Manchester United Counts On Investors Behaving Like Fanatics

Agenda-Setting Financial Insight.
Aug. 2 2012 4:22 PM

Manchester United Counts On Investors Behaving Like Fanatics

149241855
Though Manchester United just signed a fresh sponsorship deal with General Motors and foresees long-term growth in digital and mobile, revenue is expected to fall by as much 5 percent in the year to June 30.

Photo by Hong Wu/Getty Images

Manchester United is counting on investors to behave like soccer fanatics. The English club’s committed supporters expect nothing short of greatness, an ethos that carries through to Man Utd’s initial public offering. Though devotees of the Red Devils are rarely disappointed, buyers of the stock at the mooted price probably will be.

After dallying with a listing in Asia, Man Utd found an even more hospitable venue for its lopsided governance in the United States. Billionaire Malcolm Glazer and his family will retain control after the New York IPO with their more powerful Class B shares. There’s also no plan to pay any dividends to the Class A shares on offer and the company’s Cayman Islands home will make keeping official tabs on the board difficult.

Advertisement

Man Utd’s finances give further pause. Though the club just signed a fresh sponsorship deal with General Motors and foresees long-term growth in digital and mobile, revenue is expected to fall by as much 5 percent in the year to June 30. That’s because failure to qualify for the knockout stages of the Champions League in the most recent season cost the club at least 10 million pounds of broadcasting revenue.

What’s more, despite winning 12 Premier League Championships in the last 20 years, Man Utd was edged out by rival Manchester City last season. That has led to fears that Man Utd’s legendary manager, 70 year-old Alex Ferguson, and his squad are past their best. The club may also struggle to compete with the deep pockets of Man City’s owner, Abu Dhabi Sheikh Mansour, when attracting the best players.

And yet Man Utd reckons it should command a premier price. At the top end of its $16-$20-a-share range, the company’s equity would be worth some $3.3 billion – almost three times what the Glazer family paid in 2005. Add net debt of some $500 million, after IPO proceeds are used to pay off a big slug, and the enterprise value is about $3.8 billion. That’s 22 times EBITDA.

By comparison, MSG, which owns the New York Knicks and Rangers as well as Madison Square Garden, a stadium on par with vaunted Old Trafford, trades at a multiple of just under 11. Man Utd may be considered a trophy asset, but at the valuation on offer it’s no prize.

Read more at Reuters Breakingviews.

TODAY IN SLATE

Foreigners

More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

What Charles Barkley Gets Wrong About Corporal Punishment and Black Culture

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

Why Do Some People See the Virgin Mary in Grilled Cheese?

The science that explains the human need to find meaning in coincidences.

Jurisprudence

Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

Is It Worth Paying Full Price for the iPhone 6 to Keep Your Unlimited Data Plan? We Crunch the Numbers.

What to Do if You Literally Get a Bug in Your Ear

  News & Politics
Weigel
Sept. 16 2014 7:03 PM Kansas Secretary of State Loses Battle to Protect Senator From Tough Race
  Business
Moneybox
Sept. 16 2014 4:16 PM The iPhone 6 Marks a Fresh Chance for Wireless Carriers to Kill Your Unlimited Data
  Life
The Eye
Sept. 16 2014 12:20 PM These Outdoor Cat Shelters Have More Style Than the Average Home
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Slate Plus Video
Sept. 16 2014 2:06 PM A Farewell From Emily Bazelon The former senior editor talks about her very first Slate pitch and says goodbye to the magazine.
  Arts
Brow Beat
Sept. 16 2014 8:43 PM This 17-Minute Tribute to David Fincher Is the Perfect Preparation for Gone Girl
  Technology
Future Tense
Sept. 16 2014 6:40 PM This iPhone 6 Feature Will Change Weather Forecasting
  Health & Science
Bad Astronomy
Sept. 17 2014 7:30 AM Ring Around the Rainbow
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.