Would anyone want to buy Manchester United? Football finance guru Kieran Maguire provides the answers and they are largely negative.
If somebody wanted to buy the club as a trophy asset, then
yes. It is one of the biggest sporting brands in the world and the reflective
benefits of that would be huge. We are talking ultra-high-net-worth
individuals, of whom there aren’t many. There is nothing to stop anybody buying
the club.
Realistically, I can’t see somebody who wants to maximise
profits coming in to buy the club: i.e. the Glazers Mark II. Simply because the
rejection of both Project Big Picture and the Super League has constrained
their ability to take control and power. Most importantly from United’s point
of view, and this has been underplayed, they were hoping to sell the rights
directly to fans. I can’t see that happening for a while yet, at the very
least. That could have been a significant income booster for the club. So you
take that out of the equation.
Manchester United shares have underperformed at the New York
Stock Exchange since they were initially listed in 2012. So where is the upside
from an investor’s point of view?
The equivalent of an Abramovich or Mansour would be
interested, though. There are people whose wealth we cannot countenance.
Manchester United are still a ridiculously sexy brand.
It is more likely to come from the Middle East: Saudi
Arabia, Jordan. There are some very rich people in Africa as well.
Jim Ratcliffe of Ineos could afford the club but his view is
that the prices being asked were too much. He has bought a French team (Nice)
and is focusing on other sports.
Today’s value according to share price is £2.1 billion. The
Glazers would want a premium, however. You have to persuade at least 50 per
cent to sell up. So that’s the family. They would want a mark-up by at least 40
per cent, somewhere close to £3 billion.
In addition, the banks will have “change of control” clauses
in the lending arrangements they have with Manchester United. Those loans could
be rolled over but factoring in forced payments could be another £700 million.
It is an awful lot for a club that pays relatively small
dividends per year and has limited scope to boost the money coming in.
On the club's debt burden Maguire states: 'At present, I don’t see the debt as being a detriment to the club.
When they were paying the PIK loans at 14.25 per cent
interest rate, there were quite a few years when the interest costs exceeded
£100 million per year. Now the two outstanding loans are 2.25 and 3.75 per
cent, so the interest costs are £20 million or so. For a club that generates
£600 million per year in revenue, it’s not a problem.
In terms of repaying the debt, they renegotiate when the
terms come close to ending and kick it down the road. The banks are more than
happy because they get guaranteed interest coming in from Manchester United.
Manchester United are happy because they never actually repay the capital. It
is the equivalent of an interest-only mortgage.'
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