Glazers’ US IPO barely credible, let alone realistic

June 14, 2012 Tags: , Opinion 36 comments

Manchester United owner, the Glazer family, is exploring options to float the club in the United States, reports Reuters this week, after abandoning a mooted Asian IPO for the second time. Seeking up to £600 million in a partial floatation, the Glazers have now binned attempts to list the club in both Hong Kong and Singapore, with a New York IPO now proposed by the Tampa-based family. But just as Asian plans foundered on the Glazers’ ambitious over-valuation of the club, so presumably will any US float.

Plans to float in the States is one of a long line of proposed solutions to United’s £423 million debt, which has dogged the club since the Glazer family’s 2005 leveraged buyout. Two subsequent refinancing rounds have converted debt secured to buy the club into a long-term bond, while the family also paid down hundreds of millions in now infamous payment-in-kind hedge fund loans, presumably through a further US-based loan. The last published accounts showed gross debt at around £423 million, with net debt at £397 million.

The latest plan, claims Reuters, is to position United as a global “media business,” rather than appealing to the retail-centric institutional investors in Singapore, who failed to express the kind of interest the Glazers had sought. The Americans are also said to be pressing ahead with a dual-track listing in New York, offering only a small percentage of shares to the market with full voting rights, enabling the family to retain full control over the club.

“The U.S. listing would come either on the New York Stock Exchange or its electronic rival Nasdaq,” the Reuters article claimed, citing unnamed sources.

“A person familiar with the New York Stock Exchange, owned by NYSE Euronext, said an exchange decision is expected soon. U.S. One of the sources said Manchester United had always planned to position itself as a global media business rather than a sports franchise, suggesting that a U.S. listing would make more sense. Investors are familiar with the dual-class share structure that was under discussion for Manchester United’s Singapore listing, having seen it used by household names such as Google and Facebook.”

However, the family pulled the plug on Asia in part due to ‘volatile market conditions’, say analysts familiar with the situation – a less-than-subtle euphemism for the failure to attract interest at the price sought: a valuation in excess of $4 billion (£2.4 billion). Meanwhile, in a down-turned economy other sports and retail listings have failed in Asia, including the now postponed Formula One float, and the underwhelming Prada and Samsonite IPOs.

The mooted float in the US may suffer the same lack of investor intention though, unless the family lowers its proposed asking price, or promises the market a huge premium on future dividends – a logistic and legally impossibility.

Glazers’ Dilemma

Indeed, simple back-of-an-envelope calculations illustrate the Glazers’ dilemma in listing on any market, let alone in the US where there is no history of sports franchise flotation.

On takeover in 2005 the Glazer family paid 300p per share for 70 per cent, or thereabouts, of the club it did not already own, valuing United at £795.76 million on a price-to-earnings (P/E) ratio of around 19. Seven years on, and although the volume of shares to be listed is unknown – ceteris parabis – United might be reasonably be valued at more than £2.215 billion on the same multiplier. This is a reflection of the steep rise in earnings before tax and deductions under the Glazers’ stewardship.

The line drawn by the Glazer family between the price paid in 2005 and a 2012 paper valuation in excess of £2.5 billion is conveniently transparent. But all things are, of course, not equal and revisiting the takeover is illustrative, predominantly, of the steep premium paid by the Glazer family in 2005. It was a deal front-loaded with significant ‘goodwill’ – that is, the value place on intangible assets such as United’s ‘brand’.

In the intervening years the global financial outlook has deteriorated markedly, while sharply rising staff costs and uncertainly surrounding UEFA’s Financial Fair Play (FFP) regulations adds more than a little fog to any valuation even on the most generous projections of United’s future income.

US-based magazine Forbes uses a more pragmatic P/E multiplier of 12 in it’s 2012 list of “Soccer Team Valuations,” placing an approximate value on United of £1.39 billion. Even this may be generous. Forbes applies a multiplier of 8.7 to the structurally-unacquirable – and more profitable – Real Madrid, 13.6 on Barcelona, 13.1 on Arsenal and 10 on Chelsea. Perhaps a better guide still is the 10.3 multiplier at which an ailing Liverpool was sold to Fenway Sports Group in 2011.

