Political Economy of Football
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Glazer Wins Control Of United - 14/05/2005

Controversial American tycoon Malcolm Glazer has won control of Manchester United and looks likely to secure enough shares to delist the club and take it private. The key to the acquisition was the 29 per cent stake of Irish racing tycoons, J P McManus and John Magnier. A person close to their Cubic Expression investment vehicle commented, 'It was a very attractive offer, it was immediately executable and, as hard nosed businessmen, they took it.' They will make a profit of at least 80m from the sale. Harry Dobson, the Scottish mining magnate, also sold his 6.45 per cent share, making over 30m on his investment. Against sums of this kind, the efforts by Shareholders' United to erect defences for fans look like no more than sandcastles built in the face of the incoming tide. Ian Hamilton, partner with Weil Gotschal, the law firm advising Shareholders United, stated 'There's no argument with the fact that he now controls the club. It's very unlikely we'll be able to stop him delisting the company.' Glazer should be thanking NM Rothschild who replaced JP Morgan as his advisers at the beginning of the year. Instead of using the United balance sheet to leverage the borrowings required for a 790m purchase, Rothschild constructed an arrangement that used the Glazer family's existing 29 per cent United stake as collateral. Rothschild had to convince the banks financing the deal - including JP Morgan - to keep their backing in place, in spite of not being able to provide any guarantee that the tycoon would be able to lift his stake to 75 per cent. Fans, who face a further hike in ticket prices, reacted with predictable anger to the takeover. There was talk of 20,000 fans not renewing their season tickets, but the figure is likely to be much smaller. Moreover, such is the popularity of United that others would eagerly take their place. What some fans deride as a sentimental 'Bovril on the terraces' scheme to form a FC United on the AFC Wimbledon model is also unlikely to make much progress. United fans like success and Glazer has promised a larger transfer budget. Much of United's recent success has been based on the arrival of a plc structure and the associated commercial orientation of the club and the exploitation of the United brand. Such a strong global brand was bound to attract predators and that is what has happened.

Fans Fightback Faces Problems

Manchester United fans opposed to the takeover of the club by the Glazer family are doing their best to fight back, but their efforts face problems as the American sports tycoon edged to within a whisker of taking the plc private. There have been calls to boycott club merchandise and United's main sponsors, Nike and Vodafone. However, analysts doubt that any action by fans could seriously inconvenience the club's new owner. Andrew Leeof Dresdner Kleinwort Wasserstein said, 'The impact on turnover is likely to be immaterial compared to, say, failing to qualify for the group stages of the Champions League.' Concern continues to focus on the large debt burden that the club will acquire. Most of the debt will be provided by JPMorgan Chase, although the bank is likely to syndicate some of its debt to other banks once the deal is completed. A further 275m will be provided by an entity called Red Joint Venture, which is to issue preference shares to a number of institutions also thought to include JP Morgan. Some United directors are apparently uneasy about the role played by JP Morgan. United's bid defence was led by Cazenove, JP Morgan's UK joint venture partner. The issue is a sensitive one in the City as the joint venture between JP Morgan and Cazenove has only formally been in existence since February.


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