By Nick Harris
10 May 2010
The Red Knights still intend to table a formal first bid for Manchester United before the World Cup begins on 11 June despite a downbeat statement today from the super-rich fans’ group, sportingintelligence can reveal.
That initial bid is likely to be worth £1bn, although it will require only £500m of immediate funding from the Knights. Sportingintelligence understands the Knights will offer to give £300m cash to the Glazer family to leave, will spend another £200m clearing the “ticking time bomb” PIK (pay-in-kind) debt, and will take responsibility for the £500m bond debt.
That £300m for the Glazers would effectively give them a “break even” deal on their initial cash investment of around £270m (of an £800m takeover) in 2005, and no more. It is understood the Knights already have resources comfortably above the £500m needed for the £1bn bid as described.
In what is shaping up to be a chess-esque summer of takeover intrigue, the Glazers will almost certainly reject the first offer out of hand – the Americans insist the club is not for sale – and then the Knights will regroup to plan their next move.
The most crucial aspect of the first bid will come in its timing – calculated for maximum impact in the PR campaign being waged by the Knights and their campaigning partners at the Manchester United Supporters Trust.
That first bid, sportingintelligence expects, will be tabled a few days before the World Cup starts on 11 June, and certainly no later than 12 June. The Glazers will reject it swiftly. The Knights and MUST will then use the date of 13 June – the first season ticket renewal deadline – to appeal to fans with a message along the lines: “The Americans want to stay and ruin your club, don’t renew your season ticket and help them”.
If this all sounds rather choreographed, then it is only to be expected from two parties – the Glazers on the one hand and the Knights/MUST on the other – who both naturally value United highly for their own reasons. (Getting a deal done for United will be rather more convoluted than finding Britain a government after an election.)
What happens after the first offer and rejection depends on how much the Knights increase their first offer, and whether other factors – like a massive but unlikely season ticket boycott – force any change of stance in the Glazers.
It would not come as a huge surprise if a second bid, of perhaps £1.2bn, arrived sometime in July just as United are touring America, where MUST will be able to target the anti-Glazer message strategically in the Glazers’ own back yard.
Yet the Americans know they own a cash cow – loved passionately by its many fans, not least the anti-Glazer fans – and believe the cash it makes comfortably maintains interest payments on debt. If they are true to their word, they won’t be leaving any time soon.
The Knights, led by the Goldman Sachs chief economist Jim O’Neill, say they won’t pay over the odds. A statement released this morning was downbeat in as much as it acknowledged there would be no sensational knockout bid.
“We have had productive conversations with potential investors in recent weeks which have reinforced our belief that it is wrong to offer above fair value, particularly given the urgent need for the club to reduce debt; and that fair value is likely to be reducing over time given headwinds facing the game of football,” the Knights said.
Duncan Drasdo, MUST’s chief executive, reacted to the Knights’ statement by saying: “Of course it is absolutely right that the Red Knights will not pay a ridiculously inflated price for Manchester United. The Glazers overpaid in the first place and look at the problems they created with the huge debt they put onto the club because they were either not prepared or not able to fund the purchase themselves and expected supporters to fund it for them through vastly increased ticket prices.
“However demand for tickets and corporate hospitality has nose-dived due to these price increases combined with the current economic climate. Furthermore even their own advisors, JP Morgan, have recently forecast that this decline in match-day revenue will continue over the next couple of years so consequently the valuation placed on Manchester United must now be on a downward trajectory.
“Unlike the Glazers, the Red Knights and other Manchester United supporters will be putting in their own cash. It is important to make funds available for investment into the club and reducing the debt. Every pound overpaid to the Glazers is a pound less that could be spent on the next Ronaldo or Rooney or invested into expanding Old Trafford.
“The Glazers [paid] an inflated price which they evidently couldn’t afford to fund themselves and has resulted in huge damage to the club. In stark contrast the Red Knights collectively have financial resources which dwarf those of the Glazers, but they are not prepared to overpay because this would ultimately be detrimental to Manchester United Football Club.”
As a PR move, the claim of huge resources on the Knights’ behalf is slightly odd; akin perhaps to a football club telling rivals they’re loaded just ahead of the transfer window.
But the battle for United is not – and won’t be – as simple as the Knights offering a massive cash sum and the Glazers accepting it. That would be like an election with a clear winner: unthinkable.