Calculation of an IPO pricing is, as ever, part art as well as science. Elsewhere in New York the world’s most valuable company Apple is trading at P/E 14, and Google at 17.

There is almost no comparable sports franchise listed in New York, which ought to say something. However, stretching the ‘sports’ term to World Wrestling Entertainment, Inc. (WWE) yields an interesting comparison. In the same period as United’s last reported accounts WWE, on very similar earnings, yielded a market cap of around $1.39 billion (£894 million). The market considered the price a bubble, and WWE is today trading at less than half its previous share price.

Little wonder sceptics doubt the Glazers’ ability to list on NYSE at the price seemingly desired. The market is likely to reject the listing by under-subscribing the IPO, or much like the recent Facebook listing, the share price will tumble on open trading.

However, it is unlikely the Glazer family will get that far according to some observers. Independent United blogger and analyst Andy Green called the proposals “desperation” on the Glazers’ part in an interview with Reuters, Thursday.

“First it was Hong Kong, then Singapore and now New York,” said Green.

“The Glazers assumed they would get a high price in Asia and they haven’t – I’m not sure they will in the US either given there’s no tradition of listed sports clubs.”

Television Rights

That said the Glazer family will certainly cheer the Premier League’s new television rights deal struck with BSkyB and BT this week that will yield more than £3 billion between 2013 and 2016. It is a 70 per cent uplift in domestic media income, which alongside international rights still to be negotiated, could net United £20 to £30 million more annually in Premier League media rights.

Sky paid £2.28 billion for the rights to five of the seven available packages, which secured 116 live matches a season. BT acquired two packages for a total of £738 million, with the telco able to broadcast 38 matches per season.

The additional income, claims Premier League chief executive Richard Scudamore, will enable United and other English clubs to compete more effectively with Real Madrid and Barcelona who sell their broadcast rights individually.

“This will take our clubs up a notch closer to those clubs who benefit from the individual selling model, say in Spain,” Scudamore said.

“I hope this will keep our league as competitive as it can be, under a collective selling model, with the other leagues. We have just come off the back of a fantastic season and, yes, it has been good for us that we are in the market and selling something at the time when what we are displaying on the field, and therefore able to broadcast, is an attractive proposition.”

Attractive though the proposition may be, more than 20 years of Premier League history has taught that the symbiotic relationship between television income and players’ wages is almost perfectly correlatory. The television income bubble has not burst, but neither has players’ desire for ever more lucrative contracts been satiated.

Manhcester United wages and TV income

Source: Andy Green,

Perhaps, then, the real question with the IPO is not whether the Glazer family can get this one away, at the price they want, and with associated bond buy-back so heavily promised last time around, but what the strategy is post failure. It’s a scenario that, unlike the Premier League rights process, will bring little cheer to the American family.

Nor to United supporters concerned that the club should become competitive in the transfer market once again. After seven years of parsimony, it need not take a cynic to spot that dose of realism.


MS - June 14, 2012 Reply

All I can say is that I hope this does not go ahead at all, and that the Glazer’s fall flat on their faces in their efforts. I love my club Manchester United, but I don’t love the ball and chain the Glazer’s have put around the club, and shackled us for their own ultimate greedy gain. I am praying that the Glazer’s will fail big time, and that they will be forced to sell, and at market price so that people are not cheated, because the Glazer’s are appearing to be devious bastards at getting wealth at other people’s expense. Yeah I know probably most of the rich have done similar, but I am only focused on the Glazer’s at the moment, and I want to see them fall flat on their faces, and the sooner the better. If I am wrong, then someone will know doubt tell me why, but I don’t think I am wrong!

the kaizer - June 14, 2012 Reply

i hope it goes through so the debt can be cleared. thats the most important thing. and i agree the FFP rules are a waste of time. i am just hoping for a miracle that the glazers are willling to cut their lossesand sell or else

Trydent - June 14, 2012 Reply

Thank you ed for this comprehensive effort.It states the situation exactly and is the true reason for the lack of investment in our team.MS you and I are in total agreement. The present owners are vermin leeches that are just filth!The sooner these rats retreat to their sewer and drop United the better.Glazer scum are not needed,wanted or to be tolorated.I would not urinate on them if they were burning!

