The Glazers, assuming they find a buyer, will depart Old Trafford as loathed by Manchester United fans as they were on arrival. They won’t give a damn, obviously. Malcolm Glazer, the penny-pinching patriarch who led the £800m takeover in 2005, was never hard to read and nor are his sons. They are interested in sporting success to the extent that it delivers financial success for them.
By the time Glazer died in 2014, the club’s equity was valued by the market at £1.5bn, which was a commercial triumph given the thin sliver of hard cash, as opposed oodles of debt, that supported the buyout. Leverage turned a good investment into an excellent one – for the Glazers, that is, rather than the club.
Strange as it now sounds, 17 years ago many thought the family would fall flat on its face. Yes, Rupert Murdoch’s BSkyB had bid £623m for Man Utd in 1998 (and been blocked by competition authorities) but the value of TV football rights, some argued, would deflate with the popping of the turn-of-the-century dotcom bubble. The club’s revenues in the 2003-04 financial year were only £169m, so £800m looked a severe overvaluation. In late 2002, shares in Man Utd fell as low as 100p; Glazer paid 300p.
To get the deal done, the American was forced to the limit. Irish property and horse-racing tycoons JP McManus and John Magnier held a combined 28.7% stake, and the duo never knowingly undersell anything. They rebuffed Glazer’s first bid and rolled over only when the price was improved. Financial pips squeaked as the buyer had to pay interest at 14.25% – paupers’ terms – on the notorious PIK, or payment-in-kind, a higher-risk tranche of debt. It took until 2010 to get the PIKs off the books.
The first half of the gamble, in effect, was that Sir Alex Ferguson would get the club into the Champions League every year, that Old Trafford would remain full, that merchandising revenues could be boosted and Premier League TV rights had further to rise. On all scores, Glazer was correct. The moment of maximum financial danger passed when a minority stake was sold by listing Man Utd in New York in 2012.
The second half of the Glazer years has been a quieter financial affair. Before Monday’s announcement of a sale process, the stock had gone roughly sideways for a decade. The hundreds of millions of pounds being paid by the club in debt interest payments, plus the post-Ferguson decline on the pitch, also weighed on the valuation.
The real game for Glazers, then, has always been about the exit. If the £4bn-plus speculation is to be believed, they are about to win for a second time. Their victory will feel dispiriting to many. But one has to concede that a supposedly reckless financial gamble has proved anything but. Football just keeps inflating, which only feels obvious with hindsight.
Postal strikes return to sender
A week ago the mood in the Royal Mail/CWU talks was improving, or so it appeared from public and private comments. Agreement on an improved pay deal felt close, and most of the negotiating effort was reportedly concentrated on questions of redundancy terms and working practices. Deadline pressure from the approach of Christmas seemed to be playing a role.
That script has now been ripped up. Talks at Acas, the conciliation service, are over; the company has declared its offer, including an 18-month pay rise of up to 9%, to be “best and final”; the union has rejected the terms; strikes at Christmas are back on.
It is impossible from outside to determine why the breakthrough never happened. Both sides will blame the other. But one can observe that the workers have more to lose than Royal Mail’s shareholders from the failure to reach a deal.
The boardroom promise-cum-threat that “further [strike] action would necessitate further restructuring and headcount reduction” is, sadly, credible. Royal Mail made operating losses of £219m in the first half of the financial year and all the value in the group – now rebadged International Distribution Services – lies in its Amsterdam-based international business called GLS.
Whether it is fair or not, the shareholders are insisting that GLS does not cross-subsidise a loss-making Royal Mail. Some will also be lobbying for a full break-up, an outcome that would surely be more likely – not less – to turn Royal Mail into the “Uber-style gig economy company” that CWU general secretary Dave Ward warns about. The offer on the table ain’t great when inflation is 11% – but it may be the best that can be achieved.
