LONDON, ENGLAND - OCTOBER 13: Liverpool Football Club Chairman Martin Broughton (CL) and Managing Director Christian Purslow (C), leave the High Court on October 13, 2010 in London, England. The court has ruled that the owners of the club, Tom Hicks and George Gillett, have no power to stop the sale of Liverpool FC. (Photo by Dan Kitwood/Getty Images)
Tom Hicks was dealt a blow today when his legal challenge to the sale of Liverpool F.C. to New England Sports Ventures was struck down by England's High Court today.
According to Owen Gibson of the The Guardian, at issue was whether or not Hicks and George GIllett violated a refinance agreement that both men signed with the Royal Bank of Scotland in April when they tried to have managing director Christian Purslow and commercial director Ian Ayre removed from the board of directors at Liverpool F.C. in a move designed to thwart a 3-2 majority vote by the board to approve a sale to New England Sports Ventures, which is headed up by John W. Henry, principal owner of the Boston Red Sox..
RBS sued in high court and won with Mr. Justice Christopher Floyd delivering the verdict.
In a damning verdict, the judge ruled that in trying to sack two board members and replace them with their own appointments, they had been guilty of "the clearest possible breach" of a corporate governance agreement they signed as a condition of a refinancing arrangement with RBS in April.
Under that agreement, [Martin] Broughton was installed to oversee the sale of the club and the duo recognised that only he could change the make-up of the board and they promised not to interfere in the sale process.
Broughton is expected to reconstitute the board of directors by 2:00 pm CDT so as to allow for the sale to NESV to be completed. And if that happens, it would officially be two teams down with one to go.
Unfortunately as we all know, that one team is the Dallas Stars. And considering that Hicks' losses on his investment in Liverpool is expected to reach into the hundreds of millions, it could mean he'll simply dig in his heels even deeper until his asking price is met.
Or could Sal Galatioto, the man who was appointed by Hicks to oversee the sale of the Stars, do something similar to what Martin Broughton did at Liverpool?
I'll analyze after the jump.
Keep in mind that when Tom Hicks and George Gillett appointed Broughton as the chairman of the board of directors at LFC, Hicks expected the club to sell for ₤800 million, despite the fact that Hicks and Gillett bought the club in February of 2007 for ₤219 million ($348 million). Hicks eventually came off that figure, but not low enough to garner interest from prospective buyers.
So with an October 6th deadline from RBS to either pay off the original loan to buy the club or roll it over looming with no prospective buyers in sight, the club was headed for financial uncertainty with a worse case scenario being that they enter England's form of bankruptcy, administration. In some cases, as Portsmouth FC found out, entering administration carries a nine point penalty in the Premier League.
Liverpool currently sit 18th in the table in the Barclay's Premier League with just six points in six matches. They're already in the relegation zone. Do the math and you can gauge just how serious Liverpool supporters and the board took this sales process.
Which probably explains why Broughton, Purslow, and Ayre went behind Hicks' and Gillett's backs in September to get this deal done with NESV.
Now obviously, the NHL doesn't penalize teams' on ice performance for off ice financial issues. And Sal Galatio wasn't appointed by Hicks to oversee the sale of the Stars with the club's on-ice performance being in the best interests of the club.
But getting the most value for the club and getting it quickly probably are motivating factors for Sal Galatioto. The fact that Hicks stands to lose close to $130 million in his investment in Liverpool FC isn't a motivating factor.
Over the course of the last seven months, Hicks has proven he'll do whatever he can to try and squeeze every last nickel he can out of his sports investments. Even when he's facing longer odds than Carlos Pena faces when he steps into the box against Cliff Lee.
I'd expect nothing less than from Hicks as the Stars sale moves forward.
Which is why I could see Sal Galatioto being forced to do the same thing Martin Broughton was forced to do at Liverpool. I'm not a lawyer, so I can't comment on how successful such a strategy would be.
I think I can safely say that after the fiasco that was the Texas Rangers sale that it would lead to a protracted legal battle that would be strung out for months. And I think I can safely say that the damage that would do to the on ice product would set the club back at least a couple of years.