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Man Utd: The takeover maths

Robert Peston | 17:08 UK time, Thursday, 11 March 2010

Now that the Red Knights have formally appointed Guy Dawson of Nomura to advise them on their plans to bid for Manchester United, there can be no doubt of their serious intent.

Man Utd stadiumDawson has been one of London's most prominent corporate advisers for 25 years. And Nomura is Japan's leading investment bank, by a margin.

So what will Dawson actually do?

Well his first priority is to interview the 50 odd wealthy individuals who've indicated to the Knights that they'd provide funds for a bid - to see if money really will follow mouth.

The sums required are not trivial.

Here's the basic maths.

The Knights would probably leave the £500m of debt recently raised by Man Utd in the bond market in place - so long as bondholders can't force them to repay (which is by no means certain).

But the Knights would want to buy out the so-called payment-in-kind notes, which is debt whose interest rate is currently an eye watering 14.25%, rising to a penal 16.25% in August.

Redeeming that debt would probably cost more than £230m.

Of course the Knights' priority is to buy out the equity in the business held by the Glazer family.

The Glazers reportedly invested $495m of their own money into the business - equivalent at today's exchange rate to £330m.

Since the Glazers aren't forced sellers, they will presumably demand a hefty premium to what they paid before they even contemplate cashing in.

Let's assume that they would think about dealing if offered a 50% uplift - which is not an outrageous gain on an investment held for five years.

That would mean the Knights would have to find £500m for them.

Rounding up, that implies that the Knights need to raise £750m in total, to buy out the Glazers and pay off the cripplingly expensive payment-in-kind debt.

Would that be a walk in the park?

Not exactly.

If in the end some 50 deep-pocketed Man Utd fans can be persuaded to stump up, each would have to provide £15m.

Which is quite a lot to pay for a lifetime season ticket.

If David Beckham were to follow up on last night's sartorial gesture of support for the ousting of the Glazers with a cheque, he might not notice any serious shrinkage in his bank balance. But even in the City of London's bonus-land, there aren't that many football supporters keen to invest that kind of sum purely for the love of a club.

Of course it's theoretically possible that Nomura will be able to demonstrate that there's lots of money to be made from investing in Man Utd at an enterprise value of £1.25bn (which is the sum of the £750m take-out price and the bond debt).

However, the profitable upside is not conspicuous, given that Man Utd's annual turnover is just £278m, or less than a quarter of the putative takeover valuation.


  • Comment number 1.

    so the Glaziers buy club with borrowed money and extract profit, sell club for a profit leaving club still in debt, red riding hood buys club with more borrowings and leaves other borrowings in place , magic, little do the supporters realises that having been robbed and rogered once, they will put their own money into the club and get rogered again, I dont suppose the thousands of fans putting up their cash will get seats in the directors box will they ?

  • Comment number 2.

    Any estimates for the value of the "fee pot" on this wheeze?

  • Comment number 3.

    Are we now on the sports pages? Well I suppose one bubble is like another, when blowing them forever (in the air).

    I for one would have preferred for Robert to pick up another headline:

    "HSBC admits huge Swiss data theft"

    Lots of British Accounts there! May be not enough to pay off the National Debt, but every bit counts.

  • Comment number 4.


    I have been a Manyoo fan since 1955. I said when the Glazers took over they were merely carpetbaggers looking for a place to lodge their debt. I also predicted that their debts would become an encumbrance upon United.

    Premiership soccer in general (and the MUFC situation in particular) is part of the symptomology of a much broader cultural malaise. Manchester United should become a membership Trust along the lines of JLP: only then would ownership be where it belongs: firmly (and solely) among those who believe in the Busby family of fine football entertainment.

    Alas, I must now withdraw from this blog thread, in protest at the gratuitous and hard-hearted decision of the BBC to ban all url mentions in future. This isn't what I'd call embracing the internet - but it is pretty much what I've come to expect from the current Beeb regime.

    Doubtless this comment will now be censored, but in the unlikely event that it isn't, I would remind thinking threaders that there is a Truth Space of temperate wisdom called The Slog, and Googling that brand name will take you there fairly swiftly.

    With regret

    The Slogger x

  • Comment number 5.

    In the bad old days, you would have said 278 to 1250 wasn't really leveraged at all........

    If the Glazers had to get £500 million bond out at 16.25%, then wouldn't you say that was the sign of desperate men?

    If they made their money in US real estate over the past decade, I would suggest that they are in deep doo-doo at home. If they are lucky, their commercial real-estate assets have merely halved in value over the past 18 months.

    The only money the Glazers are going to make in the next few years is on the fancy fees they have attached to their 'management' input.........?

    I think a bit of brinksmanship is in order.


  • Comment number 6.

    16.25% -THATS £81 MILLION A YEAR!

  • Comment number 7.

    Good analysis, Robert.

    The Glazers might refuse to sell because they bought the whole caboodle as a debt vehicle. The premium will be big indeed, and may even have additions to that because of the terms of their borrowing and what they will be missing out on by not having MU anymore.

    They do not appear to worry about being liked, and have not apparently let public opinion affect them in any way since they hoved to.

  • Comment number 8.

    14.25% rising to 16.25% - looks as if they borrowed heavily on a credit card! £278m turnover does not look very attractive. The costs of the many MU stars must leave only as small margin and many of those are a depreciating asset. Are the red knights riding into a quagmire?

  • Comment number 9.

    A bit of a non story this. Give United a couple of poor seasons and all these "so called" United fans in London will be back following Chelsea, Real Madrid, Barcelona or the flavour of the day.

    They all plead Brazilian birth during the world cup. Australian birth when watching cricket. Swiss birth when watching tennis and so on...

    A quite boring tiresome lot whos only connection with Manchester is an episode of Coronation Street. Laugh out loud ! Sad really.

  • Comment number 10.

    If I were about to buy United, I'd check out Rooney's contract terms, at the moment United only lose or draw, its Rooney who keeps winning.

  • Comment number 11.

    Surely the valuation of the club is based on its actual and potential profitability, not on what it last sold for.

  • Comment number 12.

    Man U are the 3rd Richest Club in the world
    Position Club Turnover in € Millions Country
    1. Real Madrid 401.4 Spain
    2. Barcelona 365.9 Spain
    3. Manchester United 327.0 England

  • Comment number 13.

    I really don't understand what goes through the minds of people like this. The idea of spending this amount of money on a ruddy football club when the country is screaming out for more industy just strikes as utterly bonkers.

  • Comment number 14.

    Sorry this list just shows the clubs with the highest revenue turnovers and NOT wealth.

  • Comment number 15.

    Something funny here!
    No-one has memntioned the Nomura employee's bonuses for the deal yet

  • Comment number 16.

    Man united have the highest debt, their debt to revenue ratio is high, which puts them with the highest risk.

  • Comment number 17.

    But the question is should the Government bail the club out?

    I mean would the return on the public money used be better in the medium or long term when compared to the money used to bail the banks out?

    Oh, sorry, politicians don't do medium to long term, or at any rate not beyond May!

    So, I guess all our dosh just stays invested in the self-perpetuating bank-bailing business.

    How come football clubs aren't "too big to fail"?

  • Comment number 18.


    Football is an Industry

  • Comment number 19.


    A good thought. The only trouble is if you had thought that way back in 1986 or whenever Fergie took over you would have missed eleven Premierships, and bucket loads of cups. But most importantly you will have seen a team who play attacking football like Arsenal, but manage to keep winning for all that. I am a Brighton supporter but I love what Ferguson has done in creating four or five teams over the past twenty years, all with enormous flair. I wish you could say the same thing about our other great team Liverpool, but sadly they have fallen by the wayside. 1990 Liverpool 18 championships Man U 7. Today Liverpool 18 and Man U 18.

    Allmyfault, You note that the interest charge is £81m per year. Which means they have to find and sell a Ronaldo each year to stay even.

    As a postscript. I was President of a Branch of CIMA in the early 80s and we had Martin Spencer FCA to speak, just after the Steve Daly transfer that kicked all this off. He was Managing Director of Chelsea at the time and he told us how all the balance sheets were interwoven with transfer fees unpaid and predicted that if one big club went a great number of others would follow suit. So far it is just Leeds and Portsmouth. I wonder what would happen to Chelsea if anything happened to their benefactor?

  • Comment number 20.


    And there I was thinking it was just a sport involving 22 people and a ball.... silly me..

  • Comment number 21.

    Any one else starting to think that putting our businesses in the hands of Accountants isn't such a good thing.....

    ..... we now only seem to be able to produce profits by bookkeeping jiggery pokery!

  • Comment number 22.

    When a football club easily raises 500m from a bond issue you know there is a bubble.

  • Comment number 23.

