Manchester United is for Sale

On Tuesday 22nd November the following announcement popped out on the official website. “Manchester United plc (NYSE:MANU), one of the most successful and historic sports clubs in the world, announces today that the Company’s Board of Directors (the “Board”) is commencing a process to explore strategic alternatives for the club. As part of this process, the Board will consider all strategic alternatives, including new investment into the club, a sale, or other transactions involving the Company. This will include an assessment of several initiatives to strengthen the club, including stadium and infrastructure redevelopment, and expansion of the club’s commercial operations on a global scale, each in the context of enhancing the long-term success of the club’s men’s, women’s and academy teams, and bringing benefits to fans and other stakeholders”

The scope of this article is to understand why the Glazer family are selling, the owner’s options at this point and to analyze the main potential buyers.

Why are the Glazer family selling? In my opinion the answer to that can be divided in three: internal forces, external forces and financial opportunities.

The internal forces are the easiest to explain. Manchester United’s infrastructure (stadium, squad and training ground) needs heavy investment. For example Old Trafford is said to need a 2 billion investment. Considering that the common consensus is that Manchester United can’t afford that on its own then the Glazers will be forced to either dig very deep inside their pockets or sell. The Glazer family has not spent one penny of their own in the club. On top of that there is speculation that most of the Glazer family want to sell the club with only Avram and Joel still committed to the project.

Which leads us to the second point. The impending world recession is set to increase debt interest rates. That’s bad news for Manchester United whose debt is said to be around the half a billion mark. United had also recorded a £115m loss throughout 2022 so the club can’t tank that hike on its own.

The good news is that there seem to be plenty of appetite for football club buyers if the price is right. Chelsea had been sold for an eye watering £4.25b while the Emir of Qatar had encouraged local private investors to invest into English Premier League clubs. That led to a series of clubs seeking external investment with United being the crown jewel of the lot.

The Glazer family has three options at this point. They can sell a minority stake, they can sell a majority stake and still remain involved at the club as silent partners or they can go for a full sale. The first option had been toyed with since last summer to the very least. Rumors of the Glazer family negotiating with the Apollo

by Cleo Zarb

private equity investment group made the rounds in August. Considering that the club went on sale in November then we can presume that those talks led to a dead end.

That doesn’t mean that this option is completely off the table. Unfortunately rumors had since resurfaced of US hedge fund Elliott being interested in helping the Glazers out by buying a minority stake at this club. That’s quite concerning as Elliott are known for being a rather aggressive organization. Perhaps its most notorious case was the 15year battle with the government of Argentina, whose bonds were owned by the hedge fund. When Argentine president Cristina Kirchner attempted to restructure the debt, Elliott refused to accept a large loss on its investment. It instead successfully sued in US courts, and in pursuit of Argentine assets, convinced a court in Ghana to detain an Argentine naval training vessel, then docked outside Accra. After a change of its government, Argentina eventually settled and the hedge fund received $2.4 billion, almost four times its initial investment. Such hedge fund would not shy away from going to the extreme with us. If Elliott has a say on Manchester United then I wouldn’t exclude the sale of assets including Carrington and Old Trafford itself.

On the bright side I doubt that this option is preferable on the Glazers family part. Manchester United need huge investment something that they will struggle to produce by simply selling a minority stake especially if they need to buy out their siblings’ stakes as well. The second option (i.e. selling the majority stake) is more financial viable. That would allow Joel and Avram to stay there, let the share prices go up thanks to the new owners’ hard work and then sell for even more money in the future. Unfortunately for them I can’t see any new owner wanting to work with the Glazers. Thus if the offer is right then I believe that the third option (i.e. a full sale) is the more likely event.

Which leads us to the next question: who is interested in buying Manchester United? Only two bidders have gone public so far. One comes from INEOS led by Sir Jim Ratcliffe while the other is from Qatari banker Sheikh Jassim bin Hamad Al Thani. Elliott might be tempted to buy the club on its own. However its preference is that of buying a minority stake.

