Tom Wright describes in detail the events which led to Wallace Mercer's takeover bid and the story of how it was defeated by the Hibernian supporters and Sir Tom Farmer.
On 24 August 1987, the 33-year-old Swindon based lawyer David Duff purchased Hibernian Football Club from the then owner Kenny Waugh for £875,000 following several weeks of negotiations. Although Waugh remained on the Board of Directors the Edinburgh born Duff was immediately installed as Chairman and his brother-in-law Jim Gray as Managing Director. They would soon be joined on the Board by the accountant Jeremy James and solicitor Mrs Sheila Rowland, both the latter based in London. On her appointment, Mrs Rowland became the first-ever female to sit on the Board of a Scottish football club. A statement released by the Club at the time announced that Jeremy, James and Sheila Rowland were experts in the acquisition and purchase of property and it may be that in the future the Board will use this expertise to further the business interests of Hibernian Football Club. Duff and Gray felt that to secure the future success, and financial backbone of the Club, other business interests should be pursued. It stated that this would allow the Club to 'compete with Rangers and Celtic'. In time the motives behind this last statement would become apparent.
The 1986-67 season had proved yet another disappointment for the Hibs fans, the club finishing 9th in a 12 team league. During the campaign, the former Rangers player Alex Miller who had earlier led his former side St Mirren to Scottish Cup success, had replaced manager John Blackley, only the latest in a succession of managers in recent years. The football club had been underperforming for some time, and the fans welcomed the new owners' vision. The acquisition of goalkeeper Andy Goram from Oldham for £325,000, the purchase of Neil Orr from West Ham for £100,000, followed a few months later by Gareth Evans from Rotherham for £50,000 would increase their popularity even further, these purchases suggesting that the Club was in a healthy position financially.
The Hibernian board of directors in 1987
Left to right: Jim Gray, David Duff and Kenny Waugh
Just over a year later, on 3 October 1988 Hibernian became the first Scottish, and only the second football club in Britain to float on the stock market. With shares priced at 55p each, for a minimum investment of just £198 the ordinary man in the street could now own part of the Club. Over 1700 supporters would take up the offer, some from as far away as Australia and North America eventually giving the fans around 15% of the shares, the remainder in the hands of private investors. Helped by a smart advertising campaign involving the well known Edinburgh comedian Gary Dennis that successfully managed to circumvent the rules regarding the advertising of shares on TV and an extensive newspaper campaign, the floatation was so successful that it oversubscribed by 54%. The money raised, estimated to be over £2million, was to be used to repay borrowings and increase working capital to improve the standing of the football club.
The new owners divided the Club into three sections: the parent company Edinburgh Hibernian PLC looking after the interests of the football team, Hibernian Leisure and Hibernian Land and Property, responsible for any future business investments, and to examine the possible expansion of the group. In December 1988, a night club' The Talk of the Town' was purchased, with a substantial mortgage, for around £1m. A few months later another property, the Lenwood Sport and Country club situated in Devon would be acquired for about £400,000.
The financial intrigue deepened in February 1989, when Avon Inns, a chain of 15 properties in the West Country, was purchased for around £5.75 million, the money to be raised by a new shares issue. The owners anticipated that the chain of pubs and hotels would return a profit of around £800,000 annually for the football club; instead, it would lose almost double that amount in the first year alone.
It would later turn out that Avon Inns, The Talk of the Town nightclub and the Country club in Devon had all been in receivership at the time of purchase and were all previously owned by companies registered to the financier David Rowland. It now also came to light that Mr Rowland had been the mystery financier behind a loan of £800 thousand that had allowed David Duff to purchase the Club and that the then Hibs director Jeremy James was a director of both of Rowland's companies.
The expectation that a second share offering would raise around £5.75 million turned out to be misguided with only about 200 of the original 1750 small shareholders taking up the offer. The remainder was left in the hands of both institutions with no real interest in football and underwriters, severely weakening the financial stability of the football club. An initial high of 70p per share fell to a low of 17p, then recovered to around 22p, which unfortunately failed to meet the threshold for placing as an Unlisted Securities. Consequently, the shares had now been de-listed.
In December 1989 Hibs announced a loss of £1.6 million in the previous year, bringing the clubs total overdraft to around £5.5 million, a far cry from the £300 thousand at the time of Duff acquiring the Club just over two years before. A survey of football clubs by Price Waterhouse suggested that along with Dunfermline, the balance sheets of both Hearts and Hibs were amongst the weakest in Scotland. With the Club's significant debt, Allan Munro, a respected fund manager from the Edinburgh institution Ivory and Syme, joined the Board to oversee the Club through its financial difficulties.
