Nothing can be said to be certain except death and taxes, Ben Franklin once famously wrote. To that add the sale of Manchester United by the Glazer family, which was sealed the moment the Tampa-based clan rode into Old Trafford on a debt-fueled wave. It is, after all, how investors with high leverage normally make a profit.
And the Glazers stand to make substantial gains on any sale despite heavily indebting the club.
Following last week’s rumour of a potential £1.5 billion takeover attempt by the Qatar Foundation – read Al-Thani Qatari Royal Family – non-executive United director Mike Edelson has confirmed that the club ownership will eventually change, with the caveat that the plan is long-term.
Financier Edelson has been a non-exec since the early 1980s after being appointed by Martin Edwards to replace Matt Busby on the board. The great former United manager was appointed life president instead, while Bobby Charlton and Maurice Watkins also joined the board at the same time.
It is this long association with the club that offers a certain credibility to his comments, of course. Quoted by the Jewish Chronicle, Edelson says that “it’s no secret that, at some time, the family will sell.”
Indeed, recent moves by the Glazer family to remove the £243 million Payment-in-Kind (PIK) debt – possibly with the aid of Qatari money – is seen by some experts as a precursor to eventual sale, rather than long-term deleverage. After all, the Glazer family almost universally runs its businesses on debt.
The question, as always in leveraged buyouts (LBOs), is at what point maximum value is reached – and profitability maximised – and how receptive the is market to making a bid. On both counts evidence is stacking up in favour of a medium term sale, despite Edelson’s caveat.
While United reported record turnover in October revenue growth in media and matchday income is slowing, with commercial growth potentially limited by over-exposure to the sponsorship market.
Meanwhile, the credibility attached to a Qatari bid by analysts is growing.
“The belief is that they have already brought in extra finance from a third party in a bid to set the club up for a sale,” The Sun quoted one city source today.
After all, the chances of the Glazers having paid down the PIK debt from their own pocket is thought minimal, although the secretive nature of the family’s business dealings means we may not know soon, if ever.
While a refinance package from a US-based financial institution is likely, Middle East money is not completely left-field speculation even if the Premier League has confirmed no change of ownership.
Certainly, on the basis that there is little smoke without fire, Qatar is a potentially keen investor in United.
“They have made tentative moves before with little success but this time it looks like they could be going for it,” one source added in today’s Sun.
“Now they have landed the 2022 World Cup, the country wants to expand its influence in the game across the globe.”
This analysis certainly places Edelson’s caveat into perspective and – should a bid be forthcoming – price is key. After all a £1.2 billion bid – including any club debt – offers the family more than a £400 million uplift. £1.5 billion almost double’s the Glazers’ money.
By contrast a serious argument can also be made that the PIK refinancing has removed any critical risk to the Glazers, therefore further entrenching the family at Old Trafford. This despite the £83.6 million loss posted in October for the year ending 30 June.
However, the move to clear PIK debt, together with the bond refinancing almost a year ago, certainly means a fire sale will not happen until 2017 at least when further refinancing of the notes is likely if the Glazers remain in charge.
Of course, the Glazers have made no direct public noises about selling, save for Edelson’s intervention, with previous approaches from both Qatar and the so-called Red Knights given short shrift. Despite all the speculation, the standard line remains that the family “will not entertain any offers” for the club.
The sale, says Edelson, is a “long way down the line”. So is death but each will catch up with us in the end.