INEOS is a global petrochemicals manufacturer, it generates $65 billion annually and employs over 26,000 people. Its major shareholder is Failsworth born Sir Jim Ratcliffe (SJR) whose personal worth is around the 15 billion dollar mark. Sir Jim Ratcliffe is a self-made man who made his reputation in buying struggling businesses (or parts of businesses) within the petrochemical sector and then turning them into efficient money making machines. He also loves sports and has invested in various sports ventures such as football, the Formula 1 and cycling.

Since INEOS bought Nice in 2019 they had been the 4th bigger spenders in the French league. Unfortunately that hasn’t been reflected in terms of results. Nice ended 5th during 2019-20, 9th the year after, 5th last year and are currently 7th place. They changed 5 managers throughout this period as well. INEOS also own a lesser known club, Swiss club FC Lausanne Sport. Since the company took over they have suffered relegation twice. Its seems that SJR’s elite business acumen and management which made him a legend in the petrochemicals sector has yet to work its magic in his football club ventures.

INEOS’ initial bid is understood to be around the £4.5B and looks to buy the Glazers share which hold 69% of the global shares and around 99% of all Class B shares. The latter is quite significant as they have ten times more controlling power then the Class A shares.

The Qataris promise to keep the club debt free, they are planning to invest heavily on the squad, the stadium, the women’s team and the community.

While the Qatari bid seems more attractive to that forwarded by INEOS, the devil lies in the detail. Sheikh Jassim bin Hamad Al Thani’s net worth is around 1 Billion which makes it impossible for him to buy United on his own. Thus persistent rumors have resurfaced that probably this bid is done on the Qatari government’s behalf which would make the club state owned by a regime with dubious human rights track record. It would also potentially put us in collision course with both UEFA and the FA who expect full transparency on who truly owns the football clubs. That might lead to problems either immediately or in the long term, similar to what Manchester City are facing right now.

Sheik Jassim has never owned a football club. However Qatar do own PSG. Qatar Sports Investment (QSI) had invested heavily in the French league turning PSG into the dominant local force. Nevertheless they have failed in winning the Champions league and quite frankly PSG aren’t exactly run smoothly either. Rumors of players having direct access to the higher ups thus bypassing the manager’s authority are quite common within the French football circles. Then there’s the famous incident in 2022 following PSG’s game against Real Madrid when President Nasser Al Khelaifi stormed the referee’s dressing room and ended up breaking equipment.

Conclusion

Football wise both INEOS and Qatar has yet to prove themselves to be able to manage a football club effectively. However they have both invested heavily in trying to improve that. INEOS have just appointed former Juventus CEO Jean Luc Blanc as INEOS Sports CEO while Qatar have replaced the mercurial Leonardo with Luis Campos who is one of the finest Directors of Football in the world.

INEOS will buy the club on debt but they promised to put any new debt on the parent company (INEOS). On the other hand there are questions on whether they will also transfer any debt made by the Glazers (for example on transfers) and if they would saddle any new debt (for example for rebuilding Old Trafford) on the club.

The Qatari bid is thought to be around the £5B for 100% ownership of the club. It is being forwarded by Sheikh Jassim Bin Hamad Al Thani who is former Qatar prime minister Sheikh Hamad bin Khalifa Al Thani’s son.

Financially wise, the Qatari bid seems more attractive as it promises to invest heavily in the club and the community while keeping United debt free. However one mustn’t discount the implications of allegedly being owned by a regime and the sanctions we might face if we are caught having a shadow owner.

Both bids would probably leave us in better shape than the one we are in presently. However there is still the risk of United being sold off to a public equity such as Elliott or the Glazers remaining at the club whom I think would make things worse. It would be very hard for Manchester United to keep on competing against the likes of Manchester City, Chelsea and in the future Newcastle while concurrently still paying dividends and hefty loan repayments.