Russian dude buys London soccer club, FSA looking into suspect share movements

Car Key Boi

Well-known member
from Citywires

The Financial Services Authority (FSA) is inquiring into share movements at Chelsea Village, the owner of Chelsea Football Club, which chairman Ken Bates has just agreed to sell to Russian oil billionaire Roman Abramovich for nearly £60 million in the biggest takeover in British footballing history.

The news broke last night after it emerged that Bates had been holding secret takeover talks with Abramovich in central London that led to a deal that values £47 million Chelsea Village (CAV) at 35p per share or £59.3 million in total. The share price shot up 13p to 41p this morning in response but has dropped back to 37p.

However, Citywire has discovered that the FSA is looking into a series of deals first revealed on this website in April involving five mysterious Guernsey-based companies with close links to the board of Chelsea Village. An inside source at the FSA said: 'We're certainly interested and we're making our own enquiries.I think that is all I can say.'

The development follows reports this morning that Tony Banks, MP for West Ham and former sports minister, has called on the Government to investigate the takeover.

Abramovich has agreed to buy 50.9% of the company to give him control straight away and make the offer unconditional. This will include the 29.5% disclosed as Ken Bates stake. It will be interesting to see if the five mysterious offshore companies - Catstone Limited, Cervantes Limited, Ecspress Limited, Kalbarri Limited and Yellowpark Limited - have sold him their joint 14.5% stake too.

Other shareholders likely to have backed the deal are an offshore company called Havering, which controls 4.4% of Chelsea, from which Bates has had full support in the past. It is understood that the investor behind Havering is an individual based in Arizona in the US who is a big football fan.

If Bates could count on Havering and the mysterious five to back the deal it would account for 48.4% of the company, add in directors' stakes to take it above 50% and it would be almost impossible to block any deal he chose to push through. After Bates the largest shareholder is Ruth Gist, the widow of former vice chairman Matthew Harding, with a 21% stake. Her stake combined with Bates' adds up to 50.5% of the company so she would also be a useful ally.

Another interesting shareholder is Dr Ashraf Marwan, former head of the Egyptian secret service and a crony of late businessman Tiny Rowlands at the time of his battle with Mohammed Al Fayed to take over House of Fraser. Marwan owns 3.2% and has been the subject of rumours that he was to be broker to a big deal such as this. He has been involved with Chelsea in various ways since the 1980s.

Although the news came as a shock to the football world and the City, sharp rises in the share price over the last month suggest that somebody may have had an inkling that a deal was soon to go ahead.

The shares have risen from 14p in April, closed at 30.5p last night. They have been helped along the way by sudden jumps at the start of May and the end of June during periods of unusually high trading. Given the companys financial difficulties and poor commercial performance there seems to be little other reason for investors to buy the shares.

Bates will do very well out of the deal personally as he is by far the companys largest shareholder. His disclosed stake is worth £17.7 million under the terms of the takeover deal. If that is all he makes it will not be a bad return on the £1 for which he bought the club from the receivers in 1982 after it slipped into technical insolvency.

As to the other beneficiaries there is a degree of mystery. The five offshore companies revealed by Citywire in April share an address, which is also the address of Bates' Mayflower Securities investment vehicle. They are all British Virgin Island registered companies and they are all administered by Guernsey-based Harbour Trust.

Solicitor Neil Jacobsen is currently involved in litigation against Chelsea non-executive Mark Taylor part of which involves an attempt to prove that Harbour is a sham trust for the interests of Bates. If Bates were the beneficial owner of these other shares his total take from the sale would be closer to £26 million.

The joint stake is divided into exactly the number necessary to ensure each is below the 3% disclosable threshold and adds up to precisely the same amount as that which went missing after Swan Management, another mysterious offshore company with links to Chelsea non-executive director Patrick Murrin, sold out in June last year. Murrin is also a director of Chelseas stockbroker Seymour Pierce and its auditor Saffrey Champness and Harbour Trust. One anonymous Citywire source has suggested that no money changed hands as part of any of these share movements.

The sale to Abramovich will come as a relief to Bates. Chelsea Villages attempts to become a diversified leisure company have been totally unsuccessful. In the last five years pre-tax losses have mounted from £610,000 in 1998 to £22 million last year. It is also labouring under £80 million to £90 million debt, which Abramovich is expected to pay off in addition to the cost of the shares taking his total bill to £140 million to £150 million.

The 36-year-old Russian tycoon made his fortune from aluminium and is a major shareholder in Russian oil giant Sibneft, the national airline Aeroflot and Moscow TV. He is also a friend of president Vladimir Putin, with whom he is said to have some influence, and the governor of Chukotka, an autonomous region in Siberia rich in natural resources.

In March this year it was reported that he planned to take over CSKA, his countrys richest football club.

In keeping with Bates' personal style it looks as though Chelsea shareholders, many thousands of whom are fans with small stakes, have no choice about the future of their club. Thanks to the 50.9% stake now in Abramovich's control this was a done deal before anyone even knew it was happening.

It may be of some comfort to those shareholders to know that Abramovich should at least have the resources necessary to run a Premiership football club and to drag Chelsea out of its financial hole. However, Bates is set to stay on as chairman, which may not please everybody.
I'm sure the fans will be happy though. I'm expecting some very good signings soon.