There can be a few reasons for this.
1. I am fairly certain that this is made due to legal aspects or formal reasons. There is no purpose in appointing someone to the board just because they will work with something or be active in some regard.
2. The most common reason for changes of a board in connection with a merger are the quorum rules of the Board. Typically, if a director has a conflict of interest he/she cannot participate in a resolution and the board can only make resolutions if more than half of the directors are present. So if you have like a board with 6 directors a 3 of them have a Conflict of Interest regarding a Merger, the board would not have a quorum. If you elect another director, 4 of 7 can participate and you can make decisions regarding the merger.
Before this move, the board of the club had 11 directors. Of those, 6 were "Glazers", 2 are Glazer people (Arnold and Baty) and 3 are independent directors. After this move, the board has 12 directors of which 6 are Glazers and 6 are non-major shareholders of the company (i.e. not directly affected by a merger).
What are the rules on Conflict of Interest and quorum's for Manchester United plc? First of all, this is a field were one thing can be acceptable from a formal point of view, another standard can apply in case there is litigation following a merger which there always is. I can't provide any info on any
unwritten Cayman Island/US merger litigation standards. But if we look at the Articles of Association of Manchester United plc -- there is a quorum if you can get a "simple majority" of the Directors appointed from time to time. Which directors can be present for a resolution? The AoA are impressively flexible. Remember, the Cayman Islands are as majority owner friendly as it gets, and the AoA expressly states that no matter if you someone has a conflict of interest they can participate in a board resolution. But all this is only to the extent possible under the Cayman Islands' Companies Act.
In summary, it does not seem like the board need another director in order to form a quorum for a board resolution on a merger. However, from a risk management/litigation POV -- there could be some unwritten rules they want to adhere to, but I don't quite think so. If we want to be very conspiratorial -- one could speculate on what happens if none of the Glazers vote on an issue. Before the appointment of Patrick Stewart, you had two external guys appointed by Avram and Joel (R. Arnold and Cliff Baty) and three independent directors. Now they can hold a meeting where more than 6 participates, say Richard Arnold is elected Chair of the meeting, the Glazers lay down their votes due to the risk of getting sued, the independent directors do not take any responsibility and lay down their votes or votes against a merger, and Arnold (casting vote) + Baty + Stewert votes for the merger. 100% speculation and probably very unlikely.
3. It is very common that a listed company, with several directors on the board who has some form of conflict of interest, for risk management reasons appoint an independent sub-committee of uninterested directors to consider a takeover. This is my best bet for why this is done. I.e. that the Board of Manchester United plc will establish an "independent takeover committee" including the non-conflicted directors, to deal with everything -- practical -- related to the merger, since the Glazers' have a conflict of interest. Like its possible that Arnold and Baty also are deemed to have a conflict of interest, which only would leave the independent directors Robert Leitão, Man Utd Sawhney and John Hooks in charge of the independent deal committee. On top of that, Robert Leitão is actually the Managing Partner for Rotschilds who are advising the Glazers on the sale of the club. Does he really not have a conflict of interest even if the club label him as an "independent" director? If so, that would leave just Man Utd Sawhney and John Hooks -- 'here you go, everyone know that you will get sued, but of the 11 directors of the board 9 have pulled out so you must take your responsibility now'. I have been in this situations a couple of times my self. You leap a bunch of responsibility on a few directors -- who always are the least suited for it. But if the General Counsel of the Club joins the board and participates on the committee, the remaining few get as much support as they can get.
4. So what does it mean if the Board of Directors have appointed an independent sub-committee to handle everything related to a merger? Does the Glazers lose control? No, definitely not. A merger ultimately requires approval by the shareholders at a general meeting -- which the Glazers control -- so the Glazers still has 100% control on if a merger takes place. Its just a formal measure done so that you at least can pretend that the board is independent and acts in the interest of all shareholders.
Having considered this back and forth, like I can only come to the conclusion that this would mean that a merger is close. Sounds scary to say, but its what I would bet on. There are many X factors, many unknown variables.
When coming to that conclusion, its based on the assumption that Patrick Stewert is appointed for the reason the the board is creating a sub-committee to which it is delegating everything regarding a merger as well as the following assumption: Theoretically, the job of the bid committee could of course be to -- turn down -- a merger proposal. But these processes as far as I am aware always have a practical side and a formal side. To get a merger approved, you must have secured the Glazers support at a general meeting of the shareholders of Manchester United plc. That is what you negotiate first. When you have that in place, you iron out the formalities with the board. I just cannot envision a situation where someone makes a formal merger proposal to the board of the club without first having cleared it with the Glazers. I don't know what is due process on the Cayman Islands, but it would surprise me a great deal if a need to appoint an independent sub-committee occurred before a point where you have some kind of agreement between the main owner and a bidder.
There are so many knowledgeable people at this place. Would love to hear your input.
Why is a General Counsel of a Company amidst strategic/merger discussion all of a sudden appointed as a director of the board? @ATXRedDevil @Big Ben Foster @pogbasformerbarber @Redjazz
Ho-ho-ho!
