Manchester Case

107-032-1
‘The Manchester United Buccaneers’?

Malcolm Glazer’s Acquisition of Manchester United
Manchester United Football Club fans felt that they had almost single-handedly stopped the
world’s largest media magnate, Rupert Murdoch, from purchasing the club in 1998.
Shareholders United was therefore confident that they could repeat their success when the
American tycoon Malcolm Glazer, owner of the Tampa Bay Buccaneers, tried to purchase their
team in 2005 in a highly leveraged bid. To underscore their anger, they organised protests at
matches, hung his effigy at Old Trafford stadium, stormed the offices of his advisors and
questioned how an American could possibly be allowed to take over a symbol of England’s
greatest pride.1
Nevertheless, in June 2005, Glazer acquired Manchester United PLC in a £790 million
leveraged buyout and heated takeover battle, successful in his second attempt to purchase the
football team. This followed Roman Abramovich’s cash purchase of Chelsea football club in
Usage permitted only within these parameters otherwise contact info@thecasecentre.org

London a year earlier.
Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Manchester United’s fame
Purchased for use on the SMM233 M&A, at Cass Business School.

Manchester United are a world-famous English football club, based at the Old Trafford stadium
in Greater Manchester. The club was one of the most successful football clubs in English
footballing history at the time of the takeover, having won the Football Association (FA)
Educational material supplied by The Case Centre
Premier League/Football League 15 times, FA Cup 11 times, the League Cup twice, the
Copyright encoded A76HM-JUJ9K-PJMN9I
European Cup twice, the UEFA Cup Winners Cup once, the Intercontinental Cup once and the
European Super Cup once. With the largest stadium amongst the Premier League clubs,
Order reference F381722
Manchester United had the highest average attendance in English football for the 34 seasons
prior to the takeover, with the exception of 1987-89 during redevelopment at Old Trafford. By
2004-2005, the club had £160 million in revenues and £16 million in net profit. Manchester
United was arguably the world’s most recognised sports team.
The club had been run as a public limited company listed on the London Stock Exchange
since 1991. There was an attempted takeover by Australian-American media tycoon, Rupert
Murdoch, in 1998 eventually blocked by the British government. Murdoch’s £623 million
buyout offer was turned down partly because it was considered too low, but the fans claimed
the victory as well in beating Murdoch.
Malcolm Glazer – owner of sports teams
Although Glazer made his fortune in shopping malls, he paid $192 million in 1995 for the
American football team, the Tampa Bay Buccaneers in Florida. By 2005, the Buccaneers
were valued at $671 million. Notably, prior to Glazer’s purchase, the team had the worst
record in the National Football League in the United States and Canada but, in 2002, they won
2
the Super Bowl.
Glazer’s battle preparations in 2003
In March 2003, Glazer quietly bought his first shares in Manchester United. He purchased
2.9% of the club for a reported £9 million.
On 25 September, Glazer increased his stake in the club to 3.2%.3 With more than 3%
ownership through a company he formed called Red Football Ltd, Glazer’s identity was
revealed to the London Stock Exchange and the disclosure began to prompt speculation that
Manchester United could face a transatlantic takeover bid. Manchester United shares rose to
195.5p at the close of the trading day on 25 September, a rise of 3.4% on the previous day’s
This case study has been written by Scott Moeller and case writer Otaso Osayimwese of Cass Business School, City
University as a basis for classroom discussion rather than to illustrate effective or ineffective handling of an
administrative situation.
© 2010 S. Moeller, Cass Business School.
Distributed by The Case Centre North America Rest of the world
www.thecasecentre.org t +1 781 239 5884 t +44 (0)1234 750903
case centre All rights reserved f +1 781 239 5885
e info.usa@thecasecentre.org
f +44 (0)1234 751125
e info@thecasecentre.org
107-032-1
close, valuing the company at roughly £500 million.4 At this point, Manchester United
dismissed rumours that Glazer was connected to the club’s biggest stakeholders, JP
McManus, John Magnier and Dermot Desmond, who together owned a 10.1% stake in the
club.5 Cubic Expression, the investment vehicle of the Irish millionaires (aka the ‘Irish duo’,
McManus and Magnier) also scotched rumours of any plans to launch a takeover bid for the
club. Glazer also was reported to have said that he had no plans to be a majority owner of the
football club.6
On 1 October, a statement released to the London Stock Exchange after trading reported that
Glazer’s Red Football Ltd now held 5.9%.7 The news of this additional activity pushed
Manchester United shares up to 198.25p.8 Glazer had in less than one week almost doubled
his stake to approximately £30 million. Cubic Expression, which had begun buying shares
when the stock traded for 100p, now purchased BSkyB’s 9.9% Manchester United stake at
240p in mid-October 2003.9 Together with some other purchases, this brought Cubic
Expression’s stake in the club to about 23%.
On 29 November, Manchester United shares hit an all-time high following renewed speculation
that the club was on the verge of receiving a takeover bid after an unknown investor
purchased a major block of shares. London Stock Exchange trading data showed that two

