Thai-based investors will bid £1 billion for Manchester United according to reports in the News of the World today. The unnamed consortium, composed of unknown “billionaires”, will make the record-breaking bid with the Glazer family struggling to pay down personal and club debt, according to the newspaper.
“The group of six billionaires have spent three months on a deal they hope is too good for Malcolm Glazer to reject,” claims the Rupert Murdoch owned newspaper.
“Two consortium members are keen United fans who have twice visited Old Trafford this year to watch Sir Alex Ferguson and his players in Premier League action. Based in Bangkok, the consortium wants to buy out the Glazer family and put an end to the financial balancing act which has engulfed the world’s biggest football club.”
The unattributed source quoted by the red-top goes on to claim that the proposed investment made by the consortium would “far outstrip” that of Roman Abramovich in Chelsea in what would amount to the biggest football deal in history.
The Glazer family secured Manchester United Plc in a leveraged deal more than four years ago. But the terms of the deal have loaded the club with £600 million in debt secured on the club that accrues around £60 million in interest payments annually. Additionally, the family took out a ‘Payment in Kind’ (PIK) loan that attracts a punitive 14.75 per cent interest annually on a debt that has now reached more than £175 million.
On the revenues side of the business, United first attracted doomed US insurance group AIG and then risk management corporation AON as principal shirt sponsors. A range of other firms have taken up tiered sponsorships in travel, drinks and financial services and the new BSkyB-led television deal ensures more media cash than ever before is reaching the club’s coffers.
But ticket prices have increased sharply, locking out many fans and potentially alienating a whole generation of fans. The club has also struggled to sell-out Champions League and Carling Cup matches and a number of corporate tickets remain on the table.
Yet supporters of the Glazer family’s time at United can point to the three Premier League titles and European Cup win during their ownership. But as Rant reported earlier this month success on the pitch has come at the cost of just £ 6 million net spent per season on the team. Moreover, the family has struggled to refinance the PIK loans with the equity market frozen during the global economic downturn.
In that scenario United may well be ripe for a takeover but hardly the most attractive financial proposition. Although the £1 billion headline sounds like a substantial increase on the 2005 purchase price, the figure necessarily includes both the value of the club and debt, which stands at well over £700 million, and a profit margin that the Glazer family would undoubtedly demand. The mooted Thai consortium will need very deep pockets indeed.
Moreover, it’s questionable whether £1 billion represents good value for money in the current market. The reported ‘offer’ equates to a 400 per cent multiple on United’s annual turnover for a start. In the fickle world of football success, that’s a substantial premium.
Any new investor would also be faced with a football reality in which Real Madrid, Chelsea and Manchester City are free to spend without limits. Sir Alex Ferguson has bemoaned the lack of value in the transfer market – it is unlikely to correct itself in the near future.