MS - June 14, 2012 Reply

By the way – I don’t think the FFP is going to be exactly enforced as it is meant to be, and I think a SALARY CAP on players wages would be a great relief for football clubs, and certainly would help genuine fans to be able to afford to go to games again. Player’s have become money orientated greedy bastards too. So I hope this particular gravy train crashes as well!

timbo - June 15, 2012 Reply

A salary cap would not work, as it would end up in the European courts as a restraint of trade. Don’t go by the American model, where the players and owners in most of their major sports work to collective bargaining agreements that allow for salary caps (except for baseball) in return for a specifically sized piece of the pie – in basketball it’s around 50%. FIFA and UEFA don’t brook agreements with player associations – footballers are cattle. The FFP is the closest they’ve come to some kind of attempt at financial restraint, and it’s chiefly designed to try and reign in sugar daddy financial moguls who buy clubs as playthings to throw money at, regardless of the fact that it’s all unsustainable. As straight businesses, Chelsea and City would have gone bankrupt long ago with the amount of debt they carry. It’s just the bottomless largess of the owners who keep them afloat. FFP failed at City, because the owner cynically found a loophole in the rules by siphoning the money to the club by paying outrageously over the top prices for advertising rights at the ground for his family’s airline.

Wakey - June 15, 2012 Reply

The other thing with Salary caps is of the sports that employ them in the states it’s been Football where it’s been least successful because it’s ultimately holding the league back. The image right benefits are only of use to players reaching the end of their career who can no longer justify their places in the top European sides with the majority of the other players in the league being English lower league quality.

It works in American Football, Ice Hockey and Baseball as those games really have limited appeal outside the US so the top players only have that market for the paydays.

Even if you could get a Salary cap through the courts with a Worldwide game like Football you would need it applied worldwide otherwise the players would drift to where the money is weakening the European leagues. Even FFP has the potential to do that

the kaizer - June 14, 2012 Reply

salary cap is illegal, and you could argue thats its unfair on the big clubs what i think is good is to put a percentage cap in proportion to revenues. maybe like 55%

ChrisW - June 14, 2012 Reply

This all depends on whether the Glazers need the cash or not (and they are so secretive about their private finances we can’t know the answer to that).

If they are floating the shares to raise cash for themselves, to prop up the rest of their business empire then this is very bad news, because the club will be left having to pay dividends to these new shareholders as well as paying debt interest.

If a lot of the money goes to pay down debt then this makes very little difference to us. We have just swapped interest payments for dividend payments and lost the tax advantages of the debt. It will probably be financially neutral for the club.

Either way, I bet they’ll make the club pay for the financing costs of the flotation, like they did with the bond. That will be tens of millions.

Alfonso Bedoya - June 14, 2012 Reply

I don’t pretend to know much about stock flotations and all this lark… but it seems to me that, the plan to sell only as many shares to raise money, without giving up any control… would be completely off putting to any serious investor… anyone who considers spending millions, wants a say in how their money is being used… and that’s the thing… I don’t think this whole idea was ever meant to interest the serious investor… I think the Glazers hope that a few million gullible fans will get all excited at the chance to own a few token shares…

Bah!… I don’t know fuck all about this shit… but every time I try to understand one of these new Glazer manoeuvres… I just end up even more pissed off, and sickened at these parasites.

MS - June 14, 2012 Reply

ChrisW – thanks for that bit of interesting information. Can I ask you if this happens and the club have to pay out dividends, does that mean that the Glazers will not get that portion of the dividends payed out to shareholders. In other words will the Glazer profit go down because they will have less shares, or doesn’t it work like that?

