Jeremy Warner's Outlook: Glazer takes aim, but can he score at United?

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Old Trafford might be the Theatre of Dreams but that perennial bid story has finally become a reality. Well, almost.

Old Trafford might be the Theatre of Dreams but that perennial bid story has finally become a reality. Well, almost. Yesterday's Stock Exchange announcement from Manchester United holds out the prospect of a decently priced bid only to snatch it away, as if a winning score is put in jeopardy by a last-minute penalty. The preliminary approach regarding a possible offer contains a number of significant conditions on which United is seeking clarification. That means it is unclear whether any bid will be made.

Nor does the statement mention where the offer has come from, although it is certain almost beyond doubt that the source is Malcolm Glazer, the US sports tycoon who has been stalking the club for more than a year. Mr Glazer may just be capable of succeeding where Rupert Murdoch failed five years ago and bagging the world's biggest and most famous football club. But don't put your replica shirt on it.

He starts with a 19 per cent shareholding, but it is uphill from there on. For one thing, he does not appear to have spoken yet to United's biggest shareholders, the Irish horseracing duo of Magnier and McManus, who hold a 29 per cent stake and therefore the key to Old Trafford. For another, he is likely to face the implacable opposition of fans, who will rightly worry that a highly leveraged bid for United from across the pond would leave the club without the firepower to enter the transfer market.

And then, there is the question of price. At a mooted 300p-a-share, it is hard to see how Mr Glazer could make his money back and keep the banks happy. He may have to sell a slice of his present club, Tampa Bay Buccaneers, to finance a tilt at United but right now its currency is depreciating fast, having lost the first four matches of the American football season.

Mr Glazer is not the sort to buy trophy assets for the sake of it and, although he has made a pile of money over the years, leveraging the Manchester United brand into a US market which remains stubbornly resistant to the charms of soccer, would test even his business skills to the limit. As others have discovered, between the American football, baseball, basketball and ice hockey, there's simply not enough time to force another sport into the national sport TV schedules.

The vicissitudes of soccer, and the enormous earning power of the top players, make it a business unsuited to public ownership. Only those with money to burn, like Chelsea's new owner, or loyalty to express, like United's fans, should dabble. There again, there is no fool like an old fool and, at 76, Mr Glazer may just reckon it's worth a shot.

BP's oil gusher

It is still too early to say for sure whether BP did the right thing in agreeing to invest nearly $8bn in Russian oil, but it is beginning to look that way. Last week, a distinguished group of former statesmen wrote an open letter to the world's press complaining about the advance of authoritarianism in Putin's Russia. It would not have made encouraging reading for BP's chief executive, Lord Browne of Madingley. There has always been a strong moral case against companies investing in countries governed by dictatorial regimes with a poor record on human rights. The business case is more arguable, the main risks being that of sequestration or consumer boycott.

However, for big natural resource companies, there is often little option. For some reason, many of the world's best deposits are placed slap bang in the middle of its worst trouble spots. For trouble shooting big oil, political and economic instability comes with the territory. The choice is thus one of the lesser of several evils. In opting for Russia, BP seems to have chosen relatively well. Shell's decision to go instead for Nigeria looks much more high risk by comparison.

Was Yukos a one off, or did President Putin intend to go further in persecuting the oil oligarchs and seizing their assets back for the state? No one but Mr Putin and his closest allies know the answer, but what is clear is that Mr Putin was so horrified by the reaction - an immediate and substantial flight of capital - and the high profile the whole Khodorkovsky affair assumed in the West that he wouldn't dare do the same thing again. So long as the oligarchs and their foreign investors stay out of politics, they look safe enough. In the meantime, the high oil price is fuelling an economic renaissance in Russia which should in time provide reasonably sound foundations for more more dependable rule of law.

State sequestration is one thing. The possibility of confiscation by partners or others poses a whole set of further risks. Yet despite the odd wobble, so far so good. Russia was a key component in the 11 per cent year on year increase in oil production BP was able to report yesterday for the third quarter. By making the Russian investment payable in installments, BP has also wisely ensured that a substantial proportion of it will be paid off from the profits it generates by the time the final installment is made. Oil at $50 a barrel is already making what at the time looked a relatively expensive and high risk investment seem one of the most astute gambles of recent corporate history.

BP shares have risen strongly over the past year, but not nearly as strongly as the oil price itself, suggesting some degree of scepticism that today's benign environment for the oil majors is even remotely sustainable. Even so, it seems doubtful that the share price yet properly reflects the cash cow that BP has become. At the present rate of share buy-backs, BP would repurchase its entire capital within 25 years. Nobody knows the world will look like in 25 years, but it is as good a bet as any that oil will still be the main driver of economic activity and BP will remain securely placed at the top of its industry.

Tory tax cutting

The Tories are on fertile ground in putting tax at the centre of their strategy for the next election. They were on a hiding to nothing in attempting to move into traditional Labour territory by promising more and better public services. Outside the rhetoric, Conservative Party leaders were becoming indistinguishable from their Government counterparts. Their main idea for paying for improved front line services - by cutting out waste in the civil service - has simply been stolen from them and built into the Chancellor's plans.

To stand any chance at all against a Government which even the debacle of Iraq has failed significantly to damage, the Conservative Party has to provide an ideological alternative. This is best achieved by unashamedly making the Tories a party of low taxation. Both Oliver Letwin, the shadow Chancellor, and his leader, Michael Howard, are understandably wary of making any promises at this stage for fear of not being able to deliver. The last Conservative Prime Minister, John Major, also promised tax cuts but in the face of a severe recession, could give us only tax rises.

The difference is that Mr Howard has nothing to lose. He gains little if any credit for being so cautious. With the economy still healthy and the lies peddled over war in Iraq fast becoming just another distant memory, Labour's only apparent achilles heel is the certain knowledge that taxes will rise, possibly quite steeply, during a third term. It won't help much, mind. The die is already cast for the next general election.

Yet it might provide the foundation for a revival in Tory fortunes. Higher rates of taxation take time to damage competitiveness and economic performance, nor is the connection between the two fully appreciated until the damage has been done. But happen it eventually will, and when it does, Middle England will rise up in rebellion against the administration that allowed it. The tipping point is already quite close - the point at which further rises in taxation become counter productive by damaging economic activity, thereby reducing the potential size of the tax base and making everyone poorer. To succeed, the Tories must establish a detailed tax cutting agenda, and then wait for the pendulum to swing.

jeremy.warner@independent.co.uk

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