blocks of about 11.9 million shares were traded, together representing just over 4.5% of the

club’s total shares. The first block was sold at 264.25p and the second at 265p, a significant
premium on the earlier level of 249p and up sharply from the 105p at the beginning of the year.

Based on these share prices, the club was valued at about £690 million.
10
Commerzbank confirmed that it had brokered the trades. The investment bank would not
name the buyer or the seller of the shares. If the German bank were acting for McManus and
Magnier, who already owned 23% of the club’s shares, their total shareholdings would then
have been close to 28%. If they were acting on behalf of Glazer, this purchase would raise
Glazer’s stake to 15% and close the gap between him and the Irish duo. John de Mol, the
director of Talpa Capital, had also been buying Manchester United stock, but he declared that
he was neither the seller nor buyer of the mystery stake.11 Speculation over the seller was now
focused on another investor, the hedge fund Lansdowne Partners, after Commerzbank said it
had bought the shares from another bank. The only other bank with a stake in Manchester
United was UBS. The Swiss bank’s holding was 5%. The bank had bought Robert Maxwell’s
stake in the early 1990s at about 30p, adjusted for stock splits. UBS had earlier received
enquiries about its holdings but announced at that time that it was holding out for at least
260p.12
Public confirmation of Glazer’s interest
Manchester United revealed on 29 November that it had been in talks with Glazer during that
month. The club’s stated intentions for the talks were to gain some insight into Glazer’s actions
and plans. David Gill, Manchester United’s Chief Executive Officer, made the following
statement: ‘Mr Glazer told us he thought Manchester United was a good investment. We
presented our results to him and the strategy going forward.’
On 1 December 2003, Manchester United confirmed that Glazer was the mystery buyer who,
as a result of the purchase, now held a total of 14.3% of the company, consisting of
37,357,942 ordinary shares.13 As had been speculated, the club also announced that
Lansdowne Partners no longer held shares in Manchester United.
As the likelihood of a bid from the two biggest stakeholders increased, analysts had thoughts
about a third outside bidder coming in and making an offer for the company. Ralif Safin, a
founder of Russian oil group Lukoil, revealed that he was the mystery outside bidder. The 49-
year-old billionaire had been in talks with London investment banks about making a bid for
Manchester United shares but, to many, Safin’s scheme was not viewed as a realistic threat
because of Russian politics, changing his position in Lukoil following President Vladimir Putin’s
recent success in the latest parliamentary elections there.14
2
107-032-1
Strategy and tactics
On 2 December 2003, Gill met Glazer again to discuss the recent increase in his stake in
Manchester United. On 9 December, Manchester United revealed that Cubic Expression had
increased its stake to 24.2%.15 It was believed that Cubic Expression only had a speculative
interest in Manchester United and its latest increase in shares might have been based on
either the assumption that the share price would increase because of a possible takeover or a
defensive strategy to stop the threat of Glazer. While the Irish duo continued to dispel rumours
of a planned takeover, they acknowledged correspondence with UBS on the Swiss bank’s
5.3% stake held in the Manchester United club.16
As Glazer continued to increase his stake, his biggest defensive barrier, Cubic Expression,
increased its stake in Manchester United to 29% in February 2004.17 In addition to the 29%
stake held, Cubic Expression asked for a non-executive board seat for a nominated
representative. This seat would put the Irish duo in a position to request the appointment of a
new chairman or chief executive, positions then held by Sir Roy Gardner and Gill, respectively.
The motives of the Irish duo were difficult to determine as they insisted that they had no
interest in making a full bid for the club. The question which many analysts were asking was
how much of the Irish duo’s criticism of the club was driven by investment considerations and

how much was directed towards Sir Alex Ferguson, the club’s manager, over a racing horse

court case he was pursuing against Magnier.