It was apparent that the purchase of the Avon Inns group had been a complete disaster and rumours arose that Duff might now be willing to consider offers, either for his shares alone or the entire company. Subsequently, Duff, Gray and Munro attended a board meeting at the Inoco offices in London where the trio expected to meet a prospective buyer for the Avon Inns group. Rowland informed them that a bid was in the offing from a source that would not be to their liking. While they were speculating as to who this mystery person might be, possibly Robert Maxwell, they were astounded when who should enter the room but the Hearts Chairman Wallace Mercer.
Only a few weeks before, Wallace Mercer in partnership with the then Rangers owner David Murray and with the backing of the Bank of Scotland had announced ambitious plans to build a new 'super' stadium for Hearts on the west side of the City. This stadium would be part of a £200 million 375 acre office and housing development built on green belt land owned by Murray. The scheme would be dependent on receiving planning permission, and it would appear that the plans for the stadium formed part of a thinly disguised attempt to breach the legally protected green belt site. Later the Chairman of the council's planning committee Bob Cairns would hit out at what he described 'Millionaire casuals wanting to run amok in the green belt.' The proposal, however, would prove to be the catalyst for a takeover bid that would almost signal the end for Hibernian Football Club.
On Monday 4 June 1990, the country awoke to the breaking news that the Heart of Midlothian chairman Wallace Mercer had tabled an audacious £6.2 million bid to take over Hibs, a move described as breath-taking in its boldness and arrogance. At a press conference later that morning the Hearts chairman unveiled what he described as 'his vision for the future that would see one Edinburgh side challenge the dominance of Rangers and Celtic and an end of tribalism in the city'. This vision, however, was seen as nothing more than a naked attempt to destroy Hibernian Football Club. While described as a merger, it was evident from the start that it was a takeover bid with the aims of acquiring Easter Road and the substantial property owned by the Club sold to finance Mercer's plans for his super stadium.
As could be expected, the news provoked at first astonishment and disbelief that turned to anger and outright condemnation, not only among the Hibs support but throughout the entire country including many Hearts fans. By lunchtime, Easter Road was besieged by supporters clamouring for information and reassurance and later that evening at a crammed Supporters Club, with hundreds more packing the street outside, a 'Hands off Hibs' committee, formed by the former Hibs director Kenny McLean as chairman. A fighting fund established attracted a donation of a thousand-pound an anonymous Hearts supporter disgusted at Mercer's plans. The Hibs Supporters Club immediately released £20,000 to purchase more shares, which was followed by many others, including the former owner Kenny Waugh and the Edinburgh businessman Tom Farmer.
A banner at a match in protest of Wallace Mercer's takeover bid (pic: Eric McCowat)
Both the Edinburgh District Council and the Lothian Regional Council immediately gave Hibs their backing, the Leith MP Ron Brown promising to raise the issue with both the Monopolies Commission and the Office of Fair Trading. Permission was refused for a mass protest march through the City by the police who feared possible trouble, and a protest rally was held instead at Easter Road Stadium on Saturday.
Attended by supporters from all over the country many from Hearts, several former Hibs players including Pat Stanton, Jimmy O'Rourke, Tony Higgins and Jackie McNamara all rallied to the cause, with messages of support from golfer Bernard Gallacher and Gordon Strachan. A succession of impassioned speeches from amongst others, the Leith MP Ron Brown and the Euro MP David Martin, all condemning Mercer's plans attracted enthusiastic applause. Still, perhaps the most poignant moment of the entire afternoon was when the legendary former Hibs player Joe Baker knelt and kissed the Easter Road turf. The afternoon ended with an emotional rendering of You'll Never Walk Alone by the Proclaimers.
A banner at a match in protest of Wallace Mercer's takeover bid (pic: Crawford Tait)
The following week businessman Tom Farmer purchased yet another substantial block of shares, stating that he didn't want to own the Club only protect well over a 100 years of heritage and tradition. Mercer meanwhile had countered with his outrageous statement, claiming that 'he hoped the people could see what Hearts were trying to do - make Edinburgh a force in Scottish and European football'.
It turned out that Rowland, a venture capitalist, was the person behind the loan that had allowed Duff to purchase the Club. Rowland was gifted almost 30% of the original share issue, valued at £1.2 million, an unusually high return said to have been for his expertise in overseeing the takeover and the share issue. From the original £2 million-plus that had been raised by the first flotation, the Club had received only around £500 thousand. Another £400 thousand went in miscellaneous expenses, the rest going to Rowland. He was also in line to collect at least another £2 million from his shares plus any profit from the sale of Avon Inns making him the only winner in the deal.
