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Glazers raise more questions than answers

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David Bond | 15:44 UK time, Friday, 25 February 2011

For the second time in nine months Manchester United used their quarterly financial results today to issue a 'not for sale' statement on behalf of their American owners, the Glazer family.

The latest move comes after persistent reports linking Qatar Holdings or members of the Qatar Royal Family with a possible bid to buy out the Glazers.

Qatar Holdings has already issued a denial and today United insisted: "The owners remain fully committed to their long-term ownership of the club. No discussions have taken place. Manchester United are not for sale and the owners will not entertain any offers."

So that is that then. But what else would you expect them to say? If a deal is really being negotiated between the rulers of the country, with the richest per capita population in the world, and the Glazers, they would be extremely unlikely to tell us about it.

But there are a few things to consider here.

While it might irritate them, the continuing speculation is hardly bad news for either side.

For the Glazers it suggests interest in the club, driving up the market value (I shall return to this in a minute) and maybe helping them with financing other parts of their business empire in America.

For the recently appointed 2022 World Cup hosts, Qatar, it shows they are stepping up their interest in football - and what better way to follow up their great Fifa coup than by buying the world's most famous football brand?

All the media speculation (and yes, I know I am now contributing to it here) is also good news for the bond holders who bought into United's £500m refinancing in February 2010. Bonds are trading at 10% above the 98p price at the time of the issue and are proving extremely popular in the market.

In fact, United revealed today that they had spent £24m of their own cash on buying some of the bonds back.

The Glazers have been subject to sustained protests at Old Trafford

The Glazers have been subject to sustained protests at Old Trafford

But for all the denials and theories surrounding the takeover speculation, the key question is this: What are United really worth?

When the Red Knights asked investment bank Nomura to look into this last summer, it decided it wasn't worth more than £1bn.

According to reports then, and now, the Glazers want at least £1.5bn - giving them a £700m profit on their purchase in 2005.

That, it seems, is a price no one is willing to pay. If they were, we would not be reading endless trails on the back or business pages - it would have just happened.

As the excellent Andy Green points out on his andresred blog, United's operating profits, or EBITDA (earnings before interest, tax, depreciation and amortisation), are about £105m. Recent market estimates suggest eight or nine times that is a good price. So, if that holds true, United are worth nearer £1bn than £1.5bn.

Today's numbers also demonstrate that United's turnover is steady in all areas except commercial income which grew by 30% in the quarter to the end of December 2010. This is again a tribute to the Glazers' international commercial strategy but with media, matchday and other areas not generating much more cash and staff costs (players salaries) still going up, where is the growth in profits to justify a £1.5bn valuation?

One other quick question to ponder. City experts tell me it is entirely sensible to use spare cash to buy up some of the bonds, as United have done today. Interest is payable at 8.5% on the bond while keeping cash is worth just 1% at today's low interest rates.

But the club had cash reserves of £134.5m at the end of December. The assumption had been that the money would be used, in part, to pay of the £249m of expensive PIK loans. In the end the Glazers found the money from somewhere else.

So what are United keeping the money back for? Is it to pay dividends to bond holders? Is it to pay the Glazers back themselves? Or is it to finance a big spending spree on players in the summer?

As ever with the Glazers, the more we find out the less we seem to know.

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