ANALYSIS-Manchester United's owners see escape hatch in soccer club deal boom
Before the announcement of the sale process on Tuesday, Manchester United's shares were hovering around $13, below the team's initial public offer price of $14 in 2012. Meanwhile, deals for football clubs are attracting lofty valuations.
A sale of Manchester United Plc could provide the soccer club's controlling shareholders, the Glazer family, a lucrative exit from an investment that has languished over the past decade and drawn the ire of millions of soccer fans.
Deals for European football clubs this year, beginning with the sanctions-driven sale of Chelsea Football Club by Russian oligarch Roman Abramovich in May, have fetched top dollar. It's these rich valuations that have motivated the Glazers to formally put Manchester United up for sale, according to two people familiar with the matter.
The family, which made its fortune in real estate, retail and healthcare and also owns the Tampa Bay Buccaneers, bought the team for 790 million pounds ($939.07 million) in 2005. A sale at valuations commensurate with deals like Chelsea would yield a profit of several billion dollars, the sources said. The sources, however, warned that the Glazers, who own two-thirds of Manchester United through dual-class shares, may ultimately choose to sell only a minority stake or decide against any transaction.
A Manchester United spokesperson declined to comment. The Glazers' decision to launch a formal sale process now ends years of the family's resistance to pressure from fans to divest.
Many of the club's supporters have complained that the Glazers' debt-laden buyout of the team starved it of funds and that the owners needed to spend more to attract and retain talent and win trophies. Those complaints were aired again this month by superstar player Cristiano Ronaldo, who parted ways with Manchester United for the second time. "The Glazers, they don't care about the club or professional sport," Ronaldo said in an interview with Piers Morgan on TalkTV on Nov. 14.
Spokespeople for the six members of the Glazer family that are major Manchester United shareholders could not be reached for comment. Before the announcement of the sale process on Tuesday, Manchester United's shares were hovering around $13, below the team's initial public offer price of $14 in 2012.
Meanwhile, deals for football clubs are attracting lofty valuations. In May, Chelsea was acquired by investment group led by Todd Boehly and Clearlake Capital for a purchase price of $3.1 billion and an additional $2.6 billion in future investments. That deal valued Chelsea at 5.7 times its revenue for the last financial year, investment bankers said.
In August, investment firm group RedBird Capital acquired Italian soccer team AC Milan for 1.2 billion euros ($1.2 billion), a record for a European club outside of the English Premier League. More deals are in the works, with Manchester United arch rival Liverpool Football Club also exploring a sale. The value of acquisitions and major stakebuilding in the sports industry has risen to 9.6 billion pounds this year, up from 1.8 billion pounds last year, according to a report by law firm RPC last month.
At a 5.7 revenue multiple, Manchester United would fetch about $3.4 billion, a 41% premium to where the club's shares were trading in New York on Tuesday before news of the sale process hit. Analysts say the team is likely to fetch a higher multiple than that. Chelsea only has a fraction of Manchester United's followers. Manchester United has a bigger stadium and is more profitable. Despite going five years without having won a trophy, it consistently produces annual cash flow of about $100 million, making it a safe investment.
"We continue to believe that Manchester United's fundamentals justify a premium to clubs sold earlier this year," Jefferies analysts wrote in a research note. BUYERS LINE UP
Many well-heeled buyers are fueling deals for football clubs. Private equity firms are attracted to the clubs' cash flow and brand value. And sports teams are viewed by many billionaires as the ultimate status symbol. In August, Elon Musk tweeted: "I'm buying Manchester United ur welcome" only to then clarify he meant it as a joke. A spokesperson for Musk did not respond to a request for comment.
Even before the announcement of a sale process, Manchester United had received overtures from at least one potential acquirer: British billionaire and a long-standing fan of the club, Jim Ratcliffe, Reuters previously reported. A spokesperson for Ratcliffe declined to comment.
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