Wakey - June 14, 2012 Reply

What Glazer profit? They haven’t taken a dividend since even before the takeover (they passed on the last PLC dividend). They also passed on payouts Allowed under the terms of the bond issue

At the moment the bond holders (and before then the banks) are effectively the shareholders with the Interest basically being the dividends. The main difference is just that the interest is a static percentage so it doesn’t adjust based on financial performance like Dividends do (this can be either good or bad as you might be paying more in interest payments than you would in Dividends but it could be the other way round)

Removing the bonds would effectively force dividends to be offered to ALL the shareholders so while the Glazers may choose to keep passing on taking the dividend they could also take it

Ed - June 14, 2012 Reply

Wakey – yes, although of course the Glazers have borrowed money from the club, and the debt buyback is a pseudo dividend in that they’re using the asset’s profits to pay down the debt incurred in acquiring the asset. Classic LBO model of course.

king mob - June 14, 2012 Reply

though no financial expert, i get the impression this ipo is never going to happen. So there goes the hope of a greater transfer kitty. And then what? The real tragedy about the situation is the sense of powerlessness it engenders. We are not fans, we are seat fillers regardless of whether tourist or mancunian; we are purchasers of highly priced tat, purchasers of candy floss club subscription channels; lets face it, were all fucking mugs. No other club is funded like ours in world football. We are busted western capitalism personified. Our torrid europa campaign exposing the chasm in support between consumers and supporters. And the most frustrating thing is that we’ve nowhere seemingly to go. Our beloved manager has long since sold out; large elements of our support are either to thick or apathetic to accept the evidence of glazer enforced decline; the dark master of spin, smoke and mirrors and lies, that is gill expertly carries out his masters’ bidding. Where to go? Well, firstly lets rid ourselves of the internecine battles that scar our support. There’s never going to much in common between the butcher coated nihilists of the red issue gang and the progressive reformers of must aside from one thing: they all love united -though there going to have to trow teeth and back calls for a boycott. Only a broad church will rid us of pure evil. :

Alfonso Bedoya - June 14, 2012 Reply

@king mob… Nah Mate… even here, on this most anarchic of United forums, I’ve all but given up banging my head against that wall.

There are plenty of Glazer hating, United supporters… but for every one of those… there is a dozen, who couldn’t care less… just want to go watch the match, and “don’t bug me with your miserable conspiracy shite, we’re still competitive, and only finished second on goal difference to a billion quids worth of mercenary filth… in Fergie we trust”… fuck me…

And as long as those saps are willing to pay the Glazers bills for them, the parasites will be free to do as they please.

Denton Davey - June 14, 2012 Reply

Assume that the Glazers have to sell – who would buy ? How many “potential buyers” are out there with at least U$ 2,000,000,000 in spare change, clinking in their pockets ? The Qataris bought PSG – so that’s one set of likely lads out of the running; who else ?

My reckoning is that the Glazers don’t have to sell and that their “regime” has been successful on and off the field so it’s probably a case of “the devil you know” – at least as long as they can keep SAF alive and ticking. When he retires, then it’s a whole new ball-game. OR, MAYBE NOT.

king mob - June 14, 2012 Reply

yes alfonso, i completely agree. I’ve always kidded myself that our support is a cut above; an extension of manchester’s radical past: marx and engels sat in central libary, the wilful quixoticism of factory records etc… And there’s sections of our support who stay loyal to the roots of our club and city; but i fear them to be a minority. And yes there’s a unpleasent strain of elitism to this statement. And despite such pretensions i renewed in 2005 and didn’t leave for gigg lane to enjoy punk football and moral purity; but there you go, complex business this football supporting lark. Think your right mate, time to step away from the wall.

marlon - June 14, 2012 Reply

If this goes through, there’s no way I see United getting a significant proportion of the money. Surely if it was going toward debt repayment they would’ve said so – it would appease some fans (not that they give a shit) and surely make United a more attractive investment option. I think they’ll bleed us dry, hide all their money in the Cayman Islands and let us go bankrupt.

Alfonso Bedoya - June 14, 2012 Reply

Commenter said:
What Glazer profit? They haven’t taken a dividend since even before the takeover (they passed on the last PLC dividend). They also passed on payouts Allowed under the terms of the bond issue

At the moment the bond holders (and before then the banks) are effectively the shareholders with the Interest basically being the dividends. The main difference is just that the interest is a static percentage so it doesn’t adjust based on financial performance like Dividends do (this can be either good or bad as you might be paying more in interest payments than you would in Dividends but it could be the other way round)

Removing the bonds would effectively force dividends to be offered to ALL the shareholders so while the Glazers may choose to keep passing on taking the dividend they could also take it

What the fuck is your point exactly?

