Storied soccer franchise Manchester United F.C. is set to sell
shares for the first time in an initial public offering (IPO),
SEC filings revealed Tuesday. The organization plans to list on
the New York Stock Exchange, shunning a London offering and a
much rumored Singapore listing.
The world-famous soccer team (full of stars such as England's
Wayne Rooney and Ashley Young, Portugal's Nani, and Serbian
international and captain Nemanja Vidic) has performed well over
the past few years. Manchester United won the Barclays Premier
League in the 2010-2011 season and finished narrowly in second in
the 2011-2012 campaign behind cross-town rivals Manchester City.
Manchester United also reached the finals of the UEFA Champions
League, the major continental club tournament in Europe, losing
to F.C. Barcelona in that game.
The current owners, the Glazer family, also own the Tampa Bay
Buccaneers. In 2005, the family launched a $1.47 billion
leveraged buyout of the club, filling the club's finances with
debt. The filing says that the proceeds of the IPO will be used
to pay off some of the outstanding debt. It is important to note
that no share price has been listed and that the $100 million
total is likely to change as demand for the shares is assessed
over the next few months.
Manchester United reported $663 million dollars of debt as of
March 31. For comparison, Manchester United made an operating
profit of nearly $100 million in the twelve months ended June,
2011. The filing also indicates that much of the debt carries
high interest rates above 8 percent, and raising cash to pay down
debt may be a very good objective for the club.
Clubs such as Manchester United need cash to be able to
attract and buy the best talent. By reducing the annual interest
payments on its debt, Manchester United could make itself more
competitive in the transfer markets, bringing in more big name
players. This could be a plus for the brand value of the team,
which could translate into higher sales of items such as jerseys
with the team logo.
Potential investors must note that the Glazer family does not
intend to cede control of the company or team any time soon. The
shares are to be converted to a dual-class structure ahead of the
offering, which would leave the family in control. The company is
set to sell Class A shares (which carry one vote each), and
create a new set of shares--Class B--which will be held by the
existing owners and carry 10 times the voting power of A shares.
Also, the company is being incorporated in the Cayman Islands
where there are special anti-takeover laws.
Investors looking for a rock-solid balance sheet or a
high-growth company may not be enticed into buying Manchester
United shares. The high debt load will make interest expense high
until the debt is paid off. The size of the offering will matter,
as it will be seen exactly how much of the voting rights the
owners are willing to sell and how much debt can be paid off
after the offering. A small offering of only $100 million could
pay off some of the debt, however, it is much less than the $1
billion IPO rumored last year.
Also, comparatively speaking, owning a sports team carries
many risks not seen in other industries. For example, teams are
largely dependent on a few talented players and injuries could
hurt performance. As television revenue is tied to performance in
the Barclays Premier League, this could mean the loss of millions
of dollars in revenue.
Also, Manchester United notes in the filing that "any
successor to our current manager may not be as successful as our
current manager." Manchester United has experienced more than two
decades of unprecedented success under current manager Sir Alex
Ferguson, however as he is now 70, speculation is that he will
step down soon. Soccer analysts fear that the inability to find a
comparable replacement could also impact the team's
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.