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Manchester United's captain Patrice Evra, left, vies for the ball with Sunderland's Craig Gardner during their English Premier League soccer match at the Stadium of Light, Sunderland, England, Sunday, May 13, 2012. (SCOTT HEPPELL/AP)
Manchester United's captain Patrice Evra, left, vies for the ball with Sunderland's Craig Gardner during their English Premier League soccer match at the Stadium of Light, Sunderland, England, Sunday, May 13, 2012. (SCOTT HEPPELL/AP)

Breakingviews

Man United’s IPO transfer keeps owners in control Add to ...

Manchester United’s IPO transfer will keep the Glazer family firmly in control. For months, the owners of the English soccer club had sought a $1-billion (U.S.) initial public offering in Singapore. Now the plan has switched to a U.S. listing, reports IFR. New York doesn’t seem like the natural venue for a soccer share sale. But it’s plausible the deal will still fly, and the lop-sided governance in plan A remains.

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Brand-building in soccer-crazy, fast-growing Asia was a supposed benefit of the Singapore IPO. Instead United, which ranks only behind Spain’s top two soccer sides for revenues, must confront U.S. public indifference. Only 1 per cent of respondents to a U.S. poll by Harris in January named soccer as their favourite sport – placing it behind 13 others, including boxing and horse racing.

That might have mattered in the original plan, which anticipated lots of interest from small investors. But the U.S. buyer base will presumably be more skewed to institutions. And while they may bargain harder on valuation, they will surely see an investment case in a strong global franchise with a straightforward business model. It might also help that, unlike in Singapore, these buyers can compare United to domestic, listed sporting and media concerns such as Madison Square Gardens, the home of the New York Knicks, or Speedway Motorsports, an owner of NASCAR tracks.

Nonetheless, United’s pricing aspirations still sound ambitious, especially in view of the team’s poor performance on the pitch. Assume the $1-billion sought is for shares equivalent to 30 per cent of the company, and new stock, sold to pay down debt, makes up a third of the offering. Net debt would fall to a shade under £190-million ($300-million), implying an enterprise value of about $3.6-billion. With EBITDA for the first three quarters of the year pointing to an annual haul of about £113-million, that would point to a lofty enterprise multiple of about 21 times EBITDA.

Worse, a version of the Singapore plan to “staple” non-voting preferred shares with common stock lives on, IFR suggests. That was intended to let the Glazers keep control in excess of their economic interest. This could be accomplished in New York simply by issuing different classes of shares. In Britain such a scheme would be shown the red card. But raising capital is played by different rules around the world.

Quentin Webb

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