The club have now entered a period of consultation with Well Society members and Motherwell Football Club shareholders with regards to the proposed investment from Erik and Courtney Barmack, with voting scheduled to commence at the start of next month.
Following on from our last update, we can confirm that the Heads of Terms have now been agreed between all parties and will be distributed to all Well Society members and Motherwell Football Club shareholders in the weeks prior to the vote commencing on 1st July 2024.
Contact details for any queries can be found below.
At this point of proceedings, a clearer timeline of the proposed investment process can be made.
This timeline is as follows:
Start period of consultation with option for shareholders to email questions to Club via shares@motherwellfc.co.uk. Well Society members can also contact the Well Society directly with any queries via members@thewellsociety.uk.
Ballot Opens for Well Society members and Motherwell Football Club shareholders – 2 weeks voting period.
A note from our Chairman Jim McMahon
As has been well documented, the club has been in discussions for a number of months with Erik Barmack, a Los Angeles based entrepreneur. These talks have centred round how Erik and his wife Courtney could make an investment in MFC and become involved in helping to run the club.
These negotiations have now advanced to the point where MFC have signed Heads of Terms (HOT) about how this would work going forward and the Board of the club are recommending that shareholders accept the offer.
- A synopsis of the HOT including the safeguards built into the agreement.
- A note on valuation and the rationale for this deal.
- A steps paper on how this would be done.
- A note from Erik and Courtney about their aspirations for MFC.
And I apologise for the amount of information which is involved. This is mainly because of the nature of the deal. The bulk of corporate transactions involve an acquisition – party A buys party B – the money goes to the shareholders in B, not the underlying business. In our case all the money is going into MFC by way of yearly subscriptions for new shares in the club and that makes it much more complicated.
1- As you will see from Erik’s note below, he sees this as a partnership with the fans and the Well Society (WS) – one where both parties invest on a yearly basis for six years, with the Barmacks putting in £300k for the first three years and £350k for the next three.
2- The WS commitment is £200k for the first three years and £250k for the next three.
3- The current shareholders in MFC are WS 71% – other shareholders 29%.
4- Other shareholders will have the right to subscribe for their pro rata amount each year eg if a shareholder owns 1% at present, they will be entitled to subscribe for 1% of the new shares issued. If they do that, it will reduce the amounts the WS need to subscribe and the number of shares they receive on that share issue.
5- Erik and his wife will own 8% of the shares in MFC in the first year, going up by approximately 8% per annum until they reach 49% by year six.
6- As outlined above, this money is going in as share capital not debt and so strengthens the balance sheet; unlike other instances in Scottish football where excessive debt has led to significant problems for the clubs involved.
7- There is a buy back option for the WS up to the end of year two. If the arrangement isn’t working as envisaged, they can buy back the WS shares for £660k (two years contributions plus costs).
8- As a further safeguard, 30% of any player sales above £2m will be put into a separate account and can be used to help that purchase eg Player sales have been £4m – the £600k in that account can be used to help fund the buy back.
- The club cannot take on any external debt.
- No value can move to the Barmacks other than normal expenses.
- No assets, ground etc, can be sold.
- No change to the club name, colours, home ground can be made without the agreement of 75% of the shareholders.
- The existing loan from the WS to the club remain in place until the final payment is made in six years time and at that point half of the loan is forgiven.
- Given the money the WS holds at present, to meet its commitments over the next six years it needs to raise £100k per annum – 60% of what it currently achieves.
10- The Executive Board will be eight in total. The club’s existing CEO and FD remain in post. An additional three directors each will be nominated by the WS and the Barmacks. If tied at 4-4 on any matter the Chair (Erik) has the deciding vote.
11- The new money will be very helpful in underpinning our budget and allowing additional income from cup runs and player sales to be invested on a longer-term basis; but is not in itself transformational. What could be is the access to other income sources, new fans, media connections and commercial opportunities that Erik and Courtney are looking to bring.
12- What we have looked to do is agree a deal which opens up fresh opportunities without risking the future of the club. For the next six years the club is a “locked box“. All the additional value generated stays within the club.
Which is why the MFC Board recommends the transaction.
Valuation and reasons for the deal
One of the key questions for shareholders is whether the transaction values the club fairly. The amounts being subscribed by the Barmacks – £1.95m – prices the equity in the club at just under £4m – with the addition of the debt of £3.7m (WS and Government) that equates to an Enterprise Value (EV) of £7.7m for the whole club.
There are three main ways to value a business.
Net assets – the club does have net assets – but to realise these would mean selling the ground – work we have done in looking at a new stadium has estimated a cost of £40m – net assets is only a valid basis to look at the deal if the assets can be sold. Ours can’t be.
A multiple of sales/turnover – commonly used for hi tech or software companies who have yet to reach profitability – again not relevant.
