As covered last time, the Glazers have expressed an interest in selling part of Manchester United back from whence it came, namely the stock market. It was reported at the beginning of August that the American owners were considering a flotation of shares on the Singapore Exchange, however the offering was shelved as fears over the United States credit rating downgrade, the Eurozone debt crisis and the ailing global economy derailed world markets in September.
Now, just over a month later, markets have almost fully recovered to the levels seen in August following the persistent efforts of world leaders to stem the financial crisis. In fact, the Singapore Index last traded at $12.79 or just 1% lower than the $12.93 level when reports started surfacing about the United IPO.
Does this mean the IPO is back on? There are still plenty of problems that may affect the “way the markets are looking”, but it is a decent bet that the Glazers will be more than happy to sell into any market strength.
Manchester United is close to completing an IPO of shares in the club. The Glazer family hopes to raise $1bn by selling anywhere between 25-40% of the club to investors in Singapore and the rest of Asia. A successful sale at those percentages would value the Red Devils somewhere between 2.5 and 4 billion dollars.
The main details of the deal have been excellently covered in several places (Guardian and Bloomberg to start) so I won’t reinvent the wheel. I would like to note that the Glazers are attempting to sell shares into equity markets at their most volatile in a year and with many hanging near their 52-week lows. Asian markets (particularly Singapore) have been hit harder by the rout compared to European and American markets; the Kospi, Nikkei and Singapore Index have all dropped double digits since the beginning of August. The owners are betting that rabid Asian Manchester United fans can overcome a market environment where few want to take any risk.
Pushing ahead with the sale suggests there is a slight urgency to the financing, whether that urgency is driven by financial pressures on the club or on the Glazers is yet to be seen.
There are fresh doubts floating around Manchester United’s future today as it is rumoured that the Red Knights, a group of financiers and well heeled fans, may pull out of a bid for the club. The Red Knights bid is estimated to be in the £1.2 billion pound area, but rumours already have leaked that the Glazers consider it a significant underpricing, with the American family desiring a valuation much closer to £1.7 billion pounds.
It is not surprising to find the Red Knights trying to harness supporter anger and painting the Glazers as bullheaded owners trying to profit off the club fits nicely in that strategy. However, indirect pressure only goes so far. The Glazer family still holds all the keys to Old Trafford and have stated they have no intention to sell.
But, the Glazers cannot afford to dismiss the Red Knights entirely, nor would they want to do such a thing. With the club itself £500m in debt and the growing need for substantial transfer investment, the capital requirements of the club are ballooning while the family is on the hook personally for another £200m in Payment-In-Kind loans that are quickly ratcheting up to higher interest rates. Given the financial mess they are sitting on selling the club for an all cash payday would certainly not be an unwelcome outcome for the family.
I do not believe for a second that the Glazers are uninterested in selling and because of this it is vital that they keep the Red Knights on the hook. Talk of “fully committed” and “not for sale” are merely foreplay. The Red Knights want ownership of their favored club, the Glazers have many good reasons to sell. Both sides are now involved in a public duel, with each side jockeying for position and advantage. It remains to be seen who is going to concede on price but it will make for an entertaining summer when it comes to Manchester United.
Manchester United today was able to report a £48.2m pre-tax profit thanks only to the £80m transfer of Portuguese superstar C. Ronaldo. Otherwise it would have been another year in the red to the tune of £31.8m. Much of the loss is due to a hefty £41.9m interest bill on the £509.5m loans the club has outstanding. This debt figure does not include the £175m in PIK loans the club also holds. The Glazers are reported to be interested in a bond sale later this year to refinance a portion of the club’s debts. Read more here at F365.
It should be extremelyconcerning to the world of football when it’s most popular club (arguably) can not turn a profit without a one-time, extraordinary event like the sale of Ronaldo. Man United are not the only club in financial trouble, red ink is showing up all over the Premier League in clubs like Hull and most spectacularly at Portsmouth.