Malcolm Glazer takeover of Manchester United

After Manchester United F.C. was floated on the stock market in 1990, the high value of the club made it seem unlikely that a hostile takeover would be possible. Nevertheless, in June 2005, Malcolm Glazer succeeded not only in gaining control of the club through his takeover vehicle, Red Football Ltd., but converting it into a completely private company.

Increasing shareholding

Glazer had owned shares in the club since 2003, possibly earlier. On 26 September 2003, it was reported that he had increased his share to 3.17%,cite news |title=US investor ups Man Utd stake |url=http://news.bbc.co.uk/1/hi/business/3141968.stm |publisher=BBC News |date=2003-09-26 |accessdate=2008-08-06 ] taking his shareholding above the 3% threshold at which he had to inform the club's management about it. There had already been considerable speculation about the possibility of a takeover of the club, either by Glazer or by one of several other interested parties. By 20 October, he had increased his shareholding to 8.93%, [cite news |title=US tycoon ups Man Utd stake |url=http://news.bbc.co.uk/1/hi/business/3207492.stm |publisher=BBC News |date=2003-10-20 |accessdate=2005-09-05 ] and on 29 November it was reported that he owned around 15% of the club and had met David Gill, its chief executive, to discuss his intentions. [cite news |title=Share deal sparks Man U bid talk |url=http://news.bbc.co.uk/1/hi/business/3246512.stm |publisher=BBC News |date=2003-11-29 |accessdate=2005-09-05 ] On 12 February 2004, Glazer increased his stake in the club to 16.31% and the following day's Financial Times reported that he had instructed Commerzbank to explore a takeover bid. The club's share price increased by 5% that day, valuing the club at a total of £741m. [cite news |title=US bid talk lifts Man Utd shares |url=http://news.bbc.co.uk/1/hi/business/3485393.stm |publisher=BBC News |date=2004-02-13 |accessdate=2005-09-05 ] Glazer increased his shareholding to over 19% the following June, although he was still not the largest shareholder. [cite news |title=Glazer raises stake in Man United |url=http://news.bbc.co.uk/1/hi/business/3835575.stm |publisher=BBC News |date=2004-06-24 |accessdate=2005-09-05 ] His shareholding continued to increase, nearing 30% by October 2005. Upon reaching 30%, Glazer would have to launch a formal takeover bid. [cite news |title=Glazer stake in Man Utd nears 30% |url=http://news.bbc.co.uk/1/hi/business/3754598.stm |publisher=BBC News |date=2004-10-19 |accessdate=2005-09-05 ]

Gaining control

On 12 May 2005, Glazer reached an agreement with shareholders J. P. McManus and John Magnier to purchase their 28.7% stake in the team, giving him a controlling stake with just under 57% of the team's shares. He then managed to secure the stake of the third largest stakeholder, Scottish mining entrepreneur Harry Dobson, taking his share total to 62% of the club. Just hours later, Glazer had bought a further 9.8% stake taking his total ownership to 71.8%.

On 16 May 2005, Glazer took his shareholding in United to 75%, allowing him to end the club's PLC status and delist it from the London Stock Exchange, which he did on 22 June. [cite news |title=Glazer gets 98% of Man Utd shares |url=http://news.bbc.co.uk/1/hi/business/4629401.stm |publisher=BBC News |date=2005-06-23 |accessdate=2008-08-06 ] On 14 June 2005, Glazer successfully increased his share in the club to 97.3%, sufficient for full control. On 28 June he increased his share to 98%, enough for a compulsory buyout of all remaining shareholders. [cite news |title=Glazer Man Utd stake exceeds 75% |url=http://news.bbc.co.uk/2/hi/business/4550141.stm |publisher=BBC News |date=2005-05-16 |accessdate=2008-08-06 ] The final valuation of the club was almost £800 million (approximately $1.5 billion at the exchange rate at the time).

The future

The Glazer family's intentions for United remain unclear, but it is thought they will try to expand the club's brand name in the United States, Asia, and Africa, where United are well-followed, based on a variety of factors, including TV audiences and merchandise sales.

As a result of Glazer's takeover, a small group of disgruntled United supporters created a new club called F.C. United of Manchester, which was accepted into the North West Counties League second division, six promotions away from The Football League, and secured promotion in each of its first three seasons, twice as league champions.

Following the takeover, Manchester United has continued to thrive, with the 2005-06 season seeing Old Trafford's capacity being expanded and a lucrative new shirt sponsorship deal signed in April with American company AIG (which, coincidentally, has a large stake in a hedge fund company which helped to fund Malcolm Glazer's takeover of United). Increased revenue from TV rights to nearly each competition United participates in, as well as its successful apparel deal with Nike, has also boosted the club's profitability. This came despite fears among many supporters that the debt incurred in buying the club could lead to insolvency.

Also contrary to the fears of many fans, the Glazers promptly took action to ensure that Gill and veteran manager Alex Ferguson remained at the club, citing the duo's outstanding success.

In 2006, Malcolm Glazer made strong indications that he was at Manchester United for the long haul by appointing his other two sons, Kevin and Edward Glazer, along with his daughter, Darcie Glazer, to the Manchester United board as non-executive directors.

Refinancing

In July 2006 the club announced a refinancing package. The debt taken on by the Glazers to finance the club was split between the club and the family, approximately £256 million is secured against Manchester United's assets. [cite news |first=Simon |last=Stone |title=Manchester United profits fall by £12.3m |url=http://sport.scotsman.com/malcolmglazer/Manchester-United-profits-fall-by.2745101.jp |publisher=The Scotsman |date=2006-01-24 |accessdate=2008-08-06 ] The total amount will be £660 million, on which interest payments will be £62 million a year. The club stated, "The value of Manchester United has increased in the last year, which is why lenders want to invest in the club... 'This move represents good housekeeping and it ensures that Sir Alex Ferguson will be provided with sufficient funds to compete in the transfer market." The Manchester United Supporters Trust responded, "'The amount of money needed to be repaid overall is huge... 'The interest payment is one thing but what about the actual £660million? It is difficult to see how these sums can be reached without significant increases in ticket prices, which, as we always suspected, means the fans will effectively be paying for someone to borrow money to own their club." [cite news |title=Man Utd play down fears after £660m refinancing |url=http://soccernet.espn.go.com/news/story?id=374009&cc=5739 |publisher=ESPNsoccernet |date=2006-07-18 |accessdate=2008-08-06 ] [cite news |first=Helen |last=Power |title= Credit crisis one year on: Risky debt notes could be a losing game |url=http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/06/cccrisis106.xml&CMP=ILC-mostviewedbox |publisher=Telegraph.co.uk |date=2008-08-06 |accessdate=2008-08-06 ] Under the terms of Glazer's financing, in the event that Glazer is unable to repay bondholders, majority control of Manchester United will pass to three New York hedge funds in August 2010. The three hedge funds are Citadel, Och-Ziff Capital Management Group and Perry Capital.fact|date=September 2008

References

External links

* [http://www.joinmust.org/index.php Manchester United Supporters Trust website]
* [http://www.malcolmglazer.com/ Guestbook Manchester United and Malcolm Glazer]