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Fergie and Gill could profit from share sale, as Glazers strengthen grip

Submitted by on July 31, 2012 – 8:02 pmOne Comment

According to The Guardian, Sir Alex Ferguson and henchman David Gill could be in for a financial boost as part of the Glazers’ share flotation.

Both men, arch allies of the Glazer family since turning their backs on supporters, may cash in as part of proposals to offer shares in the club.

Meanwhile, reports also suggest that the Glazers have taken steps to make takeovers almost impossible with a sly restructuring of MUFC.

Very depressing reading, but as with the news yesterday that the Glazers have already broken their promise that the share flotation funds would be wholly used to pay off debts http://www.afinelung.com/?p=4555, is anyone surprised by any of this?

Fergie and Gill’s potential judas gold mine http://www.guardian.co.uk/football/2012/jul/31/manchester-united-glazers-employees-shares:

Manchester United’s controversial flotation in New York continues to provoke an angry reaction from supporters after it emerged that senior employees at Old Trafford stand to benefit from a share scheme worth up to $320m (£204m).

A highly lucrative “2012 Equity Incentive Award Plan”, as it is described in the Initial Public Offering (IPO) prospectus released on Monday, has raised questions among some United fans as to whether Sir Alex Ferguson, the manager, and David Gill, the chief executive, will stand to personally profit from the Glazers’ decision to list the club on the New York stock exchange.

United are refusing to comment on the situation. “Under the regulations of the SEC [Securities and Exchange Commission], we are not permitted to disclose the contents of the document,” said a United spokesman.

The Glazers, who are looking to raise up to $383m (£244m) by selling more than 19m shares in the Premier League club at up to $20 a piece, came in for severe criticism on Monday when it transpired they had reneged on their promise to use all the funds from a successful flotation to reduce United’s £437m debts.

Ferguson and Gill have both staunchly defended the American owners in the past, much to the dismay of those that have protested against the way that the club has been run since the Glazers’ leveraged buyout in 2005. Only nine days ago, Ferguson described the Glazers as “great” and suggested that “the majority of real fans will look at it realistically and say it’s not affecting the team”. Those remarks went down badly with some supporters.

Doubts also persist about how successful the IPO will prove to be, and the Equity Incentive Award Plan already looks like being a controversial element. According to the club’s prospectus, United’s executive committee, including Gill, are in line for a £1.25m IPO bonus once the deal is done. But the richest rewards will go to those selected to take part in the Equity Incentive Award Plan.

The plan is designed to “attract, retain and motivate selected employees, consultants and non-employee directors”, according to the prospectus. Some 16m shares – worth a potential $320m at the top end of the forecast IPO price – will be set aside for those selected to be part of the plan. The awards will be made using a variety of schemes and if the company is taken over, a “change of control” clause will allow United to pay out the share awards immediately.

Andy Green, a financial analyst who writes the “andersred blog” on football ownership and is an adviser to the Manchester United Supporters Trust (Must), said United should clear up Ferguson’s situation. “I’m not sure you can have a $288m [the mid-range valuation] benefit package for key employees and not include the manager,” Green said. “I think he should probably come and tell the fans either way. If he’s not benefited, fair enough. But it’s certainly going to be something that’s on a lot of people’s minds.”

Green also believes Ferguson is on dangerous ground with his comments about the fans in relation to the Glazers. “I think he is risking tarnishing some of his legacy, which is a great shame because he is the greatest manager probably in English football history. But his association with all this skulduggery is sad. Also, he has rejected the fans who are understandably and correctly concerned about what is going on. Look at this IPO, it was promised to pay down the debt. It’s now making hardly any impact – it’s the owners taking money out and leaving the club in debt. Being concerned about that is perfectly legitimate. And then for him to say that you’re not a real fan if you are concerned … well, that’s quite staggering.”

Duncan Drasdo, the Must chief executive, is aware of fans’ concerns but said that he wants to keep the spotlight on the Glazers for the moment. “I know people are asking if David Gill and Sir Alex Ferguson are going to benefit from the IPO and whether that has affected their statements. But I don’t want to divert attention away from the terms of the IPO and the pressure we’re trying to put on the banks.”

Glazers tighten rancid grip http://www.guardian.co.uk/football/2012/jul/31/glazers-manchester-united-takeovers :

The Glazer family has moved to block any future hostile takeover of Manchester United by quietly altering the club’s constitution, in a move that will further enrage the club’s fans.

The changes – almost certainly designed to protect the Glazers’ control of the club if the family cashes in further shares – is revealed in regulatory documents published as part of the club’s planned flotation in New York. The float stands to net the Glazers around $150m (£96m), despite previous assurances that proceeds would go towards paying down the club’s debt.

The US filing warns potential investors: “Anti-takeover provisions in our organizational documents and Cayman Islands law [where Manchester United are incorporated] may discourage or prevent a change of control, even if an acquisition would be beneficial to our shareholders, which could depress the price of our shares and prevent attempts by our shareholders to replace or remove our current management.”

