Rangers shoot for £20m junior market offering

TROUBLED Scottish football club Rangers yesterday announced plans to raise up to £20m through a listing on London’s Alternative Investment Market as the team’s new owners seek to rebuild the business.

Rangers has endured a disastrous year, with the club – who have won the league a record 54 times – declared insolvent and forced to restart life as a new business in the fourth tier of Scottish football.

However chief executive Charles Green, who bought the old club’s assets in June, told City A.M. that he wanted to act fast to float the business: “When I met the fans for the first time in May, I said that I’d relist it this year. We could float it in one year or two year’s time but it would be a significantly higher price and the entry for the fans then is substantially higher.

“I’d like to get the cash in the bag. I’m 60 next year, I want to get this finished before I finish. The reality is, if Israel bombs Tehran this will not list – it’s nothing to do with whether it’s a good business, or whether Charles Green’s mad, just that someone took off in an aeroplane.

“There’s a window here, there’s an appetite there, institutions said they like it, fans obviously love it.  It’s not like we’ve got a contingent liability, we haven’t got anything to run away from. It is clean, it is perfect and we can get on and do the job.”

Green, who spent yesterday in London selling the plans with Rangers manager Ally McCoist, explained that the club’s enormous and loyal fanbase could power its financial revival. He laid out bold plans to develop land around Ibrox stadium, including a new hotel, tap into new overseas fanbases and extract greater revenue from media and merchandising operations.

But Simon Denham of spread betting firm Capital Spreads, said he had doubts about the float: “With the club looking for £20m in funding, the immediate thought is that this is probably the operating revenue shortfall for this season and that the club will be looking for a similar injection every year until Premier League (or possibly ‘near’ premier) status is regained.”


...not having to pay large sums for players:
"If you look at the last eight years [Rangers] have spent £100m on players and received £5m back from sales."
"There is a wealth of talent there – we've got five guys aged 18 and under playing in the first team. Tell me a club that's got six players under 20 that have played 100 league games each – that's the opportunity now that exists for us. "

...on a pan-European competition:
"Who thinks there'll be a European Super League within 5-10 years? I do. I spoke to one of the commercial directors at Arsenal. [They] don't want to play Southampton or Swansea – but ask Arsenal if they want to play Celtic or Rangers? That's what the fans want to watch."
"And Football fans are not just the people who live in Hackney. Fans are in India, China and they want to see Man Utd play Barcelona, not every eight years but every season. If there's two divisions of eighteen then how could Rangers not be in it? I'm convinced it will happen."

...on exploiting media revenue:
"I'm going to stop Ally and the players speaking to the press, which is great news for the internet and content. What we want to do is put that onto Rangers media – and it can go out to press afterwards. We think we can make substantial revenues."

...league reconstruction:
"We're assuming that we meander – although I look at Ally when I say that – back to the top division in Scottish football."
"The Scottish FA have announced publicly that they see a restructuring of Scottish football and that, inevitably, would accelerate Rangers' moves back to the higher divisions."

...on Rangers' TV future:
"What transformed soccer was Rupert Murdoch and Sky, but it's changing. It's all going to migrate to the web. YouView paid £738m just for a few Premiership games. The minute they kicked us out of the SPL, you have your own image rights. In two weeks we're going to broadcast our away match at Clyde direct onto the internet."
"We're talking now to new sponsors for the shirts, looking at how we can improve image rights in Asia and the Far East."

...why Rangers should list now:
"I don't think it's healthy for one person to own and control a football club, so ideally no single shareholder would have more than 10 or 15 per cent."
"There were 26,000 shareholders in the old Rangers company that was listed on the Plus market. Those shareholders – through no fault of their own – lost their investment and should be given the right to apply for shares."

...the size of the fanbase:
"Part of getting control of our own merchandising is to drive revenues and capitalise on this fantastic fan loyalty. If people saw the 2008 UEFA Cup final in Manchester, Rangers took 216,000 fans who didn't have tickets. That illustrates how big this club is. That's brand loyalty."
"I say to the fans – I'm a Yorkshireman, I want to take money off them. But I don't want to run off with it, I want to put it back into the club and make more money."

