Notice of General Meeting – 2nd October 2023.
Norwich City Football Club plc (the Company) is a public limited company. However, its shares are deemed to be unlisted securities, as they are not listed or dealt in on any stock exchange or other recognised investment exchange or share trading platform.
As detailed within Rule 9 Waiver Circular documentation, the Canaries Trust, in agreement with the directors of NCFC, does offer a Match-Bargain Basis Facility for potential buyers and sellers, via our website.
The contents within this report do not constitute any form of advice, legal or otherwise, having been interpreted from the reading of the documentation disclosed on the Club’s website, and circulated to shareholders of NCFC.
The Trust has received notice, along with all other Independent Shareholders, of the forthcoming General Meeting, scheduled for 18.00 hours, on Monday, 2nd October 2023.
The Canaries Trust has over the years, regularly engaged with Club with regards to the possibility of additional investment, whether that be in the form of new share equity, new directors’ personal loans, or sponsorship. The recent involvement of Norfolk FB Holdings, LLC, (Norfolk) the group lead by Mark Attanasio, is therefore to be welcomed.
The Trust has always aimed to be a critical friend of the Club, with the intention of offering commentary, where necessary. This report is offered in that context and is intended to offer shareholders an overview of the proposals now being presented to shareholders.
As a public limited company, the Club falls under the City Code on Takeovers and Mergers. The Code is intended to provide an orderly regulatory framework for takeovers, aims to ensure the fair treatment for shareholders and to make sure they aren’t denied an opportunity to decide on the merits of any proposed takeover.
The Code becomes relevant at the point a shareholder (the Offeror – in this instance, Norfolk) is about to acquire a 30% shareholding in a Company, hence the requirement to obtain regulatory approval. At this point, the Code also normally requires the shareholder making an offer to other Independent Shareholders.
The Rule 9 Waiver Circular, posted on the Club’s website, on Monday, 4th September, included ten documents (listed in chronological order): -
1) 2021 Annual Accounts.
2) 2022 Annual Accounts.
3) The current Memorandum and Articles of Association. Adopted at the General Meeting on the 12 th September 2022.
4) Shareholders’ Agreement. Dated 13 th September 2022, between NCFC (the Company), the Majority Shareholders (DS & MWJ) and the Covered Shareholder (Norfolk FB Holdings, LLC). In essence, this relates to the management of the Company henceforth.
5) Subscription Agreement. Also dated 13 th September 2022. Makes provision, as approved by shareholders at the General Meeting on the 12 th September 2022, for the Covered Shareholder to acquire 10,000,000 C-preference shares in NCFC, at a cost of £10,000,000. The Covered Shareholder also simultaneously acquired 132,697 ordinary shares from existing minority shareholders, for £3,317,425.
6) Term Sheet. Dated 19 th January 2023. Sets out background information, together with proposed revisions to the Shareholder Agreement, which also form the basis of the five resolutions being put before shareholders at the forthcoming General Meeting. Also provides further information relating to four specific unsecured loans, together with a credit line facility with Norfolk.
7) Relevant Loan. Dated 9 th June 2023. Referred to as the Senior Unsecured Promissory Note, expressed as US$ 6,020,146.41. Cross-refencing to other documents provided, this is the equivalent to £4,862,800.
8) Relevant Loan Amendment Agreement. Dated 21 st August 2023. Extends the maturity date of the Relevant Loan from the 1 st September 2023, to 15 th February 2024.
9) Rule 9 Waiver Circular. Dated 24 th August 2023. The document seeks Approval for Waivers of Obligations under Rule 9 of the City Code on Takeovers and Mergers, and Approval for the Issuance and Allotment of New Ordinary Shares in the Company. The document contains the Notice of the Meeting, a letter from the Independent Directors, further information on Norfolk, financial information and ratings information on NCFC, additional information and the formal Notice of General Meeting, including the five resolutions to be put before shareholders for consideration.
10) Carteret Circular Consent. Dated 25 th August 2023. Provides consent to the Independent Directors to circulate the documents to shareholders in relation to the proposed General Meeting.
The Term Sheet confirms (note 1) Norfolk has invested £10,000,000 in C-preference shares in NCFC in September 2022, together with (note 2) a further £3,317,425 in the process of acquiring 132,697 ordinary shares from existing minority shareholders.
Additionally, (note 3) on the 14th December 2022, Norfolk purchased one unsecured promissory note from NCFC, for USD 2,109,360 (the “First Promissory Note”) and (note 4) on the and 19th December 2022, a second unsecured promissory note, for USD 7,692,300
(the “Second Promissory Note”). On the 20th January 2023, (note 8) Norfolk agreed to make available to NCFC the equivalent
of £1,634,700, with 11% interest (compounding monthly), a maturity date of the 1st September 2023, (“Loan Agreement £1,634,700”).
Furthermore, (note 9) and also on the 20th January 2023, Norfolk agreed to make available to NCFC the equivalent of £4,862,800, with a maturity date of the 6th February 2023, (“Loan Agreement £4,862,800”). This loan, hereafter referred to as the Relevant Loan, is due to
be repaid in full, either by a Cash Repayment of twice the principal of the Loan Agreement (£9,725,600) or by Capitalisation of the principal of the Loan Agreement for 194,512 Ordinary Shares in NCFC (equivalent to £25.00 per Ordinary Share) on a fully diluted basis being the “Proposed Share Issue”, such that Delia and Michael, and Norfolk each hold 40.33% of the outstanding shares in NCFC.
The Term Sheet also provides (note 12) for the Majority Shareholders and Covered Shareholder to vote for a period of three years (until the 18th January 2026) in step with each other on all matters.
