The Glazer family are considering the sale of up to 30 per cent of Manchester United to raise £600m which they may reinvest in the club or use to pay off the huge debts they incurred in buying it.
A number of financial sources disclosed yesterday that United are pursuing an IPO (Initial Public Offering) on the Singapore Stock Exchange – a move which would make the club publicly accountable in a way it has not been since the turbulent final days of the old plc, which the Glazers took private in 2005 by buying out John Magnier and J P McManus.
The decision to give up private ownership will expose their finances to greater public scrutiny, after the relative peace of the past six years which Sir Alex Ferguson has taken great delight in – having fallen out so spectacularly with the Irishmen. A detailed prospectus will accompany the IPO and United will be required to provide a far more extensive picture of their finances than the two-page statements which have become the norm since the Glazers' takeover.
The decision to launch in Singapore will raise eyebrows, as it invites the prospect of one of the most distinguished English clubs being 70 to 75 per cent owned by Americans and 25 to 30 per cent by Asians. The Singapore market is more difficult for British investors to access, which is likely to be why United have targeted it rather than the more open London Stock Exchange. The Premier League will put new shareholders through their "fit and proper person test" if they hold a 10 per cent stake or more.
United supporters may suspect that the Glazers want to raise money to pay off some of their own debts relating to the ownership of the club, since no explanation has ever been given as to how the family managed to pay off £220m worth of payment-in-kind notes last year. But it is highly unlikely that money raised by the IPO would not be used to pay down the club's own debt and free it to focus on its development as a business. The club spends about £45m a year to service a £500m bond and if that burden can be removed by the float – expected by the end of the year – the Glazers' move would appear to be a positive one for United and Ferguson.
The United manager has spent heavily this summer, with £50m going out on Phil Jones, Ashley Young and David de Gea, but the debt payments are a significant consideration for the business, despite the club's insistence that a substantial war chest has been available since Cristiano Ronaldo's £80m departure in 2009.
The most likely structure of the IPO would limit shareholdings to fund managers and institutional investors, rather than individuals. But whatever its composition, there will be shareholder pressure to use money raised to pay down the club's debt and increase the prospect of a dividend – as well as supporter pressure to use the IPO to make more funds available to Ferguson for his squad.
Though an IPO would effectively return United to plc status, the Glazers' majority shareholding prevents any single new investor assuming a position of power. That means it will not presage the kind of public battles which at the height of the war between Ferguson and the Irishmen over the stud rights to the horse Rock of Gibraltar, saw the businessmen's Cubic Expression – 28.9 per cent owners in United – deliver its infamous "99 questions" letter to the board and allow its disclosure to the national press.
The IPO had been expected on the $2.7trn Hong Kong Stock Exchange but Singapore's $600m exchange is likely to have been selected because of its less exacting demands. Hong Kong requires that new companies are profitable which United, after debt, is not. The club's parent company, Red Football Joint Venture, announced a record £104.7m loss in March because of costs related to swapping a long-term bank loan for the dollar and sterling bond last year and because of lower income from player sales.
If the debt burden can be removed, United's finances can race even further ahead. The Glazers' commercial operation, led by former J P Morgan banker Edward Woodward, has secured global sponsorship and licensing agreements which have led to annual revenue doubling to about £300m in six years. Uefa also said yesterday that United's £53.2m share of last season's Champions League prize money was more than any other club received, despite the club's defeat in the final. Winners Barcelona earned only £51m because broadcast deals which are factored into the payout were worth less in Spain than England.
The Credit Suisse Group is understood to be working on the IPO. United yesterday declined to discuss the issue, stating that it does not comment on speculation.Reuse content