A multiple of maintainable profits – this can be profit, profit before tax or EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation- sometimes referred to as a measure of the free cash flow a business generates).
We have operated at around breakeven over the period since we moved into fan ownership.
There is no standard multiple for businesses – especially football clubs – there generally is a range – eg pubs might go at 5/8 times profits.
But to get to £7.7m EV for MFC would require something like stable EBITDA of £1m and a multiple of 8.
We will now have been in the top division for 40 years, have managed to “balance the books” under fan ownership, improve the ground, training facilities and extend contracts for players who could have significant sell on value. So why think about changing the model?
We have always seen the WS money as an insurance policy against a major downturn in our finances – relegation would cost us approximately £3.5m and we have had to live with that possibility in the last two seasons. The rainy day money is a static strategy. Is it better to contribute regular annual amounts which can be fed into our budget? Does that make it less likely we will get dragged into relegation? The answer is probably yes, so that is something we need to consider and this transaction provides that opportunity.
And secondly, and aligned to that, because it’s the main duty of the Board to look at ways to safeguard the future of the club. Lots of good work is being done to try and increase membership, income from events etc but will that bring in sufficient revenue to protect us totally or even make a significant contribution to our cost base?
Will it allow us to compete and remain in the top level? Or do we need to do more? That is the ultimate question fans and shareholders need to consider.
- Fan ownership still embedded at the heart of the club.
- New worlds to explore.
- And two safety nets. Buy back plus no value leaving the club for at least six years.
Which is why we are recommending it unanimously as a Board.
To accept this deal 75% of our shareholders, have to vote in favour.
The WS owns 71% of these shares. If more than 50% of the votes cast by the WS members is in favour that translates to a 71% acceptance.
If more than 50% of the votes cast are against, the transaction cannot take place.
Given the significance of what we are proposing it is important to give shareholders and supporters time to consider it and ask questions about any aspects which are unclear.
We are therefore building in a twenty-one-day period to do that – which we think is sensible in the circumstances, then a further 14 days for voting which should allow the club to factor the new money into next season’s plans, if the deal is accepted in that timeframe.
The WS will consult its members separately. The club will write to other shareholders asking them to vote. After the consultation period of 21 days, voting for WS members and MFC shareholders will commence on 1st July 2024 and everyone will have a further two weeks to administer their vote which will close on 14th July 2024.
If there is a 75% + acceptance, we will then instruct our lawyers to draw up the relevant papers (Shareholders Agreement – Subscription Agreement – New Articles) for a General Meeting to formalise the transaction.
Subject: Proposal for Strategic Partnership with Motherwell FC
Dear Members of the Well Society, MFC Shareholders, and Fans of MFC,
I recently had the pleasure of meeting so many of you in person, hearing your inspiring stories, exploring the town of Motherwell, and witnessing firsthand the vibrant atmosphere at Fir Park. Thank you for your time and sharing your Motherwell passion with me. I appreciate now more than ever what makes Motherwell so special.
My wife, Courtney and I deeply respect Motherwell FC’s culture and identity, especially its fan ownership, which is a vital part of the club’s DNA. Our aim is to complement, not control, the Well Society’s shareholding and support its core mission.
We are incredibly excited about the possibility of joining forces with all of you to enrich this foundation with new resources and innovative ideas, propelling the Steelmen forward while preserving its cherished traditions. We are committed to a long-term partnership that focuses on sustainable growth without imposing financial burdens.
Below are a few more details about our proposed investment and involvement in Motherwell FC:
Capital Investment: We propose a sustained investment strategy to build long-term value for Motherwell FC, focusing on enhancing the club’s infrastructure and long-term strategic projects rather than short-term player acquisitions.
Media and Broadcasting: With our background in international film and television production, we see significant opportunities to boost MFC’s global visibility. A broadcaster recently approached us about a docuseries on the club that could open considerable commercial opportunities.
Technology and Innovation: Leveraging our extensive experience in Tech Ops & Strategy and media rights negotiations, we aim to drive MFC into new frontiers in AI and social media. This includes optimizing MFC’s engagement and innovation in digital realms.
Additional Investors: We see opportunities to bring in additional investors (which would dilute our share of the club, not yours) who can help raise MFC’s profile internationally, enhancing the club’s stature on a global stage.
Global Football Networks: Our connections with club owners across premier leagues provide us an opportunity to extend MFC’s network internationally, supporting the club’s long-term strategic goals.
Engagement and Transparency: We propose creating forums to ensure ongoing dialogue with you, allowing us to align our initiatives with the community’s needs and aspirations.
We look forward to hearing from you and hope to meet soon to discuss this exciting opportunity.
Warm regards,
Erik and Courtney Barmack
If you have any questions about this transaction, please contact the club at shares@motherwellfc.co.uk and we will respond quickly. Alternatively, WS members can also contact the Well Society directly with any queries via members@thewellsociety.uk.
