Manchester United (NYSE: MANU)

[SalvorHardin]

The combination of big stock market falls and various events has created quite a few "special situations" for investors. One such IMHO is Manchester United, the most famous and best supported football team in England (and much of the world). Like most sports teams, Manchester United is a trophy asset so if you value it as a typical operating company it looks horribly overvalued.

This is where I have to separate my Manchester United fan hat from my shareholder's interests. I believe that the increasing number of foreign owners of premier league clubs is going to push us towards an American model of sports leagues with no regulation and a European Super League, with both leagues controlled by the big clubs. These developments would be good for shareholders (relegation imposes massive costs on all football clubs) but bad for fans and the wider game.

American and other foreign investors have been buying up English premier league clubs and the pace of doing so if anything is accelerating. Chelsea recently sold for a reported £2.5 billion plus additional commitments. Over the last few days it has emerged that Liverpool are up for sale and it has been reported that India's richest man, Mukesh Ambani, is interested with Liverpool's owners looking for a price in the range of £3 billion to £4.5 billion.

Manchester United are currently valued on the New York Stock Exchange (NYSE) at $2.17 billion (about £1.85 billion). The company has around £500 million of debt and in the last decade has been very poorly run, mostly because the commercial side of the business has dictated terms to the football side (including signing players) whilst the controlling owners (the Glazer family) micromanage the club from America. Louis van Gaal, the second manager of the club since Sir Alex Ferguson retired, has been very outspoken about how the commercial side of Manchester United overrules the footballing side.

"Van Gaal warns Ten Hag against joining ‘commercial club’ Manchester United"

https://www.theguardian.com/football/2022/mar/28/van-gaal-warns-ten-hag-against-joining-commercial-club-manchester-united

Manchester United has a two-tier share structure. Each of the Glazer family's shares have ten votes; those on the NYSE have one vote. So a premium would have to be paid for the Glazer's shares in the event of a takeover. Sir Jim Ratcliffe has been mentioned as a possible bidder.

Anyway I think that it's a very interesting opportunity. Should Liverpool sell for anything like £3 billion (or more), a figure which I consider to be entirely feasible given that Liverpool is almost on a par with Manchester United for the level of global interest that it generates, the speculation about a possible Manchester United sale will rise dramatically. The Glazers are rumoured to be holding out for as much as £9 billion which could mean a very long wait for a sale (if ever). Bear in mind that the shares at the currrent price of $13.29 are below the June 2012 $14 IPO price.

The footballing side has improved considerably under the new manager, with a big improvement being that the new Chief Executive has said that he wants far less involvement with the footballing side. The previous CEO had a reputation for signing some players because he wanted a "big name" to impress the sponsors and to show off to the rest of the footballing world. I've seen comments from fairly reliable sources that when Jose Mourinho was manager, the board refused to sanction the signing of a player purely because the player didn't have a high social media profile.

https://seekingalpha.com/symbol/MANU

https://ir.manutd.com/

[Dod101]

Thanks for that. A way to get some exposure to Man United is of course to hold Finsbury Growth and Income which bought some Man United shares a few years ago.

Personally I would not buy a share only on the possibility of a takeover. I would want it to be an attractive investment in its own right then whether or not it becomes a takeover target is less important. A bit like a buying a painting.

Dod

[simoan]

American and other foreign investors have been buying up English premier league clubs and the pace of doing so if anything is accelerating. Chelsea recently sold for a reported £2.5 billion plus additional commitments. Over the last few days it has emerged that Liverpool are up for sale and it has been reported that India's richest man, Mukesh Ambani, is interested with Liverpool's owners looking for a price in the range of £3 billion to £4.5 billion.

Well, with my fans hat on... I wish someone would buy my club from the [*I'd love to put a string of expletives here*] owners. But hey, we can pour pints faster than any other stadium in the world and the main playing surface is for American Football should some mug US billionaire want to wildly overpay (i.e. meet the price the owner would want) and move his team to England! The football club is just the "anchor tenant" of the stadium btw.