The filing goes on to say that the club’s “amended and restated memorandum and articles of association” now permit the Glazers to issue new shares “from time to time, with such rights and preferences as they consider appropriate. Our board of directors could also authorize the issuance of preference shares with terms and conditions and under circumstances that could have an effect of discouraging a takeover or other transaction”.

The Glazers are only selling around 10% of the club through the stock market listing, so they would be able to block any takeover bid launched immediately after the float. However, financial experts said that the new anti-takeover clauses would protect their position if they needed to raise cash in the future by selling down their holding.

The flotation documents also show that the Glazers have retained the option to sell an additional 2.5m of their shares, which would bolster their proceeds from the offering by $45m.

Michael Moritz, a Cardiff-born Silicon Valley investor who is also a Manchester United fan and critic of the Glazers, said: “The anti-takeover provisions further protect the Glazers. It is the financial equivalent of armed robbers leaving the scene of a crime and throwing nails on the road to stop pursuers.A pound of potatoes will be a better investment than the purchase of shares in Manchester United’s stock offering. The only people who will be better off with this offering are the Glazers”.

Neither Manchester United nor Jefferies, the club’s main adviser on the listing, returned phone calls or emails.

Monday evening’s statement – which described United as an “emerging growth company” despite revenues slumping by up to 5% in the last financial year – shows that the club will be valued at around $3bn if the listing goes off successfully. Assuming United can find enough buyers, the shares will begin trading next month.

However, it is still far from clear that the club will be able to sell enough shares at what the Glazers consider an acceptable price, and concerns over the valuation have previously forced the club to abandon plans to list its shares in Hong Kong and then in Singapore. The investment bank Morgan Stanley is also believed to have stepped away from the flotation because of fears that the Glazer family had pinned too high a valuation on the club.

Much of the investor concern comes down to the club’s massive debt, which stood at £437m at the end of June, and how the balance sheet is potentially weighing the club down.

Andy Green, a football finance writer behind the andersred blog, calculates that £520m has been taken out of United since the Glazers took the club over in 2005, with most of that figure being accounted for via interest and fees related to the club’s borrowings. Meanwhile, of the £520m, £38m has been paid directly to the Glazers via £28m in consultancy fees to their companies and a £10m dividend.

Apart from raising money for the Glazers, a successful float of Manchester United will achieve two further aims. Firstly, it will raise around $150m to pay down debts. Second it will give the club a financial valuation, which the Glazers will eventually need if they are to cash in their investment by selling the club at some future point.

How much United are worth is crucial to the balance of the family’s finances. Wealth-X, a consultancy that specialises in high net worth individuals, estimates Malcolm Glazer’s fortune at $2.7bn, $1.3bn of which is tied to United. His stake in the Tampa Bay Buccaneers is worth another $980m and First Allied, his ailing shopping malls business, another $8.5m. The rest is cash shares and property.

Why the flotation is a daft idea http://www.guardian.co.uk/business/nils-pratley-on-finance/2012/jul/31/manchester-united-flotation-fantasy:

Among the many reasons not to buy shares in Manchester United in the forthcoming flotation on the New York Stock Exchange are the pure, cold financial numbers. The updated prospectus shows what happens when the team flops in the Champions League: ignoring a one-off tax credit, the club will report a small operating loss from continuing operations for the 12 months to June this year; and revenues will be about 4% lower than the previous year at £315m-£320m.

Yet the Glazers hope buyers can be found for Man Utd at a price tag of almost $3bn (£1.9bn). Six times revenues! That’s a rating associated with go-go technology stocks where income doubles every couple of years. At Man United, despite the Glazer camp’s boasts about greater commercial adventure and bigger sponsorship deals, revenues have advanced by a grand total of 14% over the course of the past three years.

But, of course, tThere are other reasons to ignore the listing. There’s no dividend for shareholders or plans to pay one. V; voting rights are unequal, with the family hoarding the class of stock with supercharged powers. And the club will still be indebted to the tune of £345m even after £80m or so is raised to pay off a slice of borrowings with a new share issue.

From an investment point of view, the only reason to take a punt on Man United at the proposed price is the hope that one day a zillionaire will make the Glazers an offer they can’t refuse. The trophy asset argument, in other words. But it rests on wishful thinking, rather than sound investment logic.

Indeed, the biggest risk factor may be one that the prospectus doesn’t mention: the presence of Sheikh Mansour at Manchester City may reduce to a trickle the number of billionaires willing to pay silly money for the right to play financial games.

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One Comment »

  • Quinny says:

    The whole 7 year saga has made me physically sick but none more so than this.

    He may be the manager of the team I love but he is a hypocritical traitor to his roots and will do and say anything in defence of the Glazers in order to line his already exceptionally deep pockets.

    When he d dead and gone he will be remembered for the damage he caused to Manchester United.

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