In February 2004, Manchester United’s board put pressure on the Takeover Panel, which
regulates mergers and acquisitions, to make a request to Glazer to clarify his intentions
concerning the club. This came after Red Football Ltd announced it was ‘considering possible
18
options, which may increase or decrease its shareholdings’. The family said it had acquired
shares in Manchester United because it had great admiration for its ‘rich history, loyal fans,
great players, outstanding managers, winning tradition and for investment purposes’. It added
it was considering its options, including ‘a possible offer for or a possible sale of its
shareholding in Manchester United’.
Unsurprisingly, throughout this period the fans of the football club were expected to resist any
offer.
• Shareholders United, along with the Independent Manchester United Supporters

Association, a similarly motivated group, organised several demonstrations before
football matches. Shareholders United was founded in 1998 as a way to stop the
earlier takeover bid by Rupert Murdoch. Its objective was to encourage Manchester
United fans to buy shares in the club. Through this, they hoped that the loyal-fan base
would have a greater say in matters concerning the club. After successfully stopping
the Murdoch takeover, Shareholders United was poised to defend Manchester United
against any future takeover attempts.
• The Independent Manchester United Supporters Association was launched in April
1995 and was an open democratic body pledged to giving the ordinary Manchester
United supporter a voice. Its main objective was to maintain a channel of meaningful
dialogue with the directors and management at the Club on behalf of its members.
Share ownership was not originally in its charter.
Oliver Houston of Shareholders United (the fans’ pressure group) said: ‘While we welcome
that Glazer has made his first public pronouncement - one that the Takeover Panel had to
19
extract from him - this supposed statement of intent is as clear as the new offside rule’. The
board as well as Shareholders United were hoping for the Takeover Panel to issue a ‘put up or
shut up’ statement to Glazer, which would ban him from making a bid for the team for the next
six months if he did not make an official offer. Normally, he would have been restricted but
because of his statement of intent that he was considering all options including a bid, he put
Manchester United into a de facto indefinite ‘offer period’. This meant that directors in the
company would be forbidden from dealing in Manchester United’s shares and meetings with
shareholders would have to be policed by financial advisors.
3
107-032-1
In March, Glazer was exempted from the Takeover Panel’s six-month ban on making a bid.
Normally he would have been restricted because of his declaration in February that he was
considering all options, but Gill had said that Glazer had the right to bid for the shares at any
time.20
Glazer further increases his stake
Glazer’s Red Football Ltd had responded to Cubic Expression’s increase in Manchester United
shares by increasing its holding to 17% on 25 February. About a month later, Glazer bought an
additional 4.1 million shares. On 31 March, Manchester United fans, Shareholders United and
the Manchester United board secured some breathing space from the takeover threat of
Glazer. Manchester United said it had spoken to Glazer and the Takeover Panel and decided
that it was in the best interests of everyone to end the offer period. Manchester United did not
ask the Takeover Panel to impose the ‘put up or shut up’ rule. Glazer said he had ‘no current
21
intention’ of bidding. This was a short-lived victory as Glazer increased his holdings in the
club to 18.3% on 27 April 2004.22 He purchased the shares from Maurice Watkins, one of
Manchester United’s non-executive directors. Watkins, a long-term shareholder and the club’s
legal advisor, sold 1m shares at 250p each to reduce his holdings to 1.9%.23 Glazer also hired
JP Morgan to advise him on making a takeover bid. JP Morgan began talks with Cubic

Expression.

