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Manchester United’s majority stakeholders, the Glazer family operating from America, have announced that they are about to sell 8 million shares with reduced voting rights, which translates to 5% of the business operations of the legendary British club.
The shares to be sold are of the Class A variety, which have 1/10th of the voting rights entailed by Class B shares,which the owners are not relinquishing. The Glazers clearly have no intention of outside interference hindering their authority at the business end of the club’s operations but at the same time are set to make a handsome profit of $150 million from the deal.
“Our success and many achievements over the last 20 years does not necessarily mean that we will continue to be successful in the future, whether as a result of changes in player personnel, coaching staff or otherwise,” United said in the share prospectus.
“A downturn in the performance of our first team could adversely affect our ability to attract and retain coaches and players.”
Shares sold to reduce debt and lack of revenue from Champions League
The shares were listed at $14 and have risen to a price of $19.31 on Wednesday, valuing the club at almost $3.2 billion. The Glazers seem to be looking to cash in on the new wave of optimism surrounding Old Trafford to reduce the mountain of debt their ownership has imposed on Manchester United since the takeover in 2005.
Having been debt free before, almost $700 million has been spent to service the club’s ownership-related debts since the takeover; something that has eaten majorly into the club’s transfer expenditure over the same period. Manchester City, Chelsea, Liverpool and Tottenham have all massively outspent United in the transfer market over the last 9 years, culminating in a humiliating mid-table finish last season. Their non-participance in this year’s Champions League as a result will also hit club revenues.
A similar floating of shares in 2012 had seen Manchester United being valued at $2.3 billion and stocks selling for $14, less than the market price asked for. This current maneouvre is a better-timed business move as is apparent from the improved figures this time around.
New lucrative deals from Adidas and Chevrolet used to attract interest
Louis van Gaal’s appointment as coach and newly signed hefty sponsorship deals with Adidas and General Motors Co. have suddenly made Manchester United shares attractive to buyers who are concerned solely with future monetary gains from selling the shares. Malcolm Glazer, who led the United takeover 9 years ago, passed away two months ago and his six grown children have showed with this move that their ideology of owning a club is the same, and perhaps have even better business acumen.
Club won’t get any of sale’s proceeds
All the proceeds will go to Red Football LLC, the Glazers’ investment vehicle, and not to Manchester United, according to the news release. This announcement is bound to enrage United fans further, with whom the Glazer family’s debt-happy ways has never been very popular.
The Glazers have also disclosed to prospective shareholders that its sponsorship deal with Adidas has a performance-related clause that would reduce the annual amount paid by the sporting goods company by 30 percent from $131 million to $89 million should United fail to make the Champions League for two straight seasons. Conversely, the fee could rise by up to $7 million each year if the team wins the Premier League, Champions League or FA Cup.
A new vision is required at Manchester United, and clearing up of the mountain of debt may be a step in the right direction in the race to catch up with those who have pulled past them in recent years.