...on the financial benefits of Scottish football:
"If you asked the manager, he'd want to manage in the Premiership. But as a businessman, it doesn't make sense, because the average Premiership wage bill is 75 per cent of income. And they will never play in Champions League football. [I told some investors two years ago], put £50m into Rangers and you're guaranteed to play in Europe every year – and it's the only league in Europe that has that guarantee."

...on cashflow:
"We're committed to no debt. We're going to keep control over wages. We'll stockpile some cash for Ally but we do want to emphasise this youth policy."
"We've got a great balance sheet, the envy of football – which football club today has got no debts, no borrowings and cash on the balance sheet?"
"We've got cash today, we will raise cash in the IPO and before this fiscal year ends we'll have cash for next year's season tickets."

....on season ticket sales:
"The real good thing is the predictability of this. We sold 36,000 season tickets at £320 average. Assuming the manager does his job and gets us promoted [we'll sell more]. The price will be higher – let's say we sell 40,000 season tickets next year at £500. I've got £20m. Tell me which high street shop can tell you with that predictability the levels of revenue."

...on the poor track record of listed football clubs:
"Historically [the record of floated football clubs] is even more abject that what you've described, they've all been poor showings. But there are models – Arsenal is a classic – where they run the club correctly, build a new stadium, work through the manager with a sensible transfer policy. It's all about putting that lot together."

...on turnover predictions:
"I would be disappointed three years down the line if we're not doing £30m and making £7m just from merchandising. Now, if we then say we've done the property deal and get £5-10m. If we're back in the top league, in Europe, that's £60m. Merchandising, better sponsorship and we're turning over more than £100m."

....on shareholder split:
"The original 19 shareholders came in at 50p. We've just done some pre-IPO funding at a £1. I'd like to see the fans with 15 or 20 per cent of the club. And maybe 50 per cent held by institutional investors."

...on how he'd spend the IPO money to improve the Ibrox area:
"In Scotland you can't get a dirnk unless you're in a members club. We've got a club that costs you £700 a year for membership. I've got a stand behind the goal with nothing behind it – stick a bar in there, cost you £1m."
"Edmondson House, which I've agreed to buy off David Murray, we could put another members club there with a walkway down into the stadium. I need £1m to buy it, £2m to do it up but it'll bring £2m pa in income. I could have that finished for the start of next season. I'd like to get on with some of these small jobs that I've got the land."

...on why previous Ibrox redevelopment failed:
"David Murray and Craig Whyte both looked at developing these pockets on land [around the stadium]. The plans they put on the table were not realistic, they were looking for a 2,000 bed hotel, one of these giant casino licenses, a big supermarket. To have all three in one planning application was madness. I suspect their motives were to get cash in and pay off debt or take the cash. My model is different and we're making it very easy for planners to pass it."
"We're saying to the council, let us regenerate this area, we'll build a new railway station, but give us the land next to it and we'll build a hotel. I believe we can get £5-10m a year in recurring revenues from the rents."

"I'm excited. It's been the most traumatic six months for the club. I don't believe for a minute we're out of the woods but at least the light is at end of the tunnel. We've lost 28 players in six months. We're not going to get back to where we were overnight. I'm very confident and looking forward to the challenge."



Taking responsibility for the Rangers flotation is just the latest in long line of successes for Stephen Keys and Max Hartley of small and mid-cap specialist Cenkos Securities.

Keys has worked on a varied range of deals, including Stobart Group’s purchase of Carlisle airport, as well as advising telecoms firm Expansys, outsourcer Quindell Portfolio and employee benefits company Personal Group.

This summer Hartley was involved in an equity issue for Breedon Aggregates, in addition to advising technology firm Pursuit Dynamics. Cenkos, founded in 2005, was the top ranked Nomad and stockbroker in the Alternative Investment Market in the third quarter – both by number of clients and size of clients’ market capitalisation.

Despite the lacklustre environment for IPOs it managed to complete 21 transactions during the first half of 2012 and raise £306m of new money for clients.

Rangers’ legal work is being handled by Field Fisher Waterhouse’s corporate finance partner Christine Phillips. Meanwhile Cenkos has employed Philip Cheveley of Travers Smith, who has a track record of working for clients involved in football club takeovers.