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The Fight for Control of Liverpool FC

Tuesday, 29 April 2014

Liverpool Football Club’s recent winning streak stands testament to its resilience and to its status as of one of England’s most successful football teams.

Difficulties off the pitch such as the inquest into the disaster at Hillsborough and the legal claim by the club’s former owners have failed to dampen spirits, evidenced by a string of league victories in the first quarter of 2014.

The last tremors from the acrimonious fight for control of Anfield that took place in 2010 finally dispersed at the beginning of 2014 when its former owners, American businessmen Thomas Hicks Sr. and George Gillett Jr. dropped their High Court litigation in a confidential settlement.

Background to Hicks and Gillett’s Ownership of Liverpool FC

The legal claim by the former owners of Liverpool FC came out of a traumatic three year episode for the club. The troubles all started in 2007 when Hicks and Gillett acquired the club in a deal believed to be worth around £435m. The pair borrowed £185m from RBS in order to complete the transaction.

During 2007 Liverpool spent significant sums in the transfer market but trouble was soon on its way. Although at the time of the takeover a new stadium was promised, by early 2008 this had not materialised as the owners had failed to find money to finance its construction. Furthermore, by 2009 a new managing director was appointed, Christian Purslow, with the task of finding £100m to keep the club’s creditors at bay.

Early in 2010 the Americans’ ownership of the club finally came under serious legal attack from their creditors RBS who were now owed £237m. In April 2010, Martin Broughton the chairman of British Airways, was brought in by RBS to sell the club. In October, after serious legal wrangling for control of the club’s board, the club announced its sale to John W Henry, the multi-millionaire owner of the Boston Red Sox Major League baseball team for £300m.

The Legal Claim Brought by Hicks and Gillett

Despite losing control and ownership of Liverpool Football Club in 2010, in 2012 Hicks and Gillett brought claims against Sir Martin Broughton, Christian Purslow, Ian Ayre (the commercial director at the time of the sale) and RBS in which they made a number of allegations. These claimed primarily that they had conspired with RBS to sell the club at a reduced price after the three directors outvoted the Americans in a board decision to recommend the sale of the club.

Hicks and Gillett finally dropped their case in January 2014 in a confidential settlement made between the parties.

Comment

The bitter nature of the dispute and the costs associated with this case - nearly £1m was spent by RBS by the time of the settlement - are instructive when it comes to serious commercial litigation. Despite this, directors facing difficulties such as a board crisis should seek legal advice early to explore the options available for resolving disputes.

For specialist advice contact Peter Gourri today by email PGourri@rollingsons.co.uk or telephone 0207 611 4848.

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