trophies on a consistent and regular basis. It signals a completely new direction for our beloved Club.
I have heard, like probably everyone reading this, that Mr Neville`s new syndicate are poised to make an offer. I certainly admire his tenacity and sincerely wish him success.
So, I will explain the basis for my scepticism for a successful takeover bid being concluded. I sincerely trust that readers will take on-board what I say as being fact, not apathy or political activism - but just "cold-sober" common sense.
The financial scenario is strictly as follows -
A 'prospector' will need to invest at least £50miliuon but will be not able to credibly forecast a return in excess of 4%. No investor, or "funds provider", of whatever calling", would or could, ever support such a project; with such modest return in a very 'high-risk' and 'static' industry. The only investor therefore who could seriously consider in vesting in Aston Villa is a person or persons, of immense wealth, who love football and in time, could come to love Aston Villa even more! It would therefore be wonderful if any of those currently hovering fit that profile.
To clarify my scepticism, stated earlier t-
1. They will need to acquire at least 51% of the shares belonging to members that exercise their voting rights. There are 11.6 million shares issued. Of these, I believe that Mr Ellis and his Board have approximately 34% between them. I believe Mr Jack Petchey has 20%. This leaves the minority shareholders with 46%. Unfortunately, for a variety of reasons, it is estimated that this latter figure is nearer to 36%. 10% of shareholders seldom vote, so would therefore be unlikely to exercise influence in a takeover situation.
So, a successful bid would need to acquire 51% of approx 10.4 million shares. The current listed price is £3.80 per share. At this price, acquisition will cost £20.2million. However I suspect the price finally negotiated will be nearer to £4.50 per share, making the minimum asking price around £24million for 51% of the issued share capital. Additionally, professional and expenses etc. will arise and I realistically estimate that an additional £25million will be needed to protect the new investment in the short-term. These additional funds would be used to bring in better quality players and management as well as supporting ongoing losses for the next 2-3 years, until we have moved up from mid-table obscurity and are competing back at the top level again.
So in summary, I believe that any successful takeover bid will need £50million - possibly another £10million-£15million more if they require at 75% of the shares, which is normal corporate takeover practice.
2. Assuming that 51% control is satisfactory for the successful bidder, he or she will then need to forecast their "Return on Investment". There is obviously no purpose in using Aston Villa`s "loss-making" as a comparator. Over the last 3 years, we will probably have made an average trading loss of £5million per annum, possibly more when we see this year`s results.
They could look at the average of all Premiership Clubs for the two years ending 2004 and 2005. This would show an average profit of £1.9 million per annum. Alternatively they could be extremely ambitious and check out the results for the same period of those clubs that regularly finish in one of the Top4 positions in the Premiership and therefore play in Europe every year. Only four clubs can lay claim to this accolade - Manchester United, Chelsea, Arsenal and Liverpool.
Chelsea made an average staggering loss in excess £40million p.a.
Manchester United made an average profit of £19.1million p.a. (pre-Glazer take-over)
Arsenal made an average profit of £7.7 million p.a.
Liverpool made an average loss of £6.2million p.a.
You can do the sums for yourselves. Any Investment Banker would certainly exclude Chelsea and unless "starry-eyed", would also exclude Manchester United. They would also take account of Liverpool`s exceptional year in 2005 when winning the European Cup. Therefore it is unlikely that any shrewd investment advisor would forecast the future profitability of Aston Villa at more than the average of all Premiership clubs and therefore would not accept a pre-tax profits forecast of more than £2million p.a. maximum.
This last statement is the crux of my concern. I just cannot see anyone in full possession of all their mental faculties, unless having almost infinite wealth, like "you-know-who", investing £50million plus, and little else in reserve, even if given adequate securities. The maximum average pre-tax return, after probably another 3 years of losses would be between3% and4% max.
If anyone disagrees, I will be extremely interested to hear from him or her.
My letter to Doug Ellis therefore signals a proposed new direction for our beloved Club. In short, I wish to see an end to all the hostilities and "ballyhoo" so that we can concentrate on the main goal - which is simply to become a Top4 Club again`, competing for and winning both UK and European trophies on a consistent and regular basis.
Before closing, I must thank every single one of the many hundreds who have taken the time and exercised the patience; and responded to my random private messages to them over the past five weeks. Their contribution has been enormous. They will know who they are; I do not need to say more. The report, when issued will contain the results of this survey, together with the results from other surveys that have been carried out simultaneously. It has been quite a hard slog, but hopefully a worthwhile one. I now know we can succeed, with everyone working in unison!
After finished reading this you may have specific questions or just wish to generally find out more information. If so, just email me at email@example.com and I will contact you by return.
My letter to the Board must remain private for the time being, but within the next 3 weeks-
A. The Board and the major shareholder of Aston Villa will have received and accepted a "take-over" bid, accompanied by a Business Plan that will put us back and retain Top6 Premiership status. We will then be competing for top European honours every season and my long slog will therefore be at an end.
B. I will publish my report, which will include a considerable volume of historical, financial and statistical data together with essential financial projections and other factual evidence. This detailed analysis has been vital because I have no interest whatsoever, in emotional argument. I wish only to see the debate conducted professionally, centred on the factual evidence available, explaining why we have been repeatedly deluded into believing that better times are just around the corner. Naturally also, I will publish full details of today's letter to Doug Ellis and his fellow directors, together with any response, if received.
If anyone would like more information, please contact me through my message box on this site or email me at - firstname.lastname@example.org - Use "VILLA FANS FIRST" as the subject.
UP THE VILLA
By Peter Cross.
Date:Monday July 24 2006
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