Saints' Big Three want answers (From Daily Echo)

Saints' Big Three want answers

6:00am Saturday 27th October 2007 in Sport By Adam Leitch, Chief Sports Writer

SAINTS' three major shareholders have joined together in an extraordinary show of unity to tell the club's current executive they will not support their plans for investment in what they believe to be their current form.

The three former chairmen, Rupert Lowe, Leon Crouch and Michael Wilde, all of whom have had high profile falling-outs, have put their differences to one side to pen an open letter to the club's current PLC chairman Ken Dulieu.

In it they make ten points about this week's stock exchange announcements and subsequent press coverage of London based hedge fund SISU Capital's proposal to take control of 55 per cent of the club's shareholding.

All three, who between them control more than half of the club's shares, insist they have not been consulted about the plans even though their support is the key to any possible deal.

They go on to say that from what they have heard so far they would not back the proposals.

As well as showing their unity to act together they also question the validity of the presentation of the deal as a "take it or leave it" offer with the only alternative ultimately being administration.

Among the points they raise they ask: How much fresh investment the club will actually receive from the deal?

Will there be any further investment from SISU, as they believe the offer would inject just one year's operating costs into the company?

What are the exact details of any refinancing of the club's debt?

Have the board taken steps to ensure SISU are fit to run the club?

Is press speculation correct over the bonuses paid to executives if the deal goes through and, if so, what is the probity of the payments?

They add: "We applaud the efforts of the Executive and Non-Executives to bring in new investment to the club and of course share the stated aim of re-promotion to the Premier League.

"However, as owners of a majority of the company we feel we need greater clarity of the proposals.

"We regret that we would not be able to support the proposals in what we believe to be their current form.

"We would also want to register our concern that the proposals are being covered in the press as a "take it or leave it" offer to which the only alternative is administration.

"Whilst a refinancing on appropriate terms would be advantageous, we do not believe that administration is unavoidable although such a course would involve reduction of the company overhead to a level consistent with ongoing Championship membership."

A spokesman for Saints commented: "We have no intention of making any comment ahead of any potential meeting with the investors."

They also re-iterated that the proposal from SISU remains the only offer on the table.

The Open letter to Ken Dulieu, chairman of Southampton Leisure Holdings PLC, from Leon Crouch, Michael Wilde and Rupert Lowe, reads: 26 October 07 Dear Ken, OPEN LETTER REGARDING REFINANCING PROPOSAL BY SISU We have studied with interest the limited details that are available for a proposed refinancing of SLH by SISU. We note that at present, the financing is subject to both due diligence and shareholder approval. Our understanding of the proposals is that they would be the subject of both ordinary and special resolutions as well as Panel waiver.

We are surprised that these proposals have been presented in an incomplete form and with no discussion of their substance or likely palatability with major shareholders. In the absence of a circular or similar document setting out the detail of the proposal, or any understanding of the likely timetable, we feel that we should table the issues below as being of critical importance to us: We believe that the proposals would provide SLH with new funds amounting to £12 million from which costs of issue, including finders fees etc, would presumably be deducted. What is the anticipated net sum available for investment?

In the event of the proposals not being ratified, are any abortive fee payments or similar due to SISU or their advisors?

The second press release from your financial advisors makes reference to the refinancing of the current securitisation arrangements. No details are given of this or the terms on which such refinancing may be made or whether the present funder would levy a penalty charge.

The securitisation arrangements are subject of a change of control clause that was subject to much debate during the EGM campaign of 2006. Has the consent of the bond holder been given to these arrangements?

We believe that on the current cost base of the company, the net new investable funds may amount to about one year's trading loss. What arrangements have SISU offered for additional funding in subsequent years should promotion not be forthcoming?

The proposals involve seeking the Takeover Panel's consent to SISU acquiring between 55% and 70% of the company without making a bid for the entire issued share capital of the company. We believe this to be inequitable as under the proposals for partial tender, any shareholder who does not share the executive and SISU's vision of the future will only be able to dispose of up to one third of their holding.

We also believe that it is inequitable that shareholders who do share SISU's and the Board's vision are being prevented from subscribing for additional shares on the same terms as SISU. The points raised in (e) and (f) could be interpreted as effective disenfranchisement of shareholders.

The effect of the proposals is to transfer control of the company to SISU for a total investment by SISU of £16 million of which under £12 million will be investable. We are not convinced that this represents the correct valuation of the company. Indeed the price of the ordinary shares in the market remains at a 25% premium to the proposed placing price at the time of writing. Such performance may suggest our informal view to be correct.

Press comments accompanying the proposal made reference to court action involving SISU that gave rise to accusations of lying and criticism of the Chief Executive's conduct. Whilst we cannot comment on the veracity of any article, what steps have you taken to ensure that the new owner of the club will observe a standard of conduct consistent with a sporting institution? We also understand that on one of SISU's previous unsuccessful attempts to buy a football club, its intentions generated significant adverse fan comment.

No details of future management or Board composition have been given in either announcement made by you and your advisors. There has been unwholesome press comment about incentives to the Executive to ensure that this proposal is ratified and we would question the probity of such arrangements should the press speculation be correct.

We applaud the efforts of the Executive and Non Executives to bring in new investment to the Club and of course share the stated aim of re-promotion to the Premier League. However, as owners of a majority of the company we feel we need greater clarity of the proposals and accommodation, amongst any other, of the issues raised above.

We regret that we would not be able to support the proposals in what we believe to be their current form.

We would also want to register our concern that the proposals are being covered in the press as a "take it or leave it" offer to which the only alternative is administration. Whilst a refinancing on appropriate terms would be advantageous we do not believe that administration is unavoidable although such a course would involve reduction of the company overhead to a level consistent with ongoing Championship membership.

We are, of course, available to meet you to discuss this or any other refinancing proposal.

Yours sincerely (signed by Leon Crouch, Rupert Lowe and Michael Wilde).

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