Manchester United’s takeover process is
about to enter the defining stage with bidders due to make their third and final offers by Friday, April 28.
United supporters are hoping the Glazers will finally sell up, with Qatari Sheikh Jassim bin Hamad Al Thani the favourite to land the club ahead of billionaire Ineos founder Sir Jim Ratcliffe, but talk of the Americans taking minority investment and staying in situ persists. Here is how a partial sale would work and how viable an option it is for the Glazers.
Where are we in the takeover process?
When Manchester United announced their “strategic review” last November, it was stated that the Glazers would consider all options, including “new investment into the club, a sale, or other transactions involving the company”. With United fans desperate to see the back of the Americans, much of the focus has centred on the only two parties proposing full takeovers: Qatari banker Sheikh Jassim bin Hamad Al Thani and Sir Jim Ratcliffe.
Yet a number of US-based investment funds, including Elliott Management,
The Carlyle Group, Ares Management and Sixth Street Partners, have registered interest in acquiring a minority stake in the club and/or providing financing. All groups have been asked by Raine, the merchant bank overseeing the process, to complete their due diligence by the end of this week before submitting third and final offers before next Friday’s deadline.
How might a partial sale work?
While four of the Glazers siblings – Kevin, Bryan, Edward and Darcie – are said to be keen to cash in on their shareholding, Joel and Avram, the United co-chairmen, are thought to be more reticent about relinquishing the club they have part owned for the past 18 years.
Joel and Avram explored financing options earlier last year with a view to finding a way to buy out their siblings and the theory is that the pair could use the equity from a minority sale to purchase those stakes and fund redevelopment of Old Trafford and a new training ground through financing.
Sounds simple enough?
Not really. United’s dual-share structure means that the Glazers own the so-called Class B shares, which hold 10 times the voting rights of the Class A shares, in their entirety. Anyone trying to purchase United shares would, in effect, only be purchasing Class A shares, which is why those investors who currently own 31 per cent of the club – against the Glazers’ 69 per cent – have no say in how it is run.
As such, financial sources have cast serious doubt on whether hard-nosed investment groups such as Elliott and Carlyle would be prepared to cough up a large amount of equity without voting rights in return, which may necessitate the existing share structure being ripped up or remodelled.
Would the Glazers go for that?
This is the big question, and why, when push comes to shove, there is the feeling in financial circles that a huge Qatari offer will be difficult to turn down. The dual share structure has enabled the Glazers to stay in complete control while also offloading large tranches of Class A shares without any threat to their autonomy at Old Trafford, effectively using the club as a personal piggy bank.
All told, the family have raised £465 million through share sales down the years. Abandoning the dual share structure to facilitate a partial sale could bring an end to that and also leave the Glazers vulnerable to newly empowered minority investors forcing a cheaper takeover in the future.
How much would it cost to buy out the four siblings?
This is another potential stumbling block. Combined, Kevin, Bryan, Edward and Darcie’s stake is worth around £1.1 billion based on the existing $20 share price. Even if a minority investor were willing and able to provide that amount of money in equity or a significant proportion of it, would it alone be enough to persuade the four siblings to sell?
The Glazers are purported to be looking for about £6 billion from Qatar or Ratcliffe so the idea of Kevin, Bryan, Edward and Darcie wanting a premium on their shareholdings does not seem too far-fetched.
What would a partial sale mean for Old Trafford?
If the Glazers were to remain in situ, they would need substantial financing to be able to fund redevelopment and expansion of Old Trafford, which is being cited as an eight-year project, and overhaul their Carrington training base. But that money would not come cheap. Given the current financial landscape and the history of groups like Elliott and Carlyle wanting value-driven deals, the interest rates involved could be punitive.
United are already paying about £20 million a year in interest on their existing loans but that figure would rise if their debt dramatically increased. And more money spent servicing debt would, in all likelihood, mean less money spent on the squad. In time, matchday and commercial revenues would soar with a new stadium and the Glazers would not need to borrow all the money immediately. But there could be a challenge financially to keep things in step in the shorter-term.
How would a Qatari takeover differ?
Sheikh Jassim is proposing a debt-free takeover and considerable investment in infrastructure so not only would United not need to secure financing for a new stadium and training ground, the club would be free of the burdensome interest and dividends payments attached to Glazer rule.
That would mean the club instantly being around £40 million a year better off in revenue terms – the equivalent of a £200 million signing every season based on a five-year player contract given that transfer fees are spread over the lifetime of deals.
