Hassallnomics 4.0

Unravelling the last 12 years of boardroom manoeuvres at Crewe Alexandra has been a long, drawn out process. Just when you think you have finished one part of the jigsaw, you find several pieces missing somewhere else.

The battle between Crewe’s directors and majority shareholder Norman Hassall has never really gone public, save for a few comments at the infrequently held fans forum events. It does therefore feel something of an achievement that in documents circulated to shareholders, I found that a two-part £3.65m deal to buy out Hassall was in fact agreed upon in 2012, and has since been partially completed.

Hassall had shares in both the football club and Commercial Enterprises through his company Crewe Alexandra Limited, which has now been renamed Gresty Holdings (Crewe) Limited. As shareholders will be aware, a deal for Hassall’s stake in the football club was completed in 2012. The second part of the deal, for his stake in Commercial Enterprises, is the one that continues to rumble on.

Crewe Alexandra Limited

To recap, Crewe Alexandra Limited was the holding company Norman Hassall used to assume overall control of Crewe in 2006. Through this, Hassall, together with another director, Daniel Potts, owned 54% of the club. With the addition of shares from John Bowler, Dario Gradi and James McMillan in 2009, the overall shareholding in Crewe Alexandra via Crewe Alexandra Limited was 61.36% and was represented as follows:

Norman Hassall: 32%

Daniel Potts: 23%

John Bowler: 3%

James McMillan: 1.5%

Dario Gradi: 1.5%

To make sense of how the deal to buy out Hassall has been partially completed we have to go back to the 30th of April 2009, when an Extraordinary General Meeting was held and a resolution was passed to increase the nominal price of a share in the club from £1 to £30. To effect this, the club needed £3m in the bank, which eventually happened three years later in 2012 following the sale of Nick Powell to Manchester United.

This is important because the purchase of a share would now cost £30, rather than the previous £1. That wouldn’t make much difference to those with a few shares in the club, but to someone who has 61,360 shares, it adds up to quite a large change in the value of your shareholding.

I wondered whether it was possible that the share price was increased to benefit the team on the pitch, or to provide extra funding for players. Sadly, there is no evidence that those were the motives.

It meant that Crewe Alexandra Limited’s shareholding went from being worth £61,360 on paper, to just shy of £1.9m – and that was indeed the price agreed with Hassall to buy those shares. The deal was finalised and financed through the remaining £1m of Hassall’s £1.325m loan from 2006 being written off, and £900,000 in cash.

However, it is unlikely that all of this money went to Hassall, because not all of the shares involved belonged to him.

As a result, Hassall has held no direct shares in the football club since 2013.

Commercial Enterprises (Crewe) Limited

This is an excerpt taken from the 2010 club accounts:

“On 9th November 2010 Crewe Alexandra Football Club Company de-merged its subsidiary company Commercial Enterprises (Crewe) Limited, thus giving Crewe Alexandra Limited a 61.4% shareholding in both Crewe Alexandra Football Club Company and Commercial Enterprises (Crewe) Limited.”

As a result of this de-merger, Commercial Enterprises now owned the car park and stadium, which had been moved from the football club company. Commercial Enterprises had been established to ‘oversee’ both of these as their parent. However, this did cause a problem. Because all the assets had previously been held within the football club company, it seemed unfair that football club shareholders should lose a significant chunk of value from their shares because the assets giving that value had been transferred elsewhere.

It was therefore decided that any shareholder in Crewe Alex would receive shares in Commercial Enterprises in direct proportion to the shares they already held in the football club. I.e, if you had 10 shares in Crewe, you would now also hold 10 shares in Commercial Enterprises. This is how Norman Hassall, and indeed all shareholders, would come to effectively have two stakes in the club.

So, by 2013, although Crewe Alexandra Limited no longer had any shares in the club, they still held a 61.4% interest in the now de-merged and asset rich Commercial Enterprises. According to the website Investopedia, de-mergers are a valuable strategy for companies that want to reduce risk and crucially, create greater shareholder value.

Both the share price increase and company manouvers were orchestrated for one sole reason: to maximise return on investment.

This web became even more tangled when Commercial Enterprises became the football clubs parent company in 2013, purchasing the 61.36% shareholding that had been sold by Crewe Alexandra Limited. Although Hassall no longer held any shares in the club, through this new chain of command, he still retained a controlling interest in the club and its property.

Director Jimmy Rowlinson had stated in February that, ‘Hassall controls the holding company, which is where the assets are, and he has been doing what he wants’.

One person many fans would be interested to hear from is the Isle of Man based property developer Daniel Potts, who has maintained his silence throughout. Ultimately, it was his alliance with Hassall in 2006 that created Crewe Alexandra Limited. It would also be interesting to discover the returns he made on his 23% stake in Crewe Alexandra Limited. If he had agreed a deal with Hassall to also receive £30 a share, then he would have netted £690,000 of the £900,000 cash that was paid out.

Potts’ involvement is not over yet either, as he should still hold shares in Commercial Enterprises, which may explain why he was appointed as a director in the company earlier this year.

What Now?

As I have written before, it is well over two years since John Bowler said he was ‘hopeful that a deal could be reached within the next few months’.

At the fans forum, Charles Grant confirmed that ‘Bowler had tried very hard to get that deal done’, and went on to say, ‘when there is only one person controlling negotiations it is very difficult, and when that person has an unrealistic value of the investment he has, it is even more difficult’.

The second part of the deal that was agreed valued Hassall’s shares in Commercial Enterprises at £1.75m. However, this figure – essentially a price for the land Crewe play football on and its adjoining car park – appears to be one the club are not willing to pay. Until Hassall decides to enter into negotiations, the situation remains at an impasse. It is worth noting that Rail House, just a short walk down Gresty Road, fetched £910,000 when it was sold in 2013.

In theory, the land Crewe own could be sold to a property investor and the place bulldozed. However, it is designated use by the local council for sports and recreation so would meet heavy objections, not least from the local fan base.

The problem with the club committing to buy back these shares – and Hassall’s valuation – is that quite simply, there is no money to buy them with. Crewe have been heavily reliant on director’s loans for cash flow in the last two years and accounts for the same period show losses of £2.4m.

The reason the club are looking to buy the shares back themselves is to undo much of the 2006 restructure that was orchestrated by Hassall. As chairman John Bowler alluded to me in an email in February, ‘group company structure is part of a review which is well underway’.

Charles Grant commented on the restructure at the fans forum later that month and said, ‘we genuinely believe that if we were to resolve this problem we have a very, very credible, acceptable, transparent and engaging way forward’.

These changes, which have already been rubber-stamped, will give local people the opportunity to purchase shares in the club. Chester City, following their winding up in 2010, were reformed as Chester FC and are now owned by Chester Fans United (CFU) under the motto, ‘Our City, Our Community, Our Club’.

Crewe’s board hope these moves will cement the clubs position within the local community and the sale of shares to fans should bring about a much needed cash injection. However, it is unlikely that Hassall’s departure will see a dramatic increase in any area of the clubs budget in the long term.

Jimmy Rowlinson has said that the directors, ‘are all fed up. It has gone on too long and we want to move forward’.

Believe me, so do the fans.

Hassall is currently away with family in Spain until July so it is unlikely anything will be decided before then. With pre-season optimism higher than it has been for years, what a massive boost it would be for the club if they were able to enter the new season with a new ownership model in place.

Rest assured, the directors will be doing everything they can to resolve matters and they are hopeful once more, but only time will tell whether this is another false dawn, or the start of a new chapter in Crewe Alexandra’s history.