RE: Man United, on fundamentals alone I couldn't invest. Unfortunately, I never buy anything that rests on the underlying asset value only being realised by a buyer paying a large premium. And I'm not sure the Glazers will ever sell whilst it's such a lovely fat cash cow for them. It doesn't look cheap on other fundamentals, a lot of them being negative numbers, and then there's the $800m of Net debt which is a big old 8x EBITDA.

All the best, Si

[SalvorHardin]

Thanks for that. A way to get some exposure to Man United is of course to hold Finsbury Growth and Income which bought some Man United shares a few years ago.

Personally I would not buy a share only on the possibility of a takeover. I would want it to be an attractive investment in its own right then whether or not it becomes a takeover target is less important. A bit like a buying a painting.

Dod

Whilst the possibility of a takeover is my main reason for owning the shares, if the Premier League moves towards being an American-style "no relegation league" the shares would be much more attractive as a normal investment. A European Super League would cut UEFA out of the picture and make even more money for the clubs.

American sports teams are very profitable. Without the fear of relegation and league wide salary cap rules, they become serious businesses. I saw this when I owned shares in Madison Square Garden, which owned the New York Knicks (basketball) and the New York Rangers (ice hockey).

Mr. Ambani's main business, Reliance Industries, owns the Mumbai Indians Indian Premier League team (IPL) The IPL doesn't have relegation, has revolutionised cricket and most IPL teams have been very good investments.

[Dod101]

Thanks for that. A way to get some exposure to Man United is of course to hold Finsbury Growth and Income which bought some Man United shares a few years ago.

Personally I would not buy a share only on the possibility of a takeover. I would want it to be an attractive investment in its own right then whether or not it becomes a takeover target is less important. A bit like a buying a painting.

Dod

Whilst the possibility of a takeover is my main reason for owning the shares, if the Premier League moves towards being an American-style "no relegation league" the shares would be much more attractive as a normal investment. A European Super League would cut UEFA out of the picture and make even more money for the clubs.

American sports teams are very profitable. Without the fear of relegation and league wide salary cap rules, they become serious businesses. I saw this when I owned shares in Madison Square Garden, which owned the New York Knicks (basketball) and the New York Rangers (ice hockey).

Mr. Ambani's main business, Reliance Industries, owns the Mumbai Indians Indian Premier League team (IPL) The IPL doesn't have relegation, has revolutionised cricket and most IPL teams have been very good investments.

Thanks for that. Food for thought.

Dod

[simoan]

Well done Salvor! MANU up 14.7% at close in US. And then another 7% after hours. Glazers have announced they are looking to sell.

All the best, Si

[SalvorHardin]

Well done Salvor! MANU up 14.7% at close in US. And then another 7% after hours. Glazers have announced they are looking to sell.

All the best, Si

Thanks. Occasionally I get one right. The shares are up a further 16% this morning (New York time) to $17.35 as I type this

It looks as though this time the Glazers are prepared to consider offers for the club. In the summer they were looking to sell a minority stake of up to 30%, with the purchaser having zero influence on how the club was run. It was no surprise that they didn't get any takers. I believe that four of the six family members have been wanting to sell for some time, whilst the other two (who run the business) have finally been persuaded to sell.

The market capitalisation of Manchester United at $17.35 is about $2.82 billion, or £2.35 billion, whilst the figures being banded around for a sale price range from a reasonable £3 billion to a "more money than sense" £9 billion (crazy, but not totally out of the question if two Arab national sovereign wealth funds get into a bidding war). Reports point towards the Glazers asking for £5 billion, roughly 110% higher than the current market capitalisation.

Given that the sale of Chelsea attracted about 200 "interested parties", I would imagine that if the price they're looking for is reasonable that the Glazers' bankers will be swamped with bids. Obviously the uncertainty about the Glazers' intentions, and the suspicion in some quarters that Chelsea's buyers overpaid by quite a bit, will exert some restrainit over the share price. Especially as any new buyer is going to be pressurised by fans to spend a small fortune on stadium redevelopment (Old Trafford is showing its age, including a leaky roof) and would want to clear almost £500 million of high interest debt which the Glazers dumped onto the club when they bought it.

