Anatomy of a bid

The revelation in the Guardian – effectively confirmed by an ever-changing Manchester United Supporters Trust (MUST) statement – of serious divisions within the Red Knights comes as a blow to many supporters. Already considered a long-shot, a successful bid for the club by the Knights now appears utterly dead.

The consortium’s limp-wristed, one-line statement of protest Thursday afternoon hardly helped defer that impression. While MUST has fronted an aggressive anti-Glazer media campaign, the Knights’ tacit endorsement of supporters’ protest but lack of substantive communication has created only a frustrating void.

One that the consortium could not fill with any conviction on Thursday.

So much for the shining Knights, riding to Manchester United’s rescue. The group have become the little more than self-parodies, beset by factionalism and over-heated egos. Sickeningly, the separate agendas now coming to the fore are little more than the inevitable confirmation of the group’s divisions that the Glazer’s stooge, David Gill, had warned of.

The Knights set out with genuine intentions of making a bid though, attracting diverse figures from the business world including Jim O’Neil, Keith Harris, Richard Hytner, Paul Marshall, and Mark Rawlinson among others.

But the strain of funding a bid large enough to satisfy the Glazers’ desired profit margin, while meeting the investment needs of the super-rich has seemingly broken the group’s back. Or at least prompted two Knights to break rank.

It’s hardly surprising, with the Knights’ challenge manifestly difficult.

Firstly the group is required to raise a significant war-chest that will meet the Glazers’ behind-the-scenes demands of between £1.5 billion cash for the club. In February Harris claimed money was no longer the object.

Indeed the Knights reportedly turned away two ‘super-Knights’, each offering £500 million to the fund. The truth appears a little different now, with the consortium intimating it will not – cannot even – fund a bid of more than £1 billion, including the £504 million bond.

The complexities of weaving together up to 40 separate investors in a way that offers long-term security, a potential exit strategy but precludes the kind of block-building that led to United’s acquisition by the Glazers has also proven impossible. While the bid terms had reportedly been agreed a fortnight ago, they are clearly not to every investor’s liking.

This is not a philanthropic act after all. While rich, none of the Knights – at least those who are public – can call upon the billions of Roman Abramovich at Chelsea or Sheikh Mansour from Manchester City. As such the promise to effectively hand over shares to United’s many supporters through a rights-issue did not sit well with the entire group.

The consortium is not aided by the Glazer family’s demands. While maintaining a ‘not for sale’ stance in public, privately the leaked reports of a £1.5 billion Middle East bid – it was £1.2 billion but what’s a few hundred million between friends – confirmed the Glazers are willing sellers.

The club has huge leverage but the Glazers are not yet desperate. However with profit ultimately only gained through sale of the asset the real question is one of price.

The Americans will take that profit eventually. For now the Glazers appear happy to milk the club for its worth, while reducing the family’s personal exposure by paying down the Payment in Kind debt through club funds.

The Glazers have spoken of untold riches yet untapped in India and China, or through new media. Realists need only look to GDP per capita or broadband penetration in those two nations to dismiss that fallacy as nothing more than a very long-term dream. Moreover the Premier League’s collective bargaining mantra precludes United from profiting more than any other club from domestic or overseas rights.

The truth is that a bid can succeed but only one that forces the Glazers hand.

Amid the now rancorous speculation the Knights may indeed put an offer to Glazer family but if the consortium is true to its word then £1 billion will be the sum.

No matter how excessive a £1.5 billion bid is for United – based on any normal Enterprise Value (EV) definition or revenue multiple – it seems that the price is set until the club or Glazer family’s finances become distressed.

The fragmented Knights now have few choices: stump up the money, force a sale through mass boycott or disappear into the ether whence they came.

Only the latter now seems realistic.