Jeremy Warner's Outlook: Glazer won't be so easy to reject this time

G7 divided as ever; Rentokil Initial
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The Independent Online

The last time Malcolm Glazer made a bid for Manchester United, the whole thing collapsed in disarray after Mr Glazer went through with his threat to remove three directors from the board. This was understandably regarded as a declaration of war by his main financial backer, JP Morgan, which would only bankroll the bid it could be done on a friendly, agreed basis. JP Morgan promptly resigned and the bid was dead in the water.

The last time Malcolm Glazer made a bid for Manchester United, the whole thing collapsed in disarray after Mr Glazer went through with his threat to remove three directors from the board. This was understandably regarded as a declaration of war by his main financial backer, JP Morgan, which would only bankroll the bid it could be done on a friendly, agreed basis. JP Morgan promptly resigned and the bid was dead in the water.

Still, where there's a fee there's a way, and JP Morgan is now fully back on side with a new offer it hopes will be harder for the the board to reject. The last bid was turned down because it was highly leveraged. All other things being equal, the price was probably high enough to be recommended, but the financing meant taking into account the interests of other stakeholders, notably the fans. Throughout its recent history, United has had little if any debt, which arguably allows it to keep gate prices lower than is generally the case with other top Premiership teams, and leaves plenty of money for player acquisition. This happy disposition might have been jeopardised by a takeover largely financed by debt.

We know little about the new offer thus far except that it is pitched at the same level as last time and is said to have a lot less debt. Yet debt is in the end only a form of security, and if there are other instruments Mr Glazer is using which carry financial obligations, such as preference shares, directors might reasonably wonder if there is really any difference. The last bid was about £500m debt financed. The latest proposals carry a minimum £250m of preference share finance, which would be fully redeemed after two or three years. Not so much debt then, but still, in effect, quite a bit.

What's more, private equity takeovers only work if they can gain 100 per cent ownership of the company. Financiers won't provide the backing if there are other calls - say a small minority shareholding - on the company's assets. That's why private equity takeovers are nearly always conditional on board agreement and on the acceptance of more than 90 per cent of the equity, which allows for compulsory purchase of the rest.

Mr Glazer can probably count on the support of at least 83 per cent of the share capital, including his own near 30 per cent stake. John Magnier and JP McManus are almost certainly sellers at Mr Glazer's mooted price. There may be other loose holders that he can rely on too. The fly in the ointment, as far as the Tampa Bay sports tycoon is concerned, are the fans, who may collectively own most of the rest. Many of these "supporter" shareholders are not in it for the money, only for love of the game and the club. Quite a few of them won't accept even if the board recommends. Directors face a tough call.

G7 divided as ever

Gordon Brown is a politician, so he's bound to put the most positive gloss he can on international reaction to his various initiatives on African poverty. There he was at the World Economic Forum in Davos a week ago claiming that Germany and France had swung full square behind his international finance facility (IFF) for the doubling of aid to Africa. The G7 meeting in London last weekend was meanwhile hailed by the Chancellor as another breakthrough that would go down in history as the "100 per cent debt write-off summit".

The reality, I regret to say, is a good deal less upbeat. There's no consensus on debt relief, and there is no agreement on the IFF. Germany has so far backed only a quite limited pilot version of the IFF that would roll out an extended vaccination programme. It remains concerned about how a wider IFF, which seeks to boost short-term aid by borrowing against future aid budgets, would ultimately be paid for. France, which has backed the IFF in principle, has expressed similar concerns. Jacques Chirac's proposed solution - an international tax on airline tickets, emissions and global capital flows - would be vehemently opposed by the US, while even Britain has doubts about the practicality of such a tax and the sovereignty issues it raises.

There is more momentum on debt relief, but even here there are deep divisions. Japan favours only selective debt relief, America backs the write-off of World Bank loans but has doubts about the Chancellor's plan to finance this out of sales or revaluations of IMF gold. The US in any case has its own goals and plans for addressing African policy and as with much else, seems generally disinclined to engage in multilateral efforts.

The upshot is that there's a country mile to go before Britain can proclaim the breakthrough it hopes to achieve in its presidency year for the G8. I take no pleasure in pointing out the chasm that still exists between the Chancellor's aspirations and the underlying reality. This is a deeply depressing state of affairs, for while the world's wealthiest nations squabble over how poverty should be tackled, more will die who could have been saved.

Yet these divisions are just the subtext for much wider concerns about the giving of aid to the Third World. In large parts of sub-saharan Africa the problem is not so much lack of capital as bad and corrupt government. Aid and debt relief delivered to such regimes would be largely money down the drain and, if it helped perpetuate illegitimate government, then it could be seen as positively harmful.

First things first, Mr Brown would say. Let's get agreement for a Marshall plan for Africa first. We can argue about how it is spent, and under what conditions, later on. Well maybe, but if it wasn't already apparent, it certainly is after last weekend's antics: multilateral efforts to help Africa remain as much of an uphill struggle as ever, notwithstanding the galvanising effect of the tsunami.

Rentokil Initial

It is hard to know whether Doug Flynn is a good, bad or indifferent appointment as Rentokil Initial's new chief executive. Brian McGowan, the chairman, has all too obviously been struggling to fill the post - it is now six months since he sacked Mr Flynn's predecessor, James Wilde - but it would be unfair and wrong to regard Mr Flynn as a desperate, scraping the bottom of the barrel type of appointment.

He comes with a reasonably impressive track record, first at News Corp where he was eventually managing director of the group's UK newspapers, and then the media buying group Aegis. Yet though his early career was spent at ICI, it is a record won primarily in the media business. He would have been much more obviously suited to the CEO's shoes at the Australian newspaper group John Fairfax, a job he recently turned down. How he will fare as a rat-catcher is anyone's guess.

Mr Flynn's calculation must be that the worst of the bad news at Rentokil is over and that the turnaround from here on in will be relatively straightforward. Rick Haythornthwaite thought the same thing when he joined Invensys. Instead it has just been one refinancing after another and still the business is struggling. The history of companies built on the back of fast fire acquisition suggests strongly that there may be more pain to come at Rentokil before things start to get noticeably better.

Still, whatever doubts there may be about Mr Flynn, they are as nothing compared with his replacement at Aegis, Robert Lerwill. He's been a non-executive director of Aegis for some years now and, in a previous incarnation, he was finance director of WPP, so on the face of it he is more obviously well qualified for the job than Mr Flynn is for Rentokil. Yet as finance director of Cable & Wireless, his more recent track record has looked distinctly unimpressive.

At C&W he was associated with a string of value-destroying acquisitions that eventually resulted in liabilities so great that C&W had to put its US business into Chapter 11 to escape them. Every dog deserves a second chance, but some will see his appointment as tantamount to a vacuum in management at the top. If he's not careful, it may not be long before he's working for his old employer again, Sir Martin Sorrell's WPP.

jeremy.warner@independent.co.uk

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