    "Let's assume that they would think about dealing if offered a 50% uplift - which is not an outrageous gain on an investment held for five years."

    Your basic maths are very basic.
    Do you really think the Glazers would sell out for a measly £170m profit?
    Whilst traditionally strong in Asia the club has only recently started leveraging the brand in other continents. There is a good deal further to go.
    Now if they were offered a £1/2 billion uplift they might, but only might, be tempted. It all depends on whether they are desperate for the readies.

  • Comment number 24.

    I badly, badly want to laugh until I collapse from exhaustion at all this (being a Leeds fan) but in truth I really do feel for Man United fans right now. I think the problem is that the Glazers have looked at the club as a business. To a degree, that's OK. But football isn't a business in the proper sense - two key staff lost to injury and your income stream could plummet overnight.... and that's before you even get to the wage bill vs. turnover which is stupidly high by the standards set in business.

    So the kind of leveraged buyout the Glazers undertook makes sense in a normal business context, but far less sense in the football sense. Man U are a massive asset to British football as a whole, and it is to be hoped that somehow it can be taken back under the kind of regime and culture that understands the insanity at the heart of football finance.


  • Comment number 25.

    #19 majorroadaheadagain2

    I dont disagree with your observations about the club, its success and style of play both of which it has had in abundance [murdered Milan on Wednesday for example].

    I do however take issue with their support and in particular the Non Manc glory grabbing circus. My point is that if Manchester United went bankrupt, most of these "supporters" would have Chelsea/Barcelona shirts, scarfs etc etc before dawn the next day.

    I know a few United fans from Manchester [yes they do exist] and I can tell you that they are concerned that all this hullabaloo about the Glaziers is all well and good if its not replacing one lot of greedy profiteers with another. Ashley at Newcastle or Ridsdale at Leeds comes to mind. Crikey Cardiff, what were you thinking?

  • Comment number 26.

    13 and 20 (wee-scamp). Football is part of the entertainment industry. Very important earner for the UK economy and brings in a lot of overseas cash. It currently suffers from the same problem as a lot of the entertainment industry - we're letting the bean-counters run it instead of the people who actually know how that segment of the industry works.

    And at Man U's level it's '22 men and a ball' in the same way that Hamlet at the National is 'a bunch of actors reading an old script'.

  • Comment number 27.


    I suspect the real issue for the Glazers is the state of their own finances, which by all accounts have taken a hard knock in the last couple of years. Thus holding on to an asset they know nothing about, in the face of the humiliating sight of being despised (albeit their fellow Americans probably know very little about what is going on, still being football-illiterate), will have very little attraction to them, and it will be the first thing they would get rid of should their circumstances dictate.

    While they are playing coy at the moment I think £170m profit might look acceptable were United's winning streak to look like coming to an end, particularly if the £80m Ronaldo money has really vanished into thin air and not is available to Fergie for replacements for Van der Saar, Vidic, Scholes and Giggs. A think the Glazers might take the money and walk away before they become an even bigger laughing stock than they are now.

  • Comment number 28.

    81Million PA Interest payments

    321Million PA Turnover

    Thats 1/4 or all turnover just on Interest!

    Before a penny is spent repaying the debt or paying running costs!

    Looke like a well run company NOT!

  • Comment number 29.

    "even in the City of London's bonus-land, there aren't that many football supporters keen to invest that kind of sum purely for the love of a club."

    Firstly, it wouldn't be purely for the love of a club. Which ever way you look at it, Utd is a good investment.

    Secondly, why do they have to come from London? Don't know if you've noticed, but Utd are pretty big in Asia and considering Nomura are involved, it's not a huge leap of faith to think there might be a larger Asian connection at work.

    Thirdly, even if you ignore both the above points, i'm pretty sure there are in fact a lot of people who'd be happy to chuck £15m into Utd and not think about. Whether we like it or not, there are some seriously rich people in this country.

    Shouldn't you know this Robert?

  • Comment number 30.

    1. It is a hot potato for any one to buy Man U
    2. I am a life long supporter of Man U with nearly empty pocket at my retirement stage.
    3. One cannot invest on feelings alone without economic sense.
    4. It is better to le Glaziers ruin the club as they have done so far.

  • Comment number 31.

    The smart money was on a John Lewis story. Doh.

  • Comment number 32.

    Madness - what special advisor/overly paid company/individual cleverly arranged this loan at 16.25% with a ridiculous exit charge of £230 million (probably arranged with the mother of all clever arrangement fees too). I am baffled by who they thought they were acting for and just how bonkers the 'business' leaders at Man U must have been to have agreed to this.

