Malcolm Glazer, the new owner of Manchester United, refused to give the club any guarantees that he would not sell Old Trafford, it emerged yesterday in the board’s official response to the £790.3 million offer. The American billionaire also declined to tie himself to any promises regarding future transfer budgets, debt levels, team selection or ticket prices during his negotiations with the board.
Glazer was repeatedly asked by United’s financial advisers to provide legally binding “protections” for the club after completion of the highly-leveraged takeover by Red, his bid vehicle. Sir Roy Gardner, the United chairman, and his fellow directors were concerned to allay fears among supporters about a sale and leaseback of Old Trafford and a hike in season-ticket prices to help to fund the deal. They had already condemned Glazer’s proposed business plan as “ aggressive” and said it would inflict a “damaging” financial strain on the club.
They had hoped that pledges on how Glazer intended to run the business would address those concerns. It is understood that the American businessman offered the board no details of his plan to increase the club’s commercial revenues substantially and repay debt of at least £540 million incurred as a result of the takeover.
“During its discussions with Red, the board sought a range of legally binding protections for the football club, its fans and any minority shareholders,”
The board was originally unable to recommend the offer because of deep misgivings about the level of debt involved. This caused Glazer to go directly to John Magnier and J. P. McManus, the Irishmen who held a 28.7 per cent stake, to negotiate a side deal and take economic control of the company. This occurred on May 12.
Since Glazer broke through 75 per cent to take the club private, the board has concluded that minority shareholders would be best advised to take the cash offered rather than be left holding shares with few rights in a private company.
Glazer is initially putting up to £374million of debt on the United balance sheet. A separate debt facility of £275million has been raised through the issue of preference shares to US hedge funds. While these have no immediate recourse to United, many analysts expect Glazer to refinance within two years and “flip” the debt — plus interest — on to the club.
The board’s view of the preference shares, or “payment-in-kind” loans, which come with high interest rates, is that they “may put additional indirect pressure on the business”. Despite their misgivings, David Gill, United’s chief executive, and Nick Humby, the finance director, are expected to stay at the club. Their shareholdings and options, to be redeemed by Glazer, mean that they are set to receive more than £2.2million and £1.4 million respectively by accepting the offer. Gill last year earned £909,000 in salary and bonuses.
Gardner and two fellow non-executive directors — Jim O’Neill, a currency guru at Goldman Sachs, and Ian Much, chief executive of De La Rue, the company that prints banknotes — are expected to resign shortly. O’Neill, a Mancunian who joined the board only in November after two directors were voted off by Glazer, is set to earn more than £5 million from the sale of his shares.
He joins a list of United directors who have profited from their association with the company. Maurice Watkins, the club’s lawyer and one of those ousted from the board, will earn £15 million from his five million shares.