Finance Uncategorized

Glazers to partially cash out, sell $150 million of Manchester United shares

The America family that owns Manchester United is taking advantage of the club's financial success to create some of their own.

Photo Credit: Clive Brunskill/Bongarts/Getty Images
Photo Credit: Clive Brunskill/Bongarts/Getty Images

Cash-flush Manchester United, at the behest of its American owners, announced it is selling 8 million new shares — a 5 percent stake in the company — on the New York Stock Exchange in a move that will reduce the Glazer Family’s ownership to 85 percent and net them approximately $150 million in the process.

The family, which at one point owned 100 percent of the company, appears to be taking advantage of the club’s new-found financial fortune by shaving a bit off the top for a healthy return.

In 2005, the Glazer family purchased the legendary English Premier League club for $1.4 billion in a leveraged buyout, and seven years later took 10 percent of its stake public on the New York Stock Exchange in a $233 million IPO.

Family patriarch Malcolm Glazer passed away in May 2014 and is survived by his wife and six children. The Glazer family also own the NFL’s Tampa Bay Buccaneers.

(Photo by Clive Mason/Getty Images)
(Photo by Clive Mason/Getty Images)

STRAIGHT TO THE TOP

Prior to going public, 100 percent of shares in the club’s parent company Red Footballer Shareholder Limited (RFSL) were fully owned by a new investment vehicle created by the Glazer family, called Red Football LLC.

The proceeds from the $150 million sale will go to Red Football LLC, not the club or parent company RFSL, according to the press release.

The cash-out comes at an opportune time, with Manchester United stock nearing its 52-week high of $19.97.

MONEY NOT AN ISSUE

A month and a half ago, Manchester United signed the most expensive jersey sponsorship in history — a uniform deal with Adidas worth $1.3 billion over 10 years.

Manchester United also entered into a $560 million, seven-year sponsorship deal with Chevrolet days prior to the record-breaking Adidas deal.

Almost $2 billion in contracts were signed with two strokes of a pen, giving the club stronger financial footing immediately. Money is certainly not an issue for Manchester United, and the Glazers, who overwhelmingly control voting shares of the club, are simply cashing in some of their chips rather than doubling down.

Photo Credit: Reuters
Photo Credit: Reuters

ALL ACCORDING TO PLAN

The Fields of Green has previously commented on the red flags associated with owning Manchester United stock. Now, we can safely add “dilution” to the warning list.

You can’t fault a family-owned business for wanting to extract some value out of its investment.

The family purchased the team with debt financing almost 10 years ago, the value of the team has risen substantially, and the owners have decided to pay themselves a little return on their investment. This happens in closely held businesses all the time.

What shareholders can fault the family for is the introduction of nearly a $1 billion in debt to purchase the team — thereby becoming the responsibility of the club — and for the dilution of existing shares through a new capital raise that will see all $150 million of the funds go to the Glazer family’s own LLC, not to the ballclub.

Manchester United is a great reminder that when business and sports intersect, the pecking order is quite simple: Owners eat first, everyone else eats second.

Currency converted using oanda.com

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