The Red Knights consortium of super-rich Manchester United supporters will make a formal offer for the club to the Glazer family before the start of the FIFA World Cup on 11 June. The expected £1.2 billion offer, which will include the £504 million bond, will test the Glazer family’s insistence that the club is not for sale this summer.
The group, informally led by Goldman Sachs’ Jim O’Neil, met this week to agree the terms of the bid, including opening offer, equity strategy and financing.
Although the terms of the formal offer for the club have not been released few analysts expect the Knights to offer the full bid price in cash.
The terms of the bond require that investors are offered 101 per cent of the face value on any ownership change. The Knights will almost certainly ask investors to wave this right, with the bond having risen in value on the back of takeover speculation.
Given the likely terms of the bid – even if the Glazer family accepts – United will retain more than £500 million in bond debt, which accrues around eight per cent interest per year. It is not yet known whether any further leverage is required in the Knights’ bid.
However, the Knights will likely seek to refinance the bond as the credit market loosens over the next couple of years and as the terms of the bond allow.
After all the bond is designed solely to allow the Glazer family to remove cash from United’s bank account in order to pay down the so-called Payment in Kind (PiK) debt for which the Americans are ultimately responsible. The bond had the effect of increasing average interest rates on the club’s debt from below three per cent to above eight.
In the lead up to the expected bid the Manchester United Supporters Association (MUST) has asked fans for their input, with a Knights promise to “put supporters at the heart of the club” well established.
“The first few steps are clear,” said a MUST email today.
“We need to get rid of the Glazers. Then we need to free United from the burden of the toxic high-interest debt their takeover saddled us with.
“Supporters will then be given the chance to share in the ownership of the club we all love and have a real say in setting the priorities for the new United.”
The organisation asks supporters how they want to run the club, including potentially expanding Old Trafford, additional transfer market spending and reducing ticket prices.
The arrangement for a supporters’ stake in the club is not yet clear, although an earlier report that the Knights will ask fans for up to £200 million is surely wide of the mark. It is far more likely that supporters will have the right to buy shares in the club over time, building up a significant stake in the club.
This is moot of course until the Glazer family accepts a bid, with noises coming out of Florida suggesting any formal bid will be turned down.
It could be a long summer ahead.
The Guardian and The Times report that the Glazer family turned down an offer of £1.5 billion late last year from an unnamed Middle East bidder. The news, which should be taken with a very large pinch of salt as other supposed bids from mysterious investors were leaked by Old Trafford sources, will cast a cloud over the Knights’ plans.
The papers report Glazer family sources as wanting to run United “for a decade” and will not be persuaded to sell at any price. More realistically the reports should be taken as the first round in a drawn out negotiation process that may last all summer.