It’s the news fans of Manchester United have been waiting for — the controlling Glazer family is considering a sale of the storied English football club. The question is whether a new owner would simply put a different face on the same issues that have dogged the Glazer era.
Ever since the late Malcolm Glazer bought the club in 2005 in a leveraged buyout, Man Utd has been mined for dividends and its financial performance aided by the extreme commercialization of the team’s brand internationally. What the fans care about is winning trophies and getting a better stadium. A full or partial sale could mark a fresh start; but the higher the price tag, the more aggressively new owners will have to run the club to justify the outlay.
The current owners will seek buyers prepared to pay between £6 billion ($9.97 billon) and £8 billion, the Times newspaper reported. Consultancy firm GlobalData posits a US$6 billion ($8.26 billion) price tag, saying a sale could make the club the most expensive sporting institution ever. Even after Man Utd’s New York-listed shares jumped on the prospect of a deal, the market enterprise value is still only US$3.2 billion. A transaction at around twice that level would represent an extremely pricy multiple of more than 50 times the current financial year’s expected earnings before interest, tax, depreciation and amortization.
The forced sale of London rival Chelsea Football Club earlier this year set the scene for wave of potential deals. The terms — £2.5 billion for the club plus a £1.8 billion investment commitment — set a benchmark. But Man Utd is a unique asset and would likely fetch a trophy price whenever it changed hands.
The club’s fans will care who it sells to. There was, after all, strong pushback against the possibility of buyout firm Apollo Global Management purchasing a stake earlier this year.
Some combination of wealthy individuals and private equity money makes most sense in terms of a buyer that would be both palatable to the crowd and able to pay what the Glazers are after. Even with a consortium, an offer would surely rely on a good chunk of debt financing. Commercial partners could bring expertise in marketing and stadium redevelopment, with the latter likely to cost in the region of £1 billion. And it remains possible that the Glazers choose to retain control while bringing in an investment partner to inject funds.
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While Man Utd is already a revenue machine, with annual sales averaging around US$740 million over the last five years, its commercial potential may be far from fully realized. It has the biggest digital footprint of any English club, Rob Wilson of Sheffield Hallam University points out. Expanding and monetizing the global fan base is likely to be the bedrock of the investment case, not least as the English Premier League gains traction with US television audiences.
For Fenway Sports Group Holdings, which recently hoisted a for sale sign above Liverpool Football Club, the Glazers’ announcement of a possible sale cannot be good news. It risks sucking away potential demand, and financing capacity, from its own auction. Fenway appears to have a choice; rush through a Liverpool deal now, or wait for its rival to sell. On balance, it may be better to let the Manchester transaction happen first. That could at least generate a high comparative for pricing a Liverpool auction, and allow more time for the debt markets to recover.
Football legend Cristiano Ronaldo parted company with Man Utd this week after criticizing the Glazers for not caring about what happens on the pitch and running the side as a marketing club. His comments neatly sum up the dynamics. Crosstown rival Manchester City has dominated the sport in recent years, leaving Man Utd supporters relying on their memories of glory days gone by.
However, new owners will almost certainly also want to run Man Utd as a brand too: That is its business attraction. But their goal should be to carry the Old Trafford crowd with them. A commercially successful club is also one that should and can afford to invest in the sport. While Man Utd is a business, it is much more than just a financial asset. Potential buyers will need to convince the fans they care about football too. -- Bloomberg Opinion
