Manchester United is a famed English Premier League soccer club that has lost its way from glory in recent years. Despite its recent history of poor performance, it continues to be one of the most popular soccer clubs in the world. Back in 2005, The Glazers bought the club via a LBO and later took the company public in 2012. The cash flow from the club went into servicing the debt and as a result, reinvestments in the club suffered. Christiano Ronaldo even publicly stated that the facilities, kitchen, and stadium have barely changed since he left the club a decade ago. 

Now the cash flow from sporting clubs usually stays lean because it funds players wages and future trades. However, on top of the mounting debt, the Glazers pay themselves millions in dividends. The fans noticed the poor leadership and publicly protested the Glazers leading to immense pressure from fans and pundits alike. In November 2022, the Glazers finally considered putting the club up for sale on the same day they terminated Ronaldo’s contract. Interestingly, they hired Raine Group as an advisor to oversee the sale process which has been involved in several big-name sports deals like WWE’s merger with UFC, Chelsea’s sale to Clearlake Capital etc.

However, more recently the Glazers were rumored to pull the club off the market in what looks like a notorious bargaining tactic to me. The shares took a hit. At current prices ($19.30/share), we are looking at a $3.3B market cap. However, valuing a heritage sports club is a difficult exercise due to the precious intangibles. Looking at the valuations of other clubs in the premier league, we can get a rough idea of what MANU could be worth. Chelsea was sold last year for $5.4B, Liverpool is currently valued at $4.5B. Given that Manchester United is an older, more popular and a more historic club than both of these, the current valuation doesn’t seem too steep.

MANU also received two offers in the last year, British billionaire Sir Jim Ratcliffe has bid between £5-5.5B for just more than 50% of the shares (~$5.8B) while offering to keep the Galzers’ involved. Sheikh Jassim of the Qatari royal family also proposed to buy the entire club outright for £6B (~$7.5B). This is roughly double to the current share price and given that the next door neighbors (Manchester City) are owned by the Emirates, I can see a good incentive for the Qatari royal family to purchase MANU.

The biggest risk I see here is the dual class share structure of MANU. It has class A and B shares where A shares carry 1 vote and B shares carry 10 votes. Glazers’ own 100% of class B shares and roughly ~4-5% of the class A shares. Looking at the latest quarterly report, the company’s issued share capital comprised 54,537,360 Class A ordinary shares and 110,207,613 Class B ordinary shares. This means that a buyer can purchase class B shares from the Glazers and still maintain economic and voting ownership of the club while leaving the class A owners stranded. I think this is the primary reason why the shares currently trade at such a wide margin from the proposed bids. However, there are new reports that Jim Ratcliffe is restructuring the offer to address concerns of minority shareholders. I like the risk-to-reward ratio here.

Disclosure: I own shares of MANU