Are you saying the Glazers are swell folks, cause they don’t dip into the till? Because that’s just bullshit!

Or are you just arguing a pedantic bit of unimportant fluff????

Greenhoffthegreat - June 14, 2012 Reply

ED -Correct me if Im wrong, but wouldnt the Glazers have to outline in share documents what they would be using IPO money for.? If they used the money for anything else not stated in the document/ brochure , e.g. they didnt wind down most of the debt as said they would, or diverted the money elsewhere ,they could be sued for fraud.

Ed - June 15, 2012 Reply

Greenhoffthegreat – well they’ll certainly have to outline any debt reduction strategy because it’ll effect the below-EBITDA performance, and that’s clearly what will drive dividends. Debt reduction will also affect the implied enterprise value.

the kaizer - June 14, 2012 Reply

the bottom line is we are fucked. what even riles me more than the glazers are their apologists defending their every action. i have been a season ticket holder for over ten years and im sorry to say im at breaking point. i cant take it anymore. these people have almost drained my apetite for the game. some have suggested i move to fc united. thats not an option. i cant support another team. these people are all that is wrong with the club. and past glazer history has suggested the glazers are willing to drag the club down with them rather than bowing to the fans. WE ARE FUCKED. king mob was right. we are fucking mugs. these guys have taken us for a ride. and not one penny of their money has been spent on buying the club or paying the debt. FOR FUCK SAKE HOW DID THAT HAPPEN

the kaizer - June 14, 2012 Reply

i meant all that is wrong with the world

the kaizer - June 15, 2012 Reply

can anyone speculate how much dividend payouts would be taken by both shareholders and glazers if the debt is cleared. my guess and understanding(only a yr 2 econs student) is that there is a legal limit that can be taken out. in no way can it be compared to our current interest payments. surely?

ChrisW - June 15, 2012 Reply

If the club is worth £1.2 billion then a 3% dividend yield translates to annual dividend payment of £36m. So that’s in the same ballpark as the £40m we spend on interest.

Also we are currently taxed on profit after interest payments. I believe that tax has to be paid on profit before dividend payments. So for tax purposes we will have bigger reported profits if we switch from paying debt interest to paying dividends, and thus we will pay more tax.

So we could even be worse off if we get rid of the debt. People seem fixated on the debt but the fact is, whoever the owners are we are going to be paying money to them one way or another (unless we can find a billionaire fan who willl buy the club and expect nothing in return).

Ed - June 15, 2012 Reply

ChrisW – yield might be even ‘worse’ than that (depending on whether you’re a fan or an investor!!). S&P 500’s current average dividend yield is about 1.96% for guidance… of course with the dual track listing the Glazers would be expected to release a bigger dividend. It’s hard to tell right now whether the IPO will be financially neutral or bad from a fans points of view, assuming fans want more cash released for the transfer market / wages etc.

Previous PLC paid nothing like that of course – total dividends between 1991 and 2005 – circa £62m.

MS - June 15, 2012 Reply

Wakey, I understood that the Glazers were withdrawing million per year for themselves, their sons, and grandsons in loans etc. I wonder if indeed they are interest free loans, and why they have to heavily borrow from the club, when as owners the profit is there for their own use anyway. They have so much debt that the club is paying anyway with the bonds interest, so why are they taking personal loans from club money for their family? I don’t understand Wakey how it is loans when they own the club lock stock and barrell don’t they? I am sorry if I am being a bit dense here, but I really don’t understand the whole economic thing, hence the very basic questions!

Wakey - June 15, 2012 Reply

Loans to directors when a business has a cash surplus isn’t that unusual as its win win. The loan is at a rate below what usual funding sources would charge and the business gets a return greater than what it would get from the cash just sitting in the bank.

It’s not beyond possibility that the Glazer kids have got the loans interest free but Malcom Glazer doesn’t strike me as someone who would let sentiment get in the way of business. Infact it may even have been mentioned that interest was being charged in one of the financial documents they released (the bond one perhaps). I do have a recollection of reading it but maybe it was an article on another business

MS - June 15, 2012 Reply

Oh right, thanks for taking time to explain this Wakey, much appreciated!

