The Cambridge United Board announced today that it is recommending to shareholders that they accept an offer from Paul Barry to become the sole owner of Cambridge United FC.
Shaun Grady, Chairman of the Board, said: “The Board has received an offer from Paul Barry to purchase the outstanding shares in the Club that he does not own already and is recommending this offer to shareholders believing it is in the best long term interest of the Club. Receipt of this proposal follows an exhaustive process led by the Board to explore other sources of external investment in the Club.
“This proposal obviously comes at a time when the issue of funding for all lower league clubs is under significant scrutiny. The Board believe the proposal provides important financial stability and security over the short and medium term. The proposal also comes at a point where there is the ability for the Club to explore and hopefully take forward new opportunities over the coming years, such as the potential new stadium development - alongside the new Marleigh training ground.
“The proposal also ensures the Club’s future would be in the hands of a long term fan whose commitment to the Club has been unstinting through good times and bad. All fans know that Paul is black and amber to his core. This recommendation follows detailed discussions with several potential investors over the last nine months which resulted in three formal proposals being made as part of a through process involving the whole Board and its advisers.
“We now want to be give shareholders and all fans as much information as we can about how we have reached this point, the process we have gone through, the criteria against which we have judged different proposals and the details of Paul Barry’s offer. This is obviously an important moment for Cambridge United and the Board of Directors recognises that we are simply custodians of the Club on behalf of the fans.
“The full details of the Paul Barry proposal and the proposed process will be communicated to Shareholders shortly.”
Background
During 2017 a significant change occurred in the ownership structure of the Club with Paul Barry becoming majority owner of the Club with 50.1% of the shares. When these changes were made the Club anticipated that the shareholding structure would continue for the foreseeable future. Given the significant losses made in 2017/18 and 2018/19 it became clear to the Board that the Club would require significant additional funding in both the short and medium term. The funding shortfall has been met over the last three years by loans from Paul Barry. The repayment obligation under these loans is in the region of £1.3m.
In September 2018 the Board received an unsolicited approach to discuss the sale of the Club to a third party. Given the financial challenges the Club was facing at the time, the Board entered into exploratory discussions on a confidential basis and provided appropriate financial information. Although several meetings took place ultimately no formal proposal was made.
Following the termination of these discussions the Board agreed it was appropriate to explore whether there was alternative third party investment available. It did so discretely and engaged a third party consultant to identify suitable potential investors. Over the last nine months the Board has had numerous meetings and conversations with various separate different groups and individuals. This resulted in three formal proposals being received, including one from Paul Barry to become 100% owner of the Club.
Criteria
The Board has been acutely aware of the importance of this decision. To enable it to reach a considered judgement in the best interests of the Club it has assessed proposals against four key principles. It has done so in conjunction with the Club’s legal advisers who have also advised the Board on their fiduciary duties in the situation of considering a change of control offer in circumstance of financial challenges. The four principles are;
i. Cultural Fit. The Board recognised it is the custodian of the Club on behalf of the fans so any sole owner must have the Club’s values at heart;
ii. Value to Existing Shareholders and Creditors. Any offer should include some financial payment to existing shareholders recognising their prior investment. It should also meet the outstanding financial loan liabilities;
iii. Long Term Financial Commitment. L2 Clubs lose on average £500,000pa. Any sole owner would need to commit to meet forecasted deficits for a significant period of time; and
iv. Ambition for the Club. A new investor/owner would need to have appropriate ambition for the development and progress of the Club on and off the pitch after stabilising in the League. The new training ground and Stadium proposals in particular represent significant opportunities for the long- term future of the Club
The Paul Barry Proposal
Paul Barry has proposed in return for and conditional upon securing 100% ownership;
i. Conversion of the loan obligation of ~ £1.3m into shares releasing the Club from these future repayment obligations;
ii. An offer to existing shareholders at an estimated total consideration of £600,000 with payment to shareholders to be made no later than June 30, 2020;
iii A financial commitment to the Club for a minimum five -year period to fund ongoing losses irrespective of which League the Club plays in; and
iv. Maintenance of the existing Board of Directors, including CFU representation, with any future changes made as and when circumstances arise.
The Board Decision
In reaching its recommendation the Board was unanimous that Paul Barry’s Proposal was in the best interests of the Club, shareholders and other stakeholders. The Board is unable to publicise confidential information about other offers that were received but Paul Barry's proposal was the only one received to satisfy all the above criteria.
i. The offer removes the repayment obligation on loans which are the most significant financial risk to the Club;
ii. The offer provides an element of financial recompense to existing shareholders who had invested in the Club in the past. The Board recognises the debt it owes to all its shareholders - large and small - who have helped sustain the Club over many years. It has been an important consideration for the Board that they should receive some financial recompense as part of any transaction;
iii. The offer commits to significant financial funding to stabilise and secure the Club over a minimum five -year period. This support would enable the Club to plan for the future beyond this five – year commitment;
iv. Paul Barry is a life – long supporter of the Club and has its best interests at heart. Paul Barry has provided significant funding to enable the Club to continue operating in the past and, in the Board’s view, would be a good sole owner and always act in the best interests of the Club.
Next Steps
The Club will provide full details of the Paul Barry proposal to shareholders and details of the forward process. It is hoped that the whole process can be concluded quickly in the coming weeks - ideally by the end of August - so the Club can be on a sound financial footing for the current season and beyond.