Asian IPO back on the agenda
Belief that the Glazer regime is readying an Initial Public Offering (IPO) in the autumn has once again gained credence following widespread international media coverage today. The Wall Street Journal broke the news Tuesday that the Glazer family has selected the Singapore Stock Exchange (SGX) as the family’s preferred venue for a $1 billion partial-IPO after exploring options over the past few months.
It is, of course, not the first time that news of the Glazer family’s plan has leaked, with the Times and other outlets reporting in June a potential Hong Kong flotation. Proceeds of any IPO could be used to buy back a proportion of United’s £500 million bond and reduce the Glazers’ personal debt exposure. More to the point institutional investors buying into the offering will also expect a dividend return. As, presumably, does the Glazer family.
Plans, now at an advanced stage according to reports this week, involve the family offering a minority share six years after the Glazer family de-listed United from the London Stock Exchange.
“Manchester United plans a $1 billion initial public offering in Singapore, two people familiar with the matter said, as the record 19-time English soccer champion seeks to cut debt that has fueled fan protest,” reports Bloomberg News.
“Credit Suisse Group AG (CSGN) is working on the transaction, which may take place this year, said the people, who declined to be identified because they weren’t authorized to speak publicly. The Premier League team had been considering Hong Kong for the IPO but now favor Singapore, although no final decision has been made, the people added.”
Rules governing loss-making companies may preclude United from flotation in Hong Kong, reports said – denied in some quarters – with the club having lost a record £104.7 million in the past fiscal-year. Much of this related to lower income from player sales and the cost of swapping long-term bank debt for the bond last January.
However, EBITDA – earnings before interest, tax and other deductions – has grown by around 70 per cent over the past six years offering the Glazers hope of a substantial premium on the family’s £800 million ‘investment’ in 2005.
While flotation will enable the Glazer family to cut club debt – depending on the mooted IPO’s success – the family is likely as keen on extracting dividends without drawing supporter ire. Bloomberg reported earlier this year that the Americans’ plans to withdraw extensive dividends of up to £120 million had been shelved on fear of further supporter unrest at the height of the so-called ‘Green and Gold’ campaign.
In the meantime the Glazers have refinanced the £220 million Payment in Kind (PIK) loan in a shroud of secrecy, while moving United’s ultimate parent company to Delaware, USA. The full early redemption cost of £249 million was almost certainly borrowed, with the family keen to pay down that debt through dividend drawing rights granted by the bond last year.
Yet questions remain both about the club’s real value and the Glazers’ long-term ownership plans. The reported a $1 billion partial-IPO of around 25 per cent of the club values United at more than £2.4 billion. That price is – based on any recognised method of enterprise valuation – a huge premium.
Moreover, the choice of SGX appears unusual, on the surface at least, with Hong Kong offering a larger and more liquid market at a time when European retail IPOs in Asia have not been universally successful. That is quite aside from the question of whether Asian institutional investors have any interest in a UK-based sports company.
While the Glazers’ bond offer was hugely over-subscribed, attractive as it was with guaranteed high rates of return and low risk, the family can offer no such assurances with the mooted IPO.
Then there is the question of supporter involvement. Indeed, more than 30,000 small-holding fans eventually bought into United’s London listing, although few into the 1991 IPO. Whether UK-based supporters will be able to access a Singaporean flotation is very much in doubt though; the IPO may in fact only be open to institutional investors. Presumably this a boon to the Glazer family that has no wish to admit large numbers of share-holding fans into an AGM.
The Manchester United Supporters Trust (MUST) offered no immediate response, preferring to wait until the family’s plans are made more concrete.
“You’ve probably seen press reports that the Glazers are to float at least part of their Manchester United shareholding on the Singapore Stock Exchange and that this is a precursor to a full sale,” said a supporter group newsletter on Tuesday.
“Until we have more details we can’t give a full response but what we do know is we want to communicate with as many Manchester United supporters as possible and make sure every Manchester United supporter has the chance to share in ownership when the opportunity arises. It is quite possible that shares will not be available to ordinary supporters and that MUST will have to provide a mechanism for supporters to buy shares.”
Whatever that mechanism may be it seems unlikely that ordinary United supporters will build any significant share holding in the club post flotation – if an IPO happens at all. After all even if all 175,000 MUST members invest £1,000 each the block will represent just over five per cent of the club.
Then the wider question of what effect floating United overseas will have, – institutional investors are unlikely to be more in tune with supporters than the Glazer family – is as yet unanswered.