The Work

October 15, 2010 1:54 PM

Liverpool Sale to Sox Owner Set After Dual Court Drama

Posted by Brian Baxter


After a wild week of litigation on both sides of the Atlantic, British Premier League franchise Liverpool F.C. will be sold to an American investor group in a deal that fielded more than a few lawyers.

On Friday, an ownership group called New England Sports Ventures, led by Boston Red Sox owner and hedge fund titan John Henry, agreed to take control of the storied British soccer team for $481 million, Bloomberg reports. The Am Law Daily reported on the proposed sale last week when Shearman & Sterling advised Henry and NESV on their bid for the team.

Liverpool is saddled with $541 million in debt from a 2007 leveraged buyout by the team's current U.S. owners, Thomas Hicks and George Gillett, Jr. (Hicks is somewhat of a veteran of franchise ownership battles, thanks to the recent bankruptcy sale of his Texas Rangers baseball team.)

The team may be as good as sold, but with Hicks and Gillett standing to lose millions from a forced sale, the legal fight is still far from over. Fish & Richardson partner Steven Stodghill, who represents Hicks and Gillett, told the BBC that they would sue for billions in damages over the deal.

"This outcome not only devalues the club but it also will result in long-term uncertainty for the fans, players, and everyone who loves this sport because all legal recourses will be pursued," Stodghill said.

Hicks and Gillett have opposed the proposed sale on the grounds that it significantly undervalued the team. Forbes has valued Liverpool at $822 million, and while that valuation has dropped in recent months because of the team's debt woes, some financial columnists believe that the franchise is still being sold at a discount.

Further complicating matters was the fact that Liverpool's loyal fans, who faithfully chant the song "You'll Never Walk Alone" from the Rodgers and Hammerstein musical "Carousel" as their club anthem, reserve a certain amount of vitriol for Hicks and Gillett as a result of the team's on-field troubles in recent years. Liverpool has struggled in the Premiership so far this season, and the team's performance will be further affected if franchise fails to make a $375 million debt payment to one of its largest creditors, the Royal Bank of Scotland, on Friday.

Henry agreed to make the RBS payment if the team was sold. If the proposed sale were scuttled and Liverpool defaulted on the money owed to RBS, however, the team would have been placed into administration, Britain's version of bankruptcy. Under Premiership rules, Liverpool, which is currently ranked eighteenth in the 20-team top league, could have faced a nine-point penalty that would have placed it at the bottom of the standings and in danger of relegation to a lower division at season's end.

That was one of the reasons the team's fans joyously gathered outside the British High Court in London on Wednesday when it ruled that Liverpool's board of directors, which favored a sale to Henry and NESV, had the right to negotiate a sale of the team. The board was represented in court by barristers from One Essex Court and on transactional aspects of the sale by Magic Circle firm Slaughter and May, according to U.K. publication Legal Week.

Hicks's ownership group, which had been represented on transactional aspects of the sale by Weil, Gotshal & Manges until the firm recused itself because of potential conflicts, turned to British firms Peters & Peters, Maitland Chambers, and Brick Court Chambers for legal counsel in the U.K.

Hicks and Gillett upped the ante by seeking and obtaining a temporary restraining order from a state court in Dallas late Wednesday barring the sale of Liverpool to Henry and NESV. (The Am Law Litigation Daily has more on Fish & Richardson's role representing Hicks in Texas; Haynes and Boone is advising Henry's group and Baker & McKenzie is working with Liverpool's board in the U.S. litigation.)

The Dallas injuction compelled RBS and its lawyers from Freshfields Bruckhaus Deringer and Erskine Chambers to ask a British High Court on Thursday to seek a removal of the Texas injunction. (Erskine also represented Henry and NESV in British court proceedings.)

The British court ruled in RBS and NESV's favor on Thursday, issuing an anti-suit injunction that cleared the way for the Liverpool sale. The Dallas judge presiding over the U.S. litigation lifted the restraining order blocking the sale early Friday, after Hicks and Gillett withdrew their request for the court order, according to the Dallas Morning News

Takeover bids by other rival suitors for Liverpool were either rejected or fell short. Represented by British firm Macfarlanes, Singapore billionaire businessman Peter Lim withdrew his offer for the team on Thursday, stating that the Liverpool board was intent on selling to Henry and NESV.

Another bid mounted by U.S. hedge fund Mill Financial--represented by Mayer Brown, according to Legal Week--made its own last-ditch attempt to take control of the team. It too fell short on Friday after its proposal was rejected by the Premier League, Reuters reports.


Photo: Shankly Gates, Wikimedia Commons

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