In addition to the four loan agreements detailed above, on the 20th February 2023, Norfolk (note 14) also undertook to provide NCFC with a “Line of Credit” equivalent to £21,000,000, which shall bear interest at 11% (compounding monthly) with a maturity date of the 1st
Rule 9 Waiver Circular.
The Circular contains a number of legal definitions, which this report aims to follow, which are important in the context of our commentary.
Under the terms of the City Code, Delia Smith, Michael Wynn-Jones and Norfolk are deemed to be working together as a Concert Party, effectively acting in Concert for the purposes of the resolutions being put before shareholders. The Concert Parties are therefore
excluded from voting on the resolutions.
The Concert Party collectively own 460,406 ordinary shares (74.63%), with the remaining balance, totaling 156,507, (25.37%) held by the Independent Shareholders, as defined within the City Code, and only Independent Shareholders are eligible to vote on the
proposed resolutions. The Club has over 6,800 Independent Shareholders.
Voting on the resolutions is to be by way of a Poll, meaning that the outcome for each resolution will be determined by the number of shares owned by each shareholder, either ‘for’ or ‘against’, rather than one shareholder, one vote.
The Waiver Circular provides, a detailed letter from the Independent Directors, Zoe Ward and Tom Smith (Part I), extensive information relating to Norfolk (Part II), an indication of the financial information of NCFC, as provided by the 2021 Year End and 2022 Year End
accounts Part III, additional information and the Notice of General Meeting Part IV, which includes the five resolutions to be voted on by the Independent Shareholders.
Within Part 1, the Independent Directors have confirmed that the repayment of the Relevant Loan by way of Capitalisation is only available if the Independent Shareholders approve the Rule 9 Waiver Resolution in respect of the Capitalisation and the Ordinary Shareholders
approve the Allotment Resolution and disapplication of pre-emption rights in respect of the allotment of New Ordinary Shares, (the “Disapplication Resolution).
1. First Rule 9 Waiver Resolution (the Capitalisation Waiver). Seeks approval from the Independent Shareholders to waiver any obligation which might otherwise fall on Norfolk to make an offer to the Independent Shareholders in relation to the proposed
Capitalisation of the Relevant Loan.
2. Second Rule 9 Waiver Resolution (the Conversion Waiver). Seeks approval from the Independent Shareholders to waiver any obligation which might otherwise fall on Norfolk to make an offer to the Independent Shareholders if, in relation to the C-
preference shares, a Trigger Event where to subsequently occur, thereby enabling an automatic Conversion of the C-preference shares into Ordinary Shares. The Company considers it unlikely that a Trigger Event will occur, if ever.
3. The Allotment Resolution. Subject to the passing of Resolution 1, the Directors of the Company are duly authorised to allot Ordinary Shares in the Company to Norfolk up to an aggregate nominal amount of £195,012, before the 1 st October 2024, unless
4. The Disapplication Resolution. Subject to the first Rule 9 Waiver Resolution, in respect of the Capitalisation Waiver, being passed by Independent Shareholders (resolution 1) and the Allotment Resolution being passed by Ordinary Shareholders
(resolution 3), gives the power to allot the New Shares in connection with the proposed Capitalisation of the Relevant Loan.
5. The Conversion Resolution is a Special Resolution in connection with the proposed Conversion Waiver, which authorised the Directors, in the even of a Trigger Event occurring, that that enables to C-preference shares to be converted into Ordinary Shares without the need for any further Shareholder approval.
The Canaries Trust has reviewed in detail the proposals being put before the Independent Shareholders and, as previously indicated, welcomed the initial investment, back in September 2022, by Norfolk.
It is also apparent from the detailed information now disclosed within the Term Sheet, that Norfolk has subsequently provided Debt Financing to the Club, in December 2022 and January 2023, in the form of four further loans, plus a Line of Credit for £21,000,000. The Independent Directors have confirmed that Norfolk has provided total assistance to the Club in excess of £33,000,000, which represents a significant commitment from Norfolk.
A proportion of the Debt Financing, the Relevant Loan, must either be repaid in full by the Company by the maturity date (1st February 2024) or capitalised into new equity in the form of 195,012 Ordinary Shares.
As a point of principle, the Trust has no objection to any form of debt-to-equity swap arrangements, not least because this strengthens the Club’s balance sheet.
However, the Trust does find itself somewhat conflicted on this principle, in this instance, specifically with regards the first Rule 9 Waiver Resolution, which, if passed, reduces the Club’s debt by some £6m, but also removes the requirement of the Offeror, Norfolk, to make
an offer to minority shareholders, which, as indicated within the Observation above, is a fundamental principle of the Takeover Code.
For further context, the Club has always prided itself on being fan owned, a point that was thoroughly endorsed by supporters, following the collapse of ITV Digital back in the early 2000’s. Many fans stepped-up during its hour-of-need, feeling it was the right thing to do, and without any thought of doing so for profit. For many fans, owning a very small part of the Club they have always supported, still remains fundamentally important.
This is the first occasion when an outside investor has reached a position where the City Code comes into consideration and, whilst for many fans, including the Trust, there is probably little wish to sell their shares, the first Rule 9 Waiver Resolution will automatically remove any option for those shareholders who might wish to sell.
It shouldn’t automatically be presumed, either because of the proposed allotment price, or the ongoing fan preference for continuing share ownership, that there is no requirement to make an offer to purchase to all existing minority shareholders.
The Trust is in favour of voting for resolutions two to five inclusive, but is conflicted, for reasons highlighted above, in relation to resolution one, and is eager to obtain the views of its membership before reaching a final decision on voting in relation to the first resolution.