Greenhoffthegreat - June 15, 2012 Reply

@ Ed. Thanks for that . On another note ,I remember how the Glazers last year pledged ,with another family ,funds to build a new sports(baseball?) stadium for Tulane University in Louisiana. If the Glazers are not going to use any of Uniteds money that they take out for themselves in the form of consultation / management fees etc ,they certainly have access to money from elsewhere(,possibly their own as they like their American football), and be sure its not going to be debt used for any stadium build.(My own support for United goes back to the 70s with watching United lose in the 76 cup final at 3 o clock morning here in New Zealand.)If we go down because of these leeches, I hope we do the following before that; A) complete domestic treble of league, league cup and FA cup and B)win Europa league/UEFA cup to complete all of our UEFA trophies. Soon after ,the Glazers are in court for massive fraud , financial irregularity etc, and go to jail for 50 years…

sidney - June 15, 2012 Reply

If/when the eurozone goes into meltdown (possibly a couple of hours from now according to Spain’s foreign minister) then I’ll probably be indifferent as the arse falls out of United and the Premier League. Infact I’d quite like to see it happen

Anantax - June 15, 2012 Reply

Call me a pessimist but its absolutely the wrong time to be doing an IPO (unless you’re a Facebook).

I am at the far end of the world but PE multiples of solid companies going on IPO here is around 7. Which i guess is around what the article said WWE is worth now….the appetite is simply not there

Not to mention that ManuUtd, though more global than most, will still be dependent on Europe and UK for a big chunk of its revenues (gate, merchandise). So any Europe meltdown will significantly hurt future earnings

Dont get me wrong – I fervently hope we can do a succeasful IPO so we can deleverage, and therefore have the financial flexibility to compete in the transfer market again, but I just don’t see good valuations on the short term horizon

Shouldve IPOed 18 months ago….

Alfonso Bedoya - June 15, 2012 Reply

Ahhh come on Mate… don’t be so naive.
What makes you think that a successful flotation would result in United being given more money to spend?
The Glazers aren’t doing this so they can invest in the club… they’ve got their own agenda, and United is just the means, not the end.
I could see them throwing United a decent, one off transfer pot, as a sort of, “well done you suckers, here have a biscuit”, to the fans… but then it’ll be back to minimal investment, and a strict wage structure.
The rest of the money will disappear into the ether, never to be seen again… in fact, I’d be willing to bet that they wouldn’t even clear all of the debt… just enough to significantly lighten the drain on annual profits… but really, why bother???… the fans will continue to service it, and if it was reduced by say, half, then the yearly bill would be very manageable, and still leave them with a very large profit to wallow in… pigs that they are…

“Badges, to god-damned hell with badges! We have no badges. In fact, we don’t need badges. I don’t have to show you any stinking badges, you god-damned cabrón and ching’ tu madre! Come out from that shit-hole of yours. I have to speak to you.”

dws - June 15, 2012 Reply

When will United fans realise that if they start boycotting certain aspects of the club, merchandising/buying food inside ground and so on, this will have an immediate effect on the Glazers. They have us by the balls and we follow like sheep giving them our hard earned cash.By all means support our beloved team but give the glazers sweet fuck all. So simple, so obvious. The glazers treat us like mugs and quite frankly that is what we are !

Larry White - June 15, 2012 Reply

Only gone and burnt my Pasta Bake.

sheesh - June 17, 2012 Reply

Morgan Stanley refuse to participate in IPO:

If you can’t read the above article, go on to Google’s ‘News’ section and do a search under “Manchester United IPO valuation in doubt”. You should be able to access the FT article that way.

Alfonso Bedoya - June 17, 2012 Reply

Yeah, I read about that elsewhere… basically they all agree… United is a valuable club… but the Glazers are just too greedy in their valuation of it… no surprise… what a family.

Can you imagine what it was like around the dinner table, when they were kids???

It was probably all slobber and drool, and baring of teeth and growling, and stabbing forks… fuckin hell… it gives me an image of a pack of vampires fighting over a bag of offal.

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