With the promise of Rowland's shares and others that had already been pledged by various financial institutions that had no interest in the Club, Mercer now appeared to have more than the 51% necessary to give him controlling interest. The Bank of Scotland, however, had insisted that unless he achieved 76%, the magical figure required to force through the sale legally, he would have to withdraw. Mercer had counted on David Duff accepting the offer for his shares that would have been worth around £700,000 to the Hibs Chairman making the scheme a fait accompli. Still, to his credit Duff refused to sell, urging the Hibs supporters and other institutions to reject the hostile bid.
THE BANK OF SCOTLAND INSISTED THAT HE HAD TO ACHIEVE 76% TO LEGALLY FORCE THROUGH THE SALE, OTHERWISE HE WOULD BE FORCED TO WITHDRAW.
The Hearts prospectus had given a 2 July deadline, but that same evening there was a protest rally at a packed Usher Hall chaired by Margo McDonald. Amongst the speakers was the Hearts player John Robertson who had disobeyed Mercer's order not to attend.
For weeks fans had taken to the streets collecting petitions. Later a packed 'Battle Bus' delivered the signatures to Tynecastle where the Hands Off Hibs committee were received warmly by some of the Hearts directors, who may well have been sympathetic to the Easter Road cause. The previous day Brian Rogan and Tony Connor, two Hibs supporters living in London, had presented a copy of the petition to Margaret Thatcher at 10 Downing Street. Several supporters had also staged a five-week-long picket of the Bank of Scotland's main offices on the Mound. The on-going campaign even receiving an airing on the popular kids' TV show Blue Peter when presenter John Leslie, against the orders of his immediate bosses, appeared on screen wearing a Hands off Hibs T-Shirt. As part of the campaign the Battle Bus containing amongst others, Gordon Strachan and the Proclaimers joined that year's Leith Festival Gala Parade, receiving tumultuous applause and support from the many thousands packing the route.
The Proclaimers and Gordon Strachan on the Battle Bus (pic: Edinburgh Evening News)
At 62% of shares his takeover bid now looking likely to fail, Mercer extended the deadline by a week, the first signs that he was weakening. In a further climb down he now claimed that Hibs could survive and share his new dream stadium on the west of the City, but even this failed to convince. On the orders of the Bank of Scotland, on Saturday 14 July 1990, he finally admitted defeat. He called off his attempt to destroy Hibs, claiming that 'although he had won the financial argument, he lost by the sheer ferocity of emotion displayed by the fans of the Easter Road club.'
It was evident that Mercer's bid had been nothing at all to do with football and more to do with profit and land deals, and his humiliating climb-down had been a tremendous victory for the Club and its fans. Ironically his attempt to 'end the tribalism in the city' had backfired spectacularly.
With a new board in place, Hibs could now look forward to the new season. The hostile bid, however, had exposed the Club's precarious financial position and regardless of a near £1 million received from Celtic for the sale of John Collins, a few months later after failing to pay a VAT bill, receivers arrived. Two bids for the Club were received; one from the former owner Kenny Waugh, the other from a consortium led by Tom Farmer, the latter eventually accepted as the preferred bidder, the football club separated from the leisure and property sections which remained in the hands of the receivers. Somewhat ironically Hibernian had been saved by Tom Farmer whose grandfather and great-uncle had played such a pivotal part in saving the Club almost a hundred years before.
The arrogant, egomaniac Mercer meanwhile was said to have still been astounded at the reaction of the Hibs support who had failed to buy into his' vision for the future'.
A new board comprising of Kenny McLean, Tom O'Malley, Allan Munro and Tom Farmer's representative, Robert Huthersall, was now in place, fronted by Chairman Douglas Crombe. There was no place for Duff, Gray or Rowland. The financial troubles were far from over, and although Hibs would continue to play football at Easter Road in the short term, it assumed that they would eventually have to move, possibly to Meadowbank. Fortunately, the obstacles overcome, and the Club remains at its spiritual home to this very day.
In 2009 the former tax exile David Rowland became the Tory parties, major donor, after handing over £2.8 million. The following year he would be elected treasurer of the party; however, he resigned that same year after damaging revelations about his 'colourful' personal and business life emerged including his role in the near demise of Hibs.
The last word should remain with Mrs Sheila Rowland, estranged wife of David Rowland, on why she had voted against the takeover bid. 'At the time that we floated the company on the Third Market, we had designed the offer to persuade the supporters to invest their money in Edinburgh Hibernian PLC. We all knew that the supporters would invest, not because they wanted a return on their money but because they wanted to help the football club. They saw it as a way of helping their team.
'At the end of the day, I thought that it would be unfair of us to take their money and then give the company to someone who wanted to shut down the Club. My husband took it upon himself to talk to Mr Mercer. No one else knew about it. For me, Wallace Mercer's attitude was a crucial factor, the way he slagged off the Hibs board and the way we had run the company. The advice we were given by the Edinburgh Financial Trust was that it was not a fair offer, and that enabled us to fight it.'
Written by Tom Wright