I'm fairly certain that all potential buyers noticed that the headlines news around the planet yesterday, and not just the sports news, was two stories about Manchester United (the potential sale and Ronaldo leaving). No other sports team generates such global coverage. Unfortunately for many football fans, if the club is bought by American investors it's going to be a big step towards the Premier League being turned into an American-style sports league with no promotion or relegation (as it's too much of a risk to their investment). The European super league hasn't gone away, it's just sleeping (according to Barcelona, Juventus and Real Madrid).

"Reports in recent months have speculated that any transaction would need to value the club at anywhere between £5bn and £9bn to persuade the owners to sell."

https://news.sky.com/story/manchester-united-owners-to-explore-sale-as-glazers-seek-new-investment-12753359

[AsleepInYorkshire]

Well done Salvor! MANU up 14.7% at close in US. And then another 7% after hours. Glazers have announced they are looking to sell.

All the best, Si

Unfortunately for many football fans, if the club is bought by American investors it's going to be a big step towards the Premier League being turned into an American-style sports league with no promotion or relegation (as it's too much of a risk to their investment). The European super league hasn't gone away, it's just sleeping (according to Barcelona, Juventus and Real Madrid).

Salvor on this occasion I don't think The Premier League being turned into an American-style sports league is going to get you off the hook. I hope it sells for £9bn and you can retire to somewhere warm. Great insight and certainly some superb take-aways for others, including me, on how to work a winner. Top class Salvor.

Nice one indeed

AiY(D)
PS. Did you know millionaires have far more friends than the average white car owner

[simoan]

The market capitalisation of Manchester United at $17.35 is about $2.82 billion, or £2.35 billion, whilst the figures being banded around for a sale price range from a reasonable £3 billion to a "more money than sense" £9 billion (crazy, but not totally out of the question if two Arab national sovereign wealth funds get into a bidding war). Reports point towards the Glazers asking for £5 billion, roughly 110% higher than the current market capitalisation.

I think the market valuation based on the share price is not the number to look at. There is a large debt pile and so really you need to look at the Enterprise Value which is $800m added on to the market value. So already the valuation is around £3 billion. I’m sure someone with deep pockets will pay more than that, but who knows how much the Glazers want? Very likely too much! My only exposure to this is via FGT.

All the best,Si

[dealtn]

No other sports team generates such global coverage. Unfortunately for many football fans, if the club is bought by American investors it's going to be a big step towards the Premier League being turned into an American-style sports league with no promotion or relegation (as it's too much of a risk to their investment). The European super league hasn't gone away, it's just sleeping (according to Barcelona, Juventus and Real Madrid).

More likely a small step in that direction.

Incidentally the latest documents from the DCMS on the "Fan Led Review" arrived today - but that's for elsewhere and off topic on this board.

[SalvorHardin]

Well done Salvor! MANU up 14.7% at close in US. And then another 7% after hours. Glazers have announced they are looking to sell.

All the best, Si

Unfortunately for many football fans, if the club is bought by American investors it's going to be a big step towards the Premier League being turned into an American-style sports league with no promotion or relegation (as it's too much of a risk to their investment). The European super league hasn't gone away, it's just sleeping (according to Barcelona, Juventus and Real Madrid).

Salvor on this occasion I don't think The Premier League being turned into an American-style sports league is going to get you off the hook. I hope it sells for £9bn and you can retire to somewhere warm. Great insight and certainly some superb take-aways for others, including me, on how to work a winner. Top class Salvor.

Nice one indeed

AiY(D)
PS. Did you know millionaires have far more friends than the average white car owner

I've already retired to somewhere warm (the radiator is currently at 20 degrees centigrade and I'm having my early evening coffee in which there is both Baileys and Cornish White Rum).

As to the push towards an American-style league, that's the only way I can see to justify some of the prices being quoted (and paid) for the top football clubs (if we ignore the trophy asset aspect of owning a club). This gives total control over membership of the league and the bigger clubs get a larger share of the TV money that they generate. Bad for the game but good for the owners.

