Manchester United Chief Executive Looks for Flotation to Pay Debt

October 10, 2011

Manchester United chief executive David Gill has given his vedict for the first time about the “potential” in floating shares on the Singapore Stock Exchange with the Glazers seemingly now valuing the club at a unprecedented £2.57 billion ($4bn).

The Glazers paid £790 million ($1.23bn) to buy Manchester United – although the final bill amounted to £850 million ($1.33bn) including the legal and advisory costs – and they recently rejected offers of £1.5 billion ($2.34bn) from China and Qatar as, it is now clear, they fell well short of their valuation.

The Glazers are seemingly planning to float 25% of Manchester United on the Singapore Stock Exchange at a value of $1 billion (£643 million), which would value Manchester United at $4 billion. If the shares are sold, they could carry voting powers of only 12%, which would fall well below the 25% threshold that allows shareholders to contest decision-making.

“It’s a potential,” Gill told the Sunday Telegraph. “I think the finances of the club are in robust health in terms of the bond interest against the EBITDA [earnings before interest, taxes, depreciation, and amortization] that we do have, so in that respect I am not concerned.

“But it was an opportunity, and is a potential opportunity, to strengthen them even further. If the proceeds were by and large used to pay down the bond debt then that would take some of the interest costs out.”

The Glazers’ advisory team – including Morgan Stanley, JP Morgan, and Credit Suisse – will inform the owners when the time is right to press ahead with the plans and, given the parlous state of the global economy at present, it appears they will have to wait.

Gill added: “It is not officially on hold but the owners will be taking appropriate advice from the advisors and determining what the markets are telling us. “But I don’t think it’s the level of the market – it is the sheer volatility. That’s the challenge.”

United generated an operating profit of £110.9 million ($173.5m) for the past financial year, has been speculated to have payed down the bond debt instead of been used for investment into the squad. Gill, though, denies Sir Alex Ferguson has been significantly hindered.

“The owners have never been anything other than 100% supportive on delivering to Alex or me the players we need to keep ourselves going, but people don’t believe us.

“If you look at it, we are spending £13 million ($20m) revamping Carrington [the training ground] and we have just completed this summer at Old Trafford our box redevelopment. There has never been any money that we have needed to develop the club that hasn’t come forward.”