In October, Glazer continued to increase his stake in the club. On 15 October, Glazer placed

an order for 25m shares with Credit Suisse First Boston (CSFB). By the end of the trading day,
his Red Football Ltd had acquired 15.8m shares at an average price of 285p, lifting Glazer’s
stake to 25.5%. If Glazer had succeeded in buying the 25m shares, his stake would have been
29%. Glazer was believed to have used CSFB rather than JP Morgan to disguise his intentions
from potential sellers. Glazer’s increase in shares came after talks broke down between JP
Morgan and Cubic Expression because a firm bid was not made for the Cubic Expression
24
stake, despite suggestions that Glazer was willing to pay 300p a share. With Cubic
Expression only willing to sell at an offer price of 310p, it was unclear whether other
shareholders would be tempted to sell to Glazer because Cubic Expression controlled such a
large block of shares. However, on 18 October, Glazer bought 6 million shares worth $30.5
million to take his holding in Manchester United to 27.6% and a day later bought 1.3 million
shares at a cost of $6.5 million, bringing his stake to 28.1%.25 By the end of October, despite
repeated requests, he still had not been granted access to view Manchester United’s books.
Glazer’s attempted takeover was dealt a severe blow on 25 October, when Gill ended
discussions with Glazer about a 300p-a-share offer. Gill said that the decision had been made
because Glazer’s proposal was ‘overly leveraged’ and would therefore leave the club with too
much debt. ‘Manchester United has been around for 126 years and too much debt could
jeopardise its future viability’, he said.26 The board felt that Glazer would mortgage the club’s
future to pay for his bid.
Fans support the club
Manchester United’s supporters opposed to Glazer buying the club received a boost on 21
October, when Weil, Gotshal & Manges, an international law firm, said that it would provide
legal advice to Shareholders United. Will Rosen, a senior partner at the firm said, ‘Many
football fans are concerned with the trend towards big business buying clubs as commercial
investments with scant regard for the traditions and social functions of these clubs. By
providing legal advice to this not-for-profit shareholders group, we feel we’re acting in the best
27
interests of football supporters.’
Although Shareholders United had been holding demonstrations and organising boycotts of
major brands affiliated with the club, they now planned to build up a blocking stake to halt any
plans to take the football club private. Meanwhile, Keith Harris, Chairman of Seymour Pierce, a
UK investment bank, and long-time Manchester United fan was working on a separate deal
that would give the club’s many fans a stake in its ownership and a say in its management.28
4
107-032-1
Two high profile examples of the protest demonstrations occurred while Glazer was increasing
his stake in the club: one before an important league match against Arsenal to show the board
that supporters were against the takeover and the other before a Champions League match
against AC Milan, when thousands of Manchester United supporters marched to demonstrate
that they would not welcome Glazer if he bought the club. These pressure groups also
encouraged members to demonstrate at shops owned by the club’s sponsors to prevent them
from trading. The purpose of this was to warn the sponsors that supporters would boycott their
products if they continued their links with the club after a takeover. They also held three
demonstrations outside the offices of JP Morgan, Brunswick (Glazer’s public relations
consultant) and the London Stock Exchange.29 When the Manchester United board refused to
recommend Glazer’s initial bid of 300p per share, the decision was seen as a victory for
Shareholders United.
Second takeover attempt
Following the rejection from the board, Glazer’s next encounter with it was at the annual
general meeting on 12 November. He had his revenge by voting three directors off the club’s
board. His votes against Philip Yea, Chief Executive of a UK private equity group, and Maurice
Watkins, the club’s legal advisor, resulted in the failure to reappoint the two board members as

non-executive directors. Andy Anson, Manchester United’s Commercial Director, was also

30
voted off the board at the annual meeting. The board had tried to enlist help from McManus
and Magnier for the reappointment of the two directors but, despite the attempts to convince

them to back the reappointments, the Irish duo abstained from voting. Manchester United’s
annual general meeting also witnessed the dislike that Shareholders United had for Glazer.
Oliver Houston of Shareholders United said: ‘The board should not allow themselves to be
bullied by Glazer. It is an irritable petulant attempt to threaten the board and is precisely why
we don’t want someone like Glazer to take over Manchester United.’

