Rangers chairman Dave King ‘must make £11m shares offer’

A judge has been urged to pass an unprecedented order which would force Rangers chairman Dave King to make an £11 million offer for the remaining shares in the club.

Advocate James McNeill QC told Lord Bannatyne that the Panel On Takeovers and Mergers believes the Ibrox boss hasn’t complied with the law.

The lawyer told the judge how the 2006 Companies Act dictates that entrepreneurs who hold a 30 per cent stake in businesses are compelled to make and offer to buy remaining shares.

He said that financial investigators believe they have established that Mr King acted “in concert” with three wealthy fans who are nicknamed the “Three Bears”.

The silk said that Mr King teamed up with George Letham, George Taylor and Douglas Park to acquire more than 30 per cent of voting rights in Rangers in late 2014.

Mr McNeill told the Court of Session how financial investigators concluded that Mr King was in control of the shares and should be liable to make an offer for the remaining shares.

However, the Court of Session heard how Mr King told the investigators that he didn’t act with the three other businessmen.

He told the financial investigators that 14 per cent of the shares were controlled a company called New Oasis Asset Management Limited which was registered in the British Virgin Islands.

Mr King allegedly told investigators that these shares were purchased using money from his family trust.

The businessman said the company was independent from him.

However, the court heard that financial investigators had obtained emails showing that Mr Letham had been in touch with him over the share purchase.

The investigators also concluded that Mr King controlled New Oasis Asset Management Limited shares and was therefore liable to follow company law and make an offer at 20 pence per share.

Urging Lord Bannatyne to pass the order, Mr McNeil said: “Mr King is in fact in control of the voting rights.

“The court should be satisfied that it can make an order seeking compliance under the legislation.”

Mr McNeill was speaking on the first day of a two day debate at the Court of Session.

The panel, which regulates deals in the UK, has stated that it had started proceedings in Edinburgh after Mr King ignored an order to make an offer for the remaining shares - this is despite the fact that the club is no longer listed.

Under UK rules, any group of shareholders that builds up a 30 per cent stake in a public company has to make a cash offer to buy the rest of the shares at the highest price they have paid over the past 12 months.

In Mr King’s case, this is 20 pence a share.

It is the first time since the panel was granted enforcement powers more than a decade ago that it has sought a court order.

On Thursday, Mr McNeil told Lord Bannatyne that on December 31 2014, the ‘three bears’ purchased 16.23 per cent of shares in Rangers.

The lawyer then said that Mr King contacted financial services firm Cantor Fitzgerald and instructed that 14.73 per cent of the shares in Rangers be purchased.

The court heard that the money used to buy the shares came from Mr King’s family trust. The shares were held by NOAML.

Mr McNeill said the four men acted “in concert” with each other. He said that evidence of this came from an email that had been sent from Mr Letham to Mr King.

The court heard that financial watchdogs had obtained a copy of this email. Mr McNeill said that in the email, Mr Letham reminded Mr King to “stay under” 30 per cent.

Mr McNeill added: “It was a concert party and this can be shown in the email which was sent to Mr King. It shows that the people were aware of the mandatory offer provision when the 30 per cent barrier was met.”

Mr McNeill said that Mr King told financial investigators that NOAML acted independently of him.

The lawyer also said that Mr Letham told financial investigators that he and his other bears didn’t act with Mr King.

Financial investigators then showed Mr Letham an email which showed contact between him and Mr King.

Mr McNeill said: “When shown this email, Mr Letham said ‘that’s really surprising me.’”

The court heard that financial investigators concluded that Mr King was in charge of the NOAML shares when he was able to remove members of the Rangers board in January 2015.

Mr McNeill also said that financial investigators established that Mr King was in charge of the NOAML shares at an extraordinary general meeting of the club in March 2015.

The lawyer said that NOAML hand’t responded to requests from financial investigators to explain the nature of the club and that Mr King also hadn’t provided information about the firm.

Mr McNeill added: “He didn’t provide any evidence that NOAML exercised any action independent of him.”

Mr McNeill said this entitled the panel to conclude that Mr King was in control of the 30 per cent shareholding stake and should make an offer to buy the remaining shares.

The court also heard that Rangers shares are currently worth around 27 pence and Mr King would be expected to make an offer at 20 pence.

The hearing, before Lord Bannatyne, continues.

Mr McNeill told the court that there were 5,500 shareholders in Rangers and said: “There will be large numbers of small shareholders”.

He said the point was that about 70 percent of the Rangers shareholding was “disenfranchised” by the concert party.

He said: “Whether small shareholders or large, there are shareholders who are being locked into the respondent’s control unless they are prepared and able to find either a matched bargain or a white knight,” he said.

“Given the disenfranchisement the order which the panel seeks is not a punishment on Mr King, it is reinforcement of the requirement of which Mr King was well aware,” he said.

“The order is not lacking in fairness, not lacking in practicality and not lacking in utility,” he said.

Mr McNeill said it was not known and he could not speculate on how many people may have been disadvantaged by what had happened.

He added: “They should be protected and the protective mechanism is to give them an opportunity to respond to an offer being made.”

Mr McNeill said the respondent’s apparent position was that he does not maintain personal funds outside of trusts.

But the senior counsel said: “Any attempt to rely on impecuniosity is irrelevant both generally and in the circumstances here.”

He told the court: “This is potentially a rogues’ charter.” He said it would be open to a person who was part of a concert party to structure their affairs either before or after the purchase.

He said before the purchase they could ensure they only had enough funds to buy what they wanted to gain control or post purchase, when they realised there was a likelihood of a mandatory bid, could pass funds away to friends, family, trusts or through other vehicles.

He said it would also be a charter for someone with no funds to persuade another to lend them enough to make the critical purchase and then say they had no other funds.

“The individual who engages in this process as an individual or as part of a concert party must accept the consequences of interfering with the interests of minority shareholders,” he said.

Mr McNeill said the consequences were threefold: to make the offer, to have a court order made or in the case of an innocent mistake to have a discussion with the panel and to have a potential derogation.

Lord Davidson of Glen Clova QC said that the respondent’s position was that the court in exercising its discretion should not pronounce the order sought.

He rejected the claim that minority shareholders had been disenfranchised and said that they retained their voting rights.

He also disputed the contention that they had been locked into control and pointed to recent trades in Rangers shares outlined by Mr McNeill in his submission.

Lord Davidson also said his client didn’t have the money needed to fund the buy back. He said there was cash in Mr King’s family trust.

The lawyer said this meant that his client wasn’t in charge of the money and that the cash belonged to his family. Consequently, the money belonged to his family and not him.

Lord Davidson said: “He does not happen to have the 10 to 12 million pounds it will take for him to make the offer.”

Lord Davidson also said that it was “pointless” for Mr King to make an offer at 20 pence per share when the share is currently worth 27 pence.

He added: “I can’t imagine there will be too many too many Rangers shareholders who will be champing at the bit to take a 25 per cent haircut to the price of their shares.

“It’s going to be a curious offer that is going to be dropping of doorsteps of Rangers fans.”

The hearing, before Lord Bannatyne, continues on Friday.