Manchester United to go public in U.S.

Will an IPO save England's fabled club from its debt?

By Nicholas Nehamas

Manchester United’s American owners have announced that they intend to take the English soccer team public in the United States.

The Glazer family, which also owns the NFL’s Tampa Bay Buccaneers, chose the New York Stock Exchange over trading floors in London, Hong Kong and Singapore. But the decision isn’t likely to enhance the Glazers’ damaged standing with United fans in England.

 An effigy of United’s American owner Malcom Glazer burns outside Old Trafford. (Reuters)

In 2005, Florida businessman Malcolm Glazer and his sons bought the club in a leveraged buyout that loaded United with debt. Since then, although the team has won four league titles and the European Champions League, fans haven’t been keen on the family.

Before the buyout, United was cash-rich and debt-free. Now the team is struggling to finance $663.2 million in debt, making it hard for the Glazers to compete for talent against wealthier clubs in Barcelona, London and Madrid. Even worse, United’s crosstown rival, Manchester City, is the sport’s current high-rollers, bankrolled by a member of Abu Dhabi’s royal family.

Working-class Mancunians are angry at the Glazers for raising ticket prices. They say the hikes are an attempt to crowd them out of the stadium in favor of what they call the “prawn-sandwich brigade,” wealthy but dull spectators who sit for the whole match instead of standing and cheering like “traditional” fans.

Soon after the Glazers bought the club, hooligans burned effigies of Malcolm in the parking lot before United home games.

Struggling Bucs

Meanwhile, fans in America are mad at the Glazers, too. Since buying United with borrowed money, the family has significantly reduced spending on the Tampa Bay Buccaneers.

The Bucs won the Super Bowl in 2003, but since the United takeover they’ve have ranked near the bottom of the NFL in terms of annual salary. Last year, they won only four of 16 games.

                                Malcolm Glazer lifts the NFL’s Vince Lombardi Trophy in 2003. (Reuters)

This season, Tampa Bay is spending more money, having signed marquee players like wide receiver Vincent Jackson and cornerback Eric Wright. Even so, the team is still $15 million under the maximum allowable salary cap. And Wright was recently arrested for drunk driving, damaging the “Men of Character approach of the Bucs new coach, Greg Schiano.

Even so, the Glazers still have a shot of winning back the goodwill of Bucs fans. Writing about the increased spending in The Tampa Bay Times, Tom Jones says: “For the first time in a long time, you feel like ownership is committed.”

An American IPO

But there was goodwill in Tampa, thanks to that Super Bowl win. In Manchester, the Glazers have been viewed with suspicion from the beginning. Paying down United’s debt might help, and IPO proceeds are supposed to do just that.

Accordingly, some fans have given the IPO a “guarded welcome,” according to The Daily Mail. Duncan Drasdo, chief executive of the Manchester United Supporters’ Trust (MUST), told the British newspaper, “If it turns out that the vast majority of the proceeds are used to pay off the debt, that is certainly something MUST would welcome and entirely vindicates our long-standing position that their debt was damaging our club.”

However, Drasdo criticized the club for refusing to offer dividends on United shares. He also said the deal’s controversial “dual-class structure,” which Mark Zuckerberg used to stay top-dog at Facebook, would scare off investors.

The team says it will raise around $100 million with the offering in New York. It had hoped to raise $1 billion by going public in Asia, home to many of the team’s estimated 659 million fans. But troubled markets in Hong Kong and Singapore led United’s owners to reconsider. The fact that “dual-class” offerings are illegal in Hong Kong might also have played into the choice of New York. The Manchester Evening News reports that the club plans further offerings of its new Cayman Islands-based holding company in the future.

But that doesn’t mean fans will automatically forgive the Glazers for dumping debt on the club, or forget that United has paid a jaw-dropping $780 million in banker’s fees and interest payments since 2005.

Even with the new revenue and lower debt, Manchester United may still have trouble competing for star players. Spanish champions Real Madrid in 2010 paid $130 million— a world record — for United’s Portuguese attacker Cristiano Ronaldo, for example.

Meanwhile, Manchester City and its Arab backers have spent more on players in the last few years than United has in the entire twenty-six year reign of coach Sir Alex Ferguson (though City’s spending might soon be restrained by European financial “Fair Play” rules). 

To make matters worse, the Citizens pipped United to this year’s English league title on goal difference after thrashing them 6-1 at Old Trafford

You can watch the highlights of that game below: