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Man Who?

13 June 2012 By Quentin Webb

Manchester United’s IPO transfer will keep the Glazer family firmly in control. For months, the owners of the English soccer club had sought a $1 billion initial public offering in Singapore. Now the plan has switched to a U.S. listing, reports IFR. New York doesn’t seem like the natural venue for a soccer share sale. But it’s plausible the deal will still fly, and the lop-sided governance in plan A remains.

Brand-building in soccer-crazy, fast-growing Asia was a supposed benefit of the Singapore IPO. Instead United, which ranks only behind Spain’s top two soccer sides for revenues, must confront American public indifference. Only 1 percent of respondents to a U.S. poll by Harris in January named soccer as their favourite sport – placing it behind 13 others, including boxing and horse racing.

That might have mattered in the original plan, which anticipated lots of interest from small investors. But the U.S. buyer base will presumably be more skewed to institutions. And while they may bargain harder on valuation, they will surely see an investment case in a strong global franchise with a straightforward business model. It might also help that, unlike in Singapore, these buyers can compare United to domestic, listed sporting and media concerns such as Madison Square Garden, the home of the New York Knicks, or Speedway Motorsports, an owner of Nascar tracks.

Nonetheless, United’s pricing aspirations still sound ambitious, especially in view of the team’s poor performance on the pitch. Assume the $1 billion sought is for shares equivalent to 30 percent of the company, and new stock, sold to pay down debt, makes up a third of the offering. Net debt would fall to a shade under 190 million pounds ($300 million), implying an enterprise value of about $3.6 billion. With EBITDA for the first three quarters of the year pointing to an annual haul of about 113 million pounds, that would point to a lofty enterprise multiple of about 21 times EBITDA.

Worse, a version of the Singapore plan to “staple” non-voting preference shares with ordinary stock lives on, IFR suggests. That was intended to let the Glazers keep control in excess of their economic interest. This could be accomplished in New York simply by issuing different classes of shares. In Britain such a scheme would be shown the red card. But raising capital is played by different rules around the world.


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