    Patently this is clearly what the gatekeepers of finance can get away with now whilst pretending to act in the interest of the business they are supposedly serving. the scales are completely tipped in their favour - propped up with central banks free money, charging whatever fees they like and remunerating themselves very handsomely to boot.

    Corporate finance is broken - where is the competition driving these costs down?

  • Comment number 33.

    1. At 5:34pm on 11 Mar 2010, romeplebian

    Perfect summary.

    Unfortunately it's removing a highly leveraged pair of yanks with a highly leveraged set of city traders. There is no benefit to the fans in any way.

    I hope they remember this when they're busy protesting - the fire is not prefereable to the frying pan.

  • Comment number 34.

    Why doesn't the BOE buy Man Utd ?? It can print money at low cost then clean up on the kind of profits that has been generated in recent years.

    A football team ''valued'' at 4 times revenue not profit... You'd think the dotcom bubble was all forgotten about.

  • Comment number 35.

    As a follower of Portsmouth Football Club I am just reminded of the fact that if you are going into debt make sure it is a huge one: can you imagine HMRC hounding Man Utd as they have Portsmouth, Cardiff and Chester? Of course not.
    Mind you - I suspect that the HMRC department chasing Portsmouth must be based in Southampton.

  • Comment number 36.

    Tyto alba

    I am glad that the Revenue is finally chasing up Portsmouth, and any other club that doesn't pay its taxes but pays hugely inflated wages to footballers instead. From the money they owe us, the taxpayer. The shame is that HMRC is so lax that it lets them get away with it for so long, and then sees them walk away without paying by going into administration - as I remember the footballers are in the queue before the taxpayer from anything coming from the administration process...They are effectively allowed to trade 10 Premiership points for all the millions they owe us. Those who think they should have been declared insolvent have a point when compared to what happens to a normal plc. Would that Woolworth were still trading with the loss of just ten points.

    Of course, Nick Clegg is always on about saving the country by getting all those who don't pay their taxes to ante up. He thinks that £2-3bn from these sources (if that is what his figure is) will make a giant hole in our annual debt figure of £179bn. Or in the £30bn we have to pay in interest charges on that debt. He has no solution to all the eastern european workers and the rest allegedly on the black economy, the sums lost from whom makes non-doms look like petty cash merchants.

  • Comment number 37.

    Pray can someone tell me how shareholders can secure their loan in purchasing a company's shares on the same companys ASSETS (eg football ground)???!! Its patently illegal !! Or I havent understood limited liability company law and the rights of creditors ahead of shareholders??!!

  • Comment number 38.

    Fascinating. Manchester United, the biggest club in the land being used as a debt vehicle. How can this be? Well, as someone who has no interest in football the sport, I have an outsider's view that at least is impartial to the Glazers and the Red Knights whoever they may be. It seems to me that in many sports money now is all that matters.
    The desire to win in sport is vital, but along came money, and the advantages of huge cash injections were just too tempting to ignore. Wages rose at dizzying rates, to the point of ludicrousness and well beyond. Now, (probably) the most successful club in the world is peeping over the brink at financial Armageddon and all that has to happen to make the nightmare a reality is 'for United to have a few poor seasons', to quote one of the contributors here. I think it would take less than that, much less.
    I wonder at the cost of the life insurance premium for Alex Ferguson? Imagine the financial catastrophe to United and the Glazers were he to suffer a bad stroke (heaven forbid; I do not wish the man ill, but it could happen)? Does this sound like a good business proposition: Investing millions for at least six or seven years to see any sort of return on the basis that an ageing man in a stressful job will live forever untouched by illness or accident and never be eclipsed professionally for at least ten years? The financial backers of this latter day Tulip bubble must either be ready to take a gigantic hit or take a lot of tranquillisers on a daily basis.
    Invest in United or any football club? If I had the money to lose I would not think of it, simply as a business proposition. Clubs no longer worry about supporters leaving them, it is investors that matter now. This bubble will burst, and when it does, many of the old names will go, including perhaps my father's old club, in the First division as it was then, by whom he was paid the princely sum of £5.10s 6d for playing in the FA cup final in 1938. That by the way was his weekly wage. Ah, the good old days long gone, but at least our clubs were not owned as debt vehicles, nor could they be ruined by market forces. Nor I must add would they ever have made financial news?


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