David Conn: Glazer bid highlights inadequacies of plc model of club structure and ownership

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The Independent Football

There cannot be many Manchester United fans - whether they grew up on Best, Law and Charlton; Coppell, Hill and Pearson, or Giggs, Scholes and Van Nistelrooy - who ever imagined their passion for the club would drag them into the heart-sinking minutiae of leveraged buy-ins, preference stock or acquisition debt. Yet as United's board huddles reluctantly over the latest unwanted proposals from the American predator, Malcolm Glazer, the fans, led by Shareholders United and the Independent Manchester United Supporters Association, have boldly waded into the nuts and bolts of Glazer's takeover intentions, an education which has left them only more implacably opposed to his takeover.

The signs are that the board will not, this time round, move significantly from the statement they made in February, when they said Glazer's plans were "aggressive", potentially "damaging" and that they were "unlikely" to approve any bid. Fans' opposition to Glazer, echoed by the board, rallies most fervently around the principle that their club is "Not for Sale" to a single raider, but it also coalesces around the alarming details of his plans.

Glazer's revised proposals (no firm bid has yet been made) are understood to propose him buying United with £300m borrowed from a range of financial institutions headed by the merchant bank JP Morgan, plus £250m in preference shares. The fans' groups have been keen to hammer home, for starters, that this is no Abramovich-style takeover. United fans would oppose that, too, because it is still ownership by one mysterious outsider, but they would have a harder job because Abramovich bought Chelsea outright with his own money, and has since provided - albeit with loans - massive new cash to tempt a manager, team and even the chief executive he wants to buy Premier League domination.

Glazer, however, is not providing new money for United to spend - bar a reported sliver, £20m, which is still borrowed. He is proposing to borrow massively just to buy the club for himself. This is the devil in the plan: Glazer's proposal is conditional on him acquiring 75 per cent of United's shares, because he will then be able to take United off the Stock Exchange. Then, he can transfer his own £300m debt to United. So the club which has always been regarded as the model, if not the most beloved, football plc, becoming relentlessly successful without ever borrowing, will suddenly be loaded with £300m of debt purely so Malcolm Glazer can make himself its owner.

The £250m preference shares, in this revised proposal, are intended to appear more attractive than Glazer raising the full £550m with debt, but the board has not been bowled over by its merits and Shareholders United warn that it is an illusory difference. The preference shares would be bought by financial institutions, which would expect to be paid back quickly. This could mean the club paying a special, expensive dividend, typically 10 to 12 per cent, every year to the preference shareholders, or having to buy them out completely. It is, in essence, debt dressed up, another £250m borrowed - again, just to make Glazer the owner.

This, borrowing money to take over a company, then loading the company with that same debt, is a leveraged buy-in. "They were quite the rage in the 1980s in America," explained Brian Sturgess, a City analyst in that period and now the publisher of the journal Soccer Investor. "Many ended in tears. They usually worked only if the new owners found ways to cut costs to the bone. I can't see this bringing any benefit to United."

That is the nub of the case against Glazer. Suddenly United go from a debt-free, profit-making company able to fund with cash Old Trafford's extension to 75,000 capacity, to become one with £550m debt, five times more than Leeds, football's most dramatic insolvent collapse. United is generally recognised to be well-run, making a profit last year of £28m, way above any other club, so there are no obvious costs to be slashed: selling any player makes the club less successful and so less lucrative.

The logical conclusion, then, is that Glazer will look to squeeze all possible income out of United until its pips squeak. The fans' warnings of steepling ticket prices are not scare-mongering; that is one of the few areas Glazer will see money to milk. At the Tampa Bay Buccaneers, his NFL franchise, ticket prices are reported to have risen every year since he took over in 1991; at United he may have to raise the price of everything: car parking, programmes, merchandise, pies, chips, mushy peas, the lot.

IMUSA was founded originally in 1995 partly to protest the doubling of season ticket prices, yet now, comparatively, United are one of the more reasonable clubs, their prices lower than the £40 to £50 commonly charged at Chelsea and Arsenal. United's board are not simply being charitable; they argue this is an informed pricing policy, based on their fans' ability and willingness to pay, which keeps the ground full. £25 to £30 is still expensive enough, and United share the Premiership's widespread scarcity of fans in the 16 to 25 age group.

Aside from that, there are relatively few areas for Glazer to exploit - United's £169m turnover last year comprised match-day revenue (36 per cent), media (37 per cent), and commercial (27 per cent).

On media rights, Glazer is assumed to have his eye on United breaking out, or at least claiming more, of the television deal done by the Premier League on behalf of all the clubs together. The top clubs get the lion's - or the fat cat's - share, but the big clubs could conceivably make more if they sell rights to their matches individually. United did flirt with this idea when the TV rights were challenged by the European Commission, but quickly returned to the collective deal, persuaded that it earns more in total and enables some sharing of money to retain a semblance of a competitive league. Glazer's business plan might project that United can reap millions more from TV by breaking away, but that is speculative, its effect on the Premier League damaging, and it cannot happen until the current deal runs out in two years.

That leaves commercial revenues, yet United's sponsorship deals with Nike, Vodafone and Budweiser have always been regarded by other clubs as frighteningly lucrative. Glazer's camp believes more money is out there, but it is difficult to see which corporations will pay so much more that Glazer will be able to chip away at his mountain of debt, and naming the stadium would be disastrously unpopular. The idea that untold billions are available from the masses in the Far and Middle East is another of football's crock-of-gold mirages, as United know; they have closed the overseas shops they opened with great fanfare in Peter Kenyon's time as chief executive.

This overall assessment lies behind the United board's February statement that Glazer's "business plan assumptions are aggressive" - read: he won't make the money he thinks - and: "the direct and indirect financial strain on the business could be damaging." Although no smoke has yet puffed out of the Old Trafford conclave, it is very unlikely that view has changed.

One of the board's considerations if, as can be assumed, they want to reject any bid, is how to frame it if Glazer is prepared to pay £3 for each share, which would give the shareholders a profit. To survive legally, they will interpret their duty as owing to a wider constituency; the employees, the company long term, and other stakeholders, not merely shareholders' wallets.

"We believe the club should have a diverse ownership, substantially involving supporters," Nick Towle, Shareholders United's chairman, himself a corporate lawyer, told me. "But this bid could anyway be catastrophic and put United in jeopardy."

The interminable Glazer battle has begun, finally, to concentrate football minds on how wrong it is for football clubs to be plcs, a view held by many fans long before recent converts like Greg Dyke and, now apparently, Kenyon himself. Spanish clubs, including Real Madrid and Barcelona, are owned by their members, the fans. Here, Supporters Direct is looking at the Government's newly established "Community Interest Companies" as a potential basis for our clubs; they would reinvest their profits, limit the amounts doled out to shareholders, and protect the assets from being stripped. Perhaps, when the Manchester United directors finally manage to swat Glazer away, they might help to develop a more enlightened structure for our great sporting institutions, making them true to the passion and loyalty which fans still, stubbornly and at times perversely, feel for them.