Glazers’ dual track IPO gets green light
The Glazer family will list Manchester United on the Singapore Stock Exchange (SGX) this autumn after local authorities gave the American family a green light for the partial IPO. The family will sell off around a third of United’s shares in a much-discussed dual track listing that will raise money but ensure the Glazers remain in Old Trafford control. Amid speculation over pricing, with the family seeking around £600 million for a 25 – 35 per cent listing, United could float by mid-October if the Glazers drum up enough local interest.
Yet, with controversy surrounding the dual track nature of the shares being offered – investors will be required to purchase non-voting preference shares in addition to ordinary stock – many questions remain about the IPO’s potential success. Not least just how attractive the Glazer family will make preference share dividends for investors who will have little influence on the club’s future strategic direction.
“They have received approval but the timetable is not fixed,” a ‘source’ close to the IPO told newswire AFP on Friday.
“The company is not in need of funds so they are not in a hurry to list. Basically, they are keeping a watching brief on market conditions. Now that there is approval, they can roll out any time.”
The SGX go ahead will allow United to open formal talks with potential anchor investors, while a prospectus and tour are likely in the coming weeks. The club is believed to have already held informal discussions with investment company Temasek Holdings, which is owned by the Government of Singapore.
SGX’s go-ahead comes amid fresh speculation in the Mirror that the Qatari Royal family is prepared to offer £1.6 billion for total acquisition of the club. In reality United may approach the Qatari’s to take a significant, if minority, shareholding on flotation, with the Glazers now convinced IPO will maximise the family’s profits. Full sale is surely likely only if the IPO gravy-train fails in the coming weeks. After all, with the eurozone debt crisis showing no signs of abating, markets globally have become twitchy about new listings.
However, Qatar is making significant noises in the football market, having won the right to host the 2022 World Cup finals, while members of the Royal family has invested in Malaga and French Paris St Germain. The Qatari Foundation struck a record-breaking shirt sponsorship with Barcelona last season.
“The Mirror understands that a delegation from the Qatari royal family, headed by Sheikh Hamad bin Khalifa Al Thani, will be in Manchester on Monday in a bid to conclude the deal,” said the paper on Friday.
“Top Middle East sources revealed last night that an official approach to the Glazer family is being made and a deal could even be clinched by next week. The super-rich Qataris think United is a good deal – even at the profit it would make for the current rulers.”
Doubts remain about the IPO’s potential for success, with the family seeking to retain around 90 per cent control on flotation. The dual track listing means each ordinary share will be sold with a preference share. While preference shares hold no voting rights they will attract higher dividends and first option of repayment in the unlikely event that United is made insolvent. In practice this means that post-IPO United is likely to pay out higher annual dividends than if the Glazer family went for a standard listing.
“Football clubs around the world are mostly quite closely held and not very transparent,” Pearlyn Wong at Bank Julius Baer & Co., told Bloomberg on Friday.
“They don’t like to give up voting rights so they can make faster decisions over things like players and management. Usually preference shares come as a follow-up offering, rather than at the IPO stage. Whether people will receive the share structure well depends on how much dividends they can get and whether the company has the cashflows to support it.”
United recently reported annual pre-tax and interest (EBITDA) earnings of £110.9 million for the year to the end of June 2011, with a pre-tax headline profit of £29.7 million. However, the club currently pays around £45 million per season in interest on bond debt, although it spent more than £60 million in the past financial year buying back some of the notes. United has spent more than £470 million on interest, debt repayment and related fees during the course of the Glazer family’s six-year tenure at Old Trafford.
Another senior analyst told Bloomberg that “institutional investors are unlikely to be interested [because] the lack of voting rights is just a kick in the teeth,” raising the spectre that the Glazers will sell United’s brand to retail investors. It is not a community that traditionally has a strong voice in the Singapore market.
The doubts place into question the IPO timescale, which could now happen at any point but is likely to go ahead – if at all – when the Glazer family believes the market is most receptive. Moreover, the family’s oft-reported $4 billion asking price – a significant premium by any measure – will be tested by a genuine market valuation for the first time.
Then there is the question about just how much debt the IPO will enable United to repay. After all, the dual listing has a significant impact on this process, with ordinary share sales diluting the family’s holding and raising money for the Glazers directly, and preference shares raising money for the club.
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