[Lootman]

As to the push towards an American-style league, that's the only way I can see to justify some of the prices being quoted (and paid) for the top football clubs (if we ignore the trophy asset aspect of owning a club). This gives total control over membership of the league and the bigger clubs get a larger share of the TV money that they generate. Bad for the game but good for the owners.

Liverpool FC is sort of kind of up for sale as well, or at least part of it. But I think that will be handled in a more discreet manner, whereas the Man U sale could be a cathouse fight of an auction.

A European Super League isn't a terrible idea in my view, depending on how it is structured. I'd rather watch Man U or Liverpool play Juventus or Dortmund than Wolves or Southampton.

Although if we had had no relegation for as long as th NFL then the Super League might have Ipswich, Blackburn and Notts Forest in it.

[SalvorHardin]

The Daily Telegraph has just published a report saying that Sir Jim Ratcliffe (Ineos) will put in a bid. Also that the Glazers want at least £5 billion.

"The owner of petrochemicals giant Ineos will now table a fresh approach – although he is wary about overpaying as insiders suggest the Glazers are looking for a price in excess of £5bn."

https://www.telegraph.co.uk/football/2022/11/23/manchester-united-sale-sir-jim-ratcliffe-will-bid-glazers-put/

[SalvorHardin]

The share price reached $23 earlier today ($22.90 as I type this), which is a market capitalisation of about $3.75 billion (£3.1 billion). Almost $10 up since my first post, though British buyers will have lost a bit of that (in sterling terms) due to the pound rising against the dollar.

Lots of commentary about a possible deal, as you might expect. Much of the commentary on financial websites makes a mistake by valuing Manchester United as if it was a conventional operating company, rather than treating it as a trophy asset (as said earlier, to justify the price as a business you'd really need no relegation from the Premier League and the European Super League to start soon).

I'm expecting lots of rumours followed by an announcement of an agreed deal, sometime between now and the end of the season.

Price anything between $4 billion and $6 billion, but up to £9 billion if there is a bidding war between Arab states.

In recent years when major sports teams have come up for sale, the price has tended to be substantially above the pre-sale estimates. Currently there is serious talk of the NFL's Washington Commanders (aka Washington Redskins and a very poor team nowadays) being sold for as much as $7 billion compared to an estimated $5.6 billion a year ago

Bear in mind that Chelsea (nowhere near as big a draw as Liverpool or Manchester United) sold for £2.5 billion earlier this year and I'd argue that the price was artificially low because the government turned it into something close to a fire sale by insisting on a quick sale.

Don't rule out Qatar as a bidder, even though they own Paris St. Germain. Qatar can easily change the ownership of PSG to pass muster with the football authorities (whose rules are regularly bypassed). Also they have David Beckham in their corner, and he's got lots of connections in the football world.

Dubai and Kuwait are serious contenders IMHO.

[simoan]

I hear what you’re saying from an investment perspective but as a life-long football fan I find it utterly depressing and intolerable that nation states are allowed to own English football clubs. I guess the Man United LGBTQ+ fans will just have to suck it up.

English top level football lost its soul in 1992, so why should I still care 30 years later? It’s because any real fan recognises the importance of Football League and Non-league clubs, and what they mean to their local communities. I only go to lower league games now because it’s honest, good fun, and good value compared to the rampant hype and overpricing of the Premier League. Everything as exemplified by the raising of the drawbridge that was the European Super League. Sorry this is OT but I hope MUFC fans take the necessary action to stop a country from taking ownership of their club. The Glazers may have been poor owners, but at least they don’t harm anyone’s human rights.

All the best, Si

[SalvorHardin]

I hear what you’re saying from an investment perspective but as a life-long football fan I find it utterly depressing and intolerable that nation states are allowed to own English football clubs. I guess the Man United LGBTQ+ fans will just have to suck it up.

English top level football lost its soul in 1992, so why should I still care 30 years later? It’s because any real fan recognises the importance of Football League and Non-league clubs, and what they mean to their local communities. I only go to lower league games now because it’s honest, good fun, and good value compared to the rampant hype and overpricing of the Premier League. Everything as exemplified by the raising of the drawbridge that was the European Super League. Sorry this is OT but I hope MUFC fans take the necessary action to stop a country from taking ownership of their club. The Glazers may have been poor owners, but at least they don’t harm anyone’s human rights.

All the best, Si

I agree and have to wear two very distinct hats; shareholder and fan (since the time of Best, Law and Charlton).

As a shareholder I want the biggest price. Dubai, Qatar, Kuwait bidding war. I don't own enough shares to make a difference and if I didn't own them then someone else would get the profits if the club is sold.

But as a fan I want the Glazers out and would prefer someone like Jim Ratcliffe, or a consortium with no state actors, as long as they could clear the debt. And if they could appoint football people to run the football side (rather than the gimps letting investment bankers play real life FIFA manager and wasting hundreds of millions in the process).

I'd also like the UEFA financial fair play rules to actually be used to stop Abu Dhabi, Saudi and Qatar from breaking the sport (some of their sponsorship deals with related parties are totally out of line with what the market would pay).

I wonder if Elon Musk has had a rethink about owning Manchester United. He did tweet about it some time ago, but then said he was joking

[WickedLester]

I wonder if Elon Musk has had a rethink about owning Manchester United. He did tweet about it some time ago, but then said he was joking

A corporate seat in the Twitter Box perchance?

[SalvorHardin]

The results for the first quarter of 2022-23 were posted Thursday evening and they were grim. Dividend cancelled and a loss of £26.5 million to go with the £115.5 million loss for the whole of 2021-22. Borrowings have risen to £577 million (in addition to another £208 million of liabilities).

The stadium is antiquated, the roof leaks, the training complex is falling apart and the Glazers don't have the money to fix these.

At least they have (mostly) fixed the team, where players are signed (or not) by football people rather than by investment bankers who are more concerned with their social media presence rather than what they do on the pitch.

Squeaky bum time for the gimps in Florida.

The results probably kibosh their hopes of getting their upper estimates for the club, unless there's a ego driven bidden war between Arab states, given that buyers can see that the club is in a worst state than previously thought (and that the gimps are being pushed into a sale because they don't have the money to fix the big problems). The share price fall of 6.8% on Friday is a strong indicator IMHO.

That said Manchester United is still a huge attraction as a trophy asset and I have no doubt that American investors are running the proverbial slide rule over the possibilities of getting 14 Premier League owners to stop relegation and to push ahead with the European Super League (good for shareholders, bad for fans).

Warren Buffett says that you should invest in a business that an idiot can run, because sooner or later one will (i.e. ever since Fergie retired).

I still reckon that £4 billion to £5 billion is achievable in a sale ($30 to $37 per share, compared to $20.35 at yesterday's close), provided that the gimps don't screw it up (given their track record since Fergie left, that's highly debatable).

[SalvorHardin]

After looking further into the recent results, I've taken some profits by selling half of my shareholding. I also wanted to raise some cash to buy some bombed out American REITs, so it was a fairly easy decision to make.

The results were worse than I thought. If trading continues in the same vein the club will be bankrupt within a couple of years. It won't go bust, even if the gimps don't sell up, as the club will drastically cut its spending on transfers. Which should worsen the on-pitch results.

It turns out that two of the Glazers recently tried to borrow enough to buy the other four out. But no-one wanted to lend them the money. Phew!

Given how the gimps have mismanaged the club into the ground (our finances are starting to look a bit like Barcelona's) they're going to find it very difficult to get a substantial minority investor. Phew again!

Anyway, I'm holding on with my remaining shares in anticipation of a bid. It is possible that the gimps won't sell, expecting that they can get more in the future.

Also if the European Super League rises from the dead (if it wins its court case against UEFA) and if the Premier League moves to becoming an American-style no-relegation league (American owners want this), then this could justify the sort if price tag that the gimps are reckoned to want (£7 billion to £9 billion).

[pje16]

Also if the European Super League rises from the dead

I do hope NOT
leave the EPL alone, it is fine as it is
as we saw with their botched attempt last time, the fans don't want it