Will the Red Knights be able to rescue the Red Devils from the Glazers?
If you are a shareholder in a listed company and you are not happy with how it’s being run, you have options. You can sell your shares and move on, you can increase your stake, make a stand by voting against the bosses or indeed back an activist investor and help topple the big cheeses.
If you are a customer and you don’t like the widgets or shoes being sold by the company, you can boycott their products. You have the power: the customer is king.
By the same token, if you are a fan of, say a football club, and you don’t like what the club’s bosses are doing, you can vote with your feet by not turning up to matches.
Yet that would be daft, like cutting off your own nose to spite only yourself and at the same time cutting the legs from under the players that you love and the team you have loyally supported for years.
Or you can do what thousands of Manchester United fans did last Sunday, invade Old Trafford’s football stadium, create a level of havoc that would not look amiss in Beirut, send off a few flares, get one of the most anticipated matches of the year against Liverpool cancelled and beat up a few policemen in the process.
It was not a good look, even for the aptly named Red Devils. But you can understand their frustration and fury. For years the club’s fans, many of whose families have been supporting the club since it was created in 1878 out of the Lancashire and Yorkshire Railway, have been patiently trying to get the Glazer family in the US to change their ways.
But to no avail; campaigners say attempts to persuade the Glazers to adapt or even to hold discussions with the various fan groups have been ignored at every twist and turn. The Glazers have made two terrible, basic errors: they have operated from across the Atlantic like a secret cult and treated their fans as consumers. They are not: fans belong to a tribe, and the attachment is emotional as well as social. Atavistic as well as visceral. And as we saw, fans are prepared to fight.
Sunday’s unhappiness was not the first time they have shown their fury. The trigger for the protest may have been prompted by plans for the new European Super League, but the anger with the Glazers goes back to when the family bought the club in a highly-leveraged £790 million buyout sixteen years ago next month. Then, the club had £6 million in the bank and no debt.
The Glazers have run United like a privately owned, highly geared company rather than one with publicly traded shares with engaged shareholders. They own 75% of the club through a dual-share structure listed on the New York Stock Exchange, have taken out about £22 million a year in dividends while the debt mountain has ballooned.
Some £837 million of interest has been charged on loans to date – sometimes up to £100 million a year. But because the debt is tax deductible, United gets a tax credit of £71 million while total debt stands at around £450 million.
Indeed, the banks which lent to the Glazers were so worried about the risks involved that they charged up to 14.25 per cent on the loans. Kieran Maguire, lecturer in finance at Liverpool University and author of the Price of Football, reckons the banks have earned about 80p for every net £1 spent in the transfer market by United since the Glazers took control. (For more details of the finances see the excellent Twitter thread from @SwissRamble.)
Having such a tightly held share structure also makes it impossible for anybody interested in shaking up the management to build up a stake or, indeed, make a full takeover as bidders would need the backing of the family. (Another reason why the craze for SPACs is such a bad idea.) To date, the Glazers, operating remotely from the US have resisted any offers -including one from a big Middle Eastern sovereign wealth fund last summer. Instead, they continue to strip money out of Old Trafford and stand accused by their fans for running the fabric of the club to the ground. Even the toilets need doing up.
As always, there is a counter view: that the Glazers have been one of the biggest spenders on transfers while they have been brilliant at signing up sponsors with juicy commercial deals such as those with Adidas, Chevrolet, Coca Cola, Tag Heuer, TeamViewer and others. This year United will earn £279 million from commercial contracts.
What they have done differently to other clubs is sell sponsorship on a regional basis. For example, they have telecoms partners in the US and Canada, another in Africa, another in China.
It’s one of the reasons the Glazers claim the United brand is one of the most popular on the planet – particularly big in the Far East – with some suggesting there are a billion fans worldwide. One in seven of the world’s population? Really. Sounds a stretch.
The big question now is whether the Glazers will respond positively to the letter sent by the Manchester United Supporters Trust (MUST) after the protests, which urged the co-chairman, Joel Glazer, to engage with fans if there is not to be a repeat of the violence.
Rather sensibly, MUST asks for them to introduce a share structure which is accessible to all, including fans, appoint independent directors, take part in the government’s fan-led review of football, consult with fans over season tickets and so on. They also point out not a single member of the family has ever met with anyone from MUST. Quite extraordinary.
In another letter to Joel Glazer, Lord O’Neill and Sir Paul Marshall known as the Red Knights after their attempt to buy the club six years ago, have also demanded sweeping reforms. They want the Glazers to overhaul the corporate structure and share classes, bring in a new fan-controlled supervisory board, and an end to the Glazer family’s majority stake.
It’s not known how the Glazers will react to these latest demands. But the market does. United’s shares have been slipping all week, and last night closed down 2% at $16.43 where the club is valued at $2.6 billion (£2.1 billion.) Maguire reckons the Glazers might just sell
for around £4 billion. But who would pay that sort of premium with so much debt? Analysts suggest a more realistic price is around £2.5 billion if the Glazers were willing to walk away.
Behind the scenes, football fanatics and their bankers are working overtime. The grapevine suggest there are plenty of bidders going over the numbers getting ready for a takeover. There is talk that O’Neill and Sir Paul might be going over the spread sheets again, hoping to rustle up a consortium should the opportunity arise.
Such a bid might need another big anchor investor behind it but any potential bidder would have to include a big slug of equity for fans, and hopefully keep the majority of investors UK-based. Getting fans to invest would also be a great idea, locking them in as well as
giving them a voice. As new research from Morning Consult, a global data intelligence company, shows, most fans believe that their clubs do not care about them but that 7 per cent of fans of Manchester United, Liverpool, Arsenal and Chelsea would be prepared to invest more than £1,000 in club shares to guarantee they had a say.
The problem for the Glazers is if those voices continue to get heard either through violence or boycotting sponsors, they are in big trouble. If the Glazers do not make changes, or show that they are prepared to make changes, the club’s big international sponsors may well do it for them – either by pulling out or piling on the pressure.
Sponsors know better than anyone how being associated with a tarnished reputation can harm their own global brand. The United campaign has started already with fans posting on Twitter with the hashtag ‘NotAPennyMore’ vowing to boycott and target the sponsors.
Big sponsors will be quick to respond to negative publicity and won’t hesitate for a second in pulling their sponsorship, as we saw when Tiger Woods and Lance Armstrong fell out of favour for their transgressions. If the Glazers don’t act fast, they will find that putting the magic of a global brand back in the bottle is even tougher – and more costly – than winning the Premier League.