Yesterday, Manchester United PLC announced the secondary offering of 8 million of its Class A Ordinary Shares, presently held by its controlling shareholders, the Glazer family, through the holding company Red Football LLC.
Control of the club will not change as a result of the offering, though liquidity of its shares, which have been listed on the New York Stock Exchange for two years, should modestly improve through greater availability. The offering will proceed by way of a shelf-prospectus offering, under the rules of the Securities and Exchange Commission
The underwriters for the issue are Jefferies LLC, BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities and Nomura Securities International, who will also have an option to purchase up to an additional 1.2 million Class A Ordinary Shares from the selling shareholder.
When the club went public, in August 2012, it listed its shares at $14 per share, but ended up with a float of only about 10% of the company. Despite the loss of the Premier League championship title last year, finishing seventh, and the disastrous stint of David Moyes as manager, succeeding Sir Alex Ferguson, the business side of the club, which is all about massive sponsorship deals, has held up remarkably well.
Two weeks ago, Manchester United signed a new global technical sponsorship deal with Adidas worth a minimum of about $1.25 billion over 10 years, subject to certain conditions.
In 2012, General Motors committed to a $559 million, seven year global sponsorship deal for jersey naming rights for its Chevrolet brand.
The Chevrolet sponsorship deal takes effect this season, concluded not long before GM took a decision to withdraw the Chevrolet brand itself from all its European markets, in favor of the Opel brand. This demonstrates the global strength of Manchester United and its ability to survive pitfalls such as Nike’s decision to withdraw their major sponsorship a while back.
Accordingly, Manchester United’s shares have been up considerably, trading yesterday at $19.31 per share. This has lifted its market capitalization to about $3.2 billion, and the rising trend obviously stimulated the Glazers to add a little liquidity to the market for the company’s shares, where there had hitherto been a very thin float in public hands.
After this deal is done, the children of the late Malcolm Glazer, the entrepreneur who first purchased the club in 2005, will still own better than 80% of the club. But with a greater float can come higher volumes of trading and, stimulating greater interest in the shares over time.
The franchise’s future ultimately depends on renewed success on the pitch by the football club it embodies. The club has hired a highly regarded new manager, the Dutch Louis van Gaal, and the players seem to have taken to him with enthusiasm, judging by their successful pre-season friendly games.
With a number of key, new players still to be signed, glory days could be ahead again for Manchester United. As a long-time fan, I certainly hope so. For the business side, it is measurably important that it does: Manchester United has disclosed to potential investors in the new share prospectus that failure to play in the European Champions League for two consecutive seasons would see the future annual Adidas payments drop by 30 percent, from $125 million to about $88 million.
On the other hand, the club will enjoy upsides if it wins the Premier League again.