If the Glazer family – owners of the Barclays Premier League side popularly known as the ‘Red Devils’ – get their wish, this Manchester-based football club could soon become a wholly-owned subsidiary of a holding company based in the Cayman Islands.
This re-organisation is part of a bigger plan for the indebted club which plans to hold an initial public offering (IPO) of stock and become a listed company on the New York Stock Exchange; and in the process become the first team to ‘go public’ on the NYSE in a decade.
No Luck in Singapore!
With no luck with its IPO proposal of US$1billion in Singapore, the American owners of the ‘Red Devils’ are now looking across the Atlantic for new investors in the franchise. Banking on their belief that the ‘ManU’ brand is a global franchise and its ranking this year by Forbes Magazine as the most valuable football club in the world for an eighth successive year, the Glazers are hoping to raise at least US$100million.
The supporting documents filed with the Securities Exchange Commission as part of the offering confirm what it already common knowledge – ManU is saddled with debt of US$423million as a result of the 2005 leveraged buy-out by the current owners and has an estimated annual debt service of $40million.
Staggering Player Wages.
Besides significantly paying down the debt, the money raised through the IPO is to increase their Scottish manager’s budget to buy players that can rival those of its cross-town neighbour and current League Cup holders Manchester City (ManCity). ManCity continues to benefit from the largesse of its United Arab Emeriti owners who have enabled the club to operate virtually debt free and so offer players likes Yaya Toure, Carlos Tevas, David Silva and Sergio Aguero salaries that could cover the national debt of a number of island small nations!
Supporters of ManU who welcome the move will tell you that the Glazer’s purchase of club through a near 100% loan was madness in the first place because the debt-service is so high that the Club can hardly afford to keep its top players far less afford to buy new ones.
Why Not London?
England is ‘football-mad’ and has enough money to buy into the club. So why have the owners opted for the NYSE and not the LSE? In fact the club was listed on the London Stock Exchange from 1991 until 2005 when it was delisted as a result of the buy-out.
Well first the NYSE is the largest stock exchange in the world and the potential pool of investors is several times a multiple of what can be accessed through the LSE. Secondly because football is firmly imprinted on British culture the idea that the Glazer family would retain control over the club through Class B shares, which would have 10 times the voting power of the shares that would be sold to the public might not sit well with potential London financiers who will want to ensure that their money can buy a voice in the Glazers’ boardroom.
This has been mooted as the reason why the Singapore listing was abandoned in favour of New York. It seems the investment culture in the U.S is more comfortable with the concept of ‘ownership without control’ and many may be content to add ManU shares to their ManU kit and memorabilia.
At least that’s what the Red Devils are hoping for.
With many more millions possibly available to the club in time for the Christmas/New Years transfer window, Sir Alex is no doubt hoping to have the funds to engage in a ‘footie’ spending spree the likes he has not seen in recent memory.