Public pressure on Glazer and his advisors continued. Sir Roy Gardner, who was also Chief
Executive of Centrica, a UK energy company, reportedly vowed to cut all ties with JP Morgan.
Sir Roy was unhappy because JP Morgan had promised Manchester United that it would
never undertake a hostile bid against a Cazenove client. Cazenove and JP Morgan formed a
joint venture early in 2005 and the two banks continued to work on separate sides of the
31
takeover. Manchester United’s supporters took further action. For example, they decided to
abandon their red scarves and chanting in favour of black scarves and protests as an
expression of their opposition to Glazer gaining full control of the club.32
Glazer reportedly asked British police to keep his address secret and also requested secrecy
from Companies House, at which directors must register their address. This request occurred
after Shareholders United listed one of his addresses on a website urging fans to ‘focus [their]
venom’ on him by post or email, as well as an effigy of him having been strung up outside Old
Trafford the previous week. Cars owned by club directors who sold their shares to Glazer were
reportedly damaged and an attempt by an anti-Glazer group to occupy the Manchester offices
of NM Rothschild, another of his advisors, backfired when protesters got stuck in the lift and
had to be rescued by firefighters.33
The board considered having meetings with Glazer and Cubic Expression in an attempt to
clarify whether Glazer planned to make a hostile bid for the club. The board was worried about
the prospect of a hostile bid after Cubic Expression’s decision to not sell out to Glazer. The
board’s decision to pressure Glazer into a decision came after JP Morgan formally withdrew its
backing of him claiming he acted against their advice at the AGM. In response to not receiving
a formal offer from Glazer, the board gave an ultimatum. It decided not to discuss any bid for
the club unless it was given a formal offer. The club board also threatened to issue an official
stock exchange request that would demand Glazer ‘put up or shut up’.
On 20 December, Gill met Glazer, who indicated his wish to make a second bid for the club for
£800 million. The price of 300p per share was the same as the first offer but this time the
financing was said to be less leveraged and more cash-based. Glazer had contacted
Commerzbank to discuss funding the bid. Commerzbank replaced JP Morgan as his lead
34
financial advisor.
5
107-032-1
In February 2005, Glazer was finally granted limited due diligence, allowing his Red Football
Ltd to gather non-public financial information. At this point, it seemed unlikely that Glazer
would launch a hostile bid, but it was clear that he would need the backing of McManus and
Magnier.
In late April, senior figures on the Manchester United board were believed to have decided not
to recommend Glazer’s 300p a share offer to the club’s shareholders. The decision left Glazer
with the option of launching a hostile bid by going directly to the shareholders without the
recommendation of the board. However, since the board had not explicitly rejected his
proposal, he did not need to launch a hostile bid. The Manchester United board described the
300p-a-share bid as ‘fair’ but said it would not recommend Glazer’s proposal because it would
35
burden the club with too much debt.
Deadline set
On 28 April, the Takeover Panel set Glazer a deadline of 17 May to make a formal bid for
Manchester United. The Panel’s intervention came at Manchester United’s request.
Manchester United were said to have asked the Panel to intervene because the ‘uncertainty’
surrounding the potential offer was ‘disruptive to the business’, adding, ‘it was in the interests

of all concerned to have a definitive timetable’ relating to the ownership. If Glazer did not

submit a formal bid by 17 May, the Panel rules would prevent him from making another for six
months.

On 30 April, Shareholders United unexpectedly made an offer to two of the biggest
shareholders, excluding Glazer. The group, backed by Nomura, contacted Cubic Expression
(28.7% stake) and Harry Dobson, Scottish mining magnate (with 6%, the third largest stake),
and made an offer to buy their shares. Shareholders United controlled only about 2% of
Manchester United’s equity but wanted to increase its stake to a level that would prevent
Glazer from buying 100% of the company. Shareholders United offered to buy a portion of the
Cubic Expression shares and was interested in buying Dobson’s entire stake. Initially, it was
36
unclear whether the group would be able to match Glazer’s offer for the shares. The
pressure group proposed to finance an investment trust which would be funded by current and
future shareholders and which would be leveraged by borrowings from Nomura.
Final whistle
Finally, it appeared to be ‘game over’ on 12 May when Glazer won a majority stake in
Manchester United after persuading the Irish duo to part with their entire stake for 300p per
share. The deal gave Glazer a controlling stake of 56.9%. As a result, he had to bid for the
remaining shares in a formal offer for the club and follow the UK legal bid timetable.37 Two
days after his buyout of Cubic Expression’s shares, Glazer increased his stake to 74.8%,
bringing the football club closer to delisting and by 20 May he had over 76%.
The club’s fans paid a visit to JP Morgan at a dinner which it hosted at Manchester Art Gallery
as part of the National Association of Pension Funds’ annual conference. Fans, furious about
Glazer’s apparent takeover success, invaded the event. Ten to 15 minutes of ‘dialogue’
ensued; wine was reported to have been thrown and one invited guest taunted the intruders
with Chelsea songs before police arrived to eject the supporters. Furious Manchester United
fans called for a boycott of the club’s main sponsors, Nike and Vodafone. As an expression of
this collective anger and frustration, Sean Bones, Vice Chairman of Shareholders United said,
‘we feel we can blow a hole in Mr Glazer’s financial projections and have a direct effect on
revenue streams’. The group also warned of possible legal action if Glazer took the club
38
private.
With the necessary 75% to enable him to de-list the club from the London Stock Exchange,
Glazer ignored Shareholders United and sent a formal letter to all the remaining shareholders
about his plan for a mandatory cash purchase of their shares. The letter stated that it would
make applications to cancel the stock exchange listing of Manchester United shares and that
trading would cease on June 22 ‘or as soon thereafter as is “practicable.”’ Red Football Ltd
added that the offer to buy up the 23.8% of shares it did not already own for 300p would be
6
107-032-1
open until 3pm on 13 June and warned the club’s remaining shareholders that they might not
be able to sell their shares to Glazer after that date.39
The board was forced to bow to the inevitable. It advised investors to sell their shares for the
‘fair’ price of 300p. It did not use the word ‘recommend’ and argued that selling was a better
option than remaining a minority shareholder in an unlisted company that would not pay
dividends. The board also said that it continued to be concerned about the level of debt in
Glazer’s business plan.40 Although Shareholders United was expected to continue to fight the
takeover, it was expected that the other shareholders would sell out to Glazer, increasing his
stake to the necessary level to own the entire company.
After Glazer’s unconditional offer, David Gill and Nick Humby, the club’s Finance Director,
were expected to stay on with the company once the buyout was completed. Sir Roy Gardner,
Ian Much and Jim O’Neil resigned after Glazer’s unconditional offer. Glazer’s sons, Joel,
Avram and Bryan were appointed to the board as non-executive directors and replacements
for the three who had resigned.
By 14 June, Glazer’s Red Football Ltd had received acceptances from 88.7% of the
outstanding shareholders. Soon it had increased its shareholding to 90% and Glazer decided

to extend the offer period for a further two weeks until 27 June. Glazer continued to urge all

shareholders to accept the offer. The company still intended to de-list. Shareholders United
continued to oppose the takeover, putting some of the proceeds of the sale of its stake into a

41
fund, and hoped that fans would follow. In desperation, some shareholders stated that they
would not sell their shares, regardless of whether Glazer reached the ownership level which
gave him the right to buy even the shares of dissenting shareholders.
On 22 June, Glazer announced that he had increased his stake to 98%, more than enough for
a compulsory buyout of the remaining shares of the club.42 As a result, after 14 years on the
London Stock Exchange, Manchester United was de-listed and ownership passed 100% to
Red Football Ltd. Glazer completed the £790 million takeover on 29 June. On 30 June, Joel,
Avram and Bryan Glazer left Old Trafford in police vans after protests turned violent outside
the Manchester United head office.
7
107-032-1
Exhibit 1: UK Share Ownership Thresholds and Consequences
Shares of Target Consequence
Obligation (Companies Act, 1985) to disclose interest in shares to target
3% within two business days. Target must inform Regulatory Information
Service. Must disclose each further 1% acquired.
Restrictions in SARs (substantial acquisitions of share) relevant, unless
15-30%
offer announced; intentions must be disclosed.
Mandatory offer triggered. If bidding company holds between 30-50%
30% (usually from a previous bid) then mandatory offer triggered if any further
shares acquired.
Minimum acceptance condition under the City Code. Control effectively
50%
passes.
75% Ability to delist company.
90% (dependent) Enables compulsory acquisition of remaining 10% (‘squeeze-out’).
Source: http://www.finance-glossary.com

Exhibit 2: The City Code

The City Code contains the rules which govern the management and timing of takeovers of
companies listed on the London Stock Exchange. Written and enforced by the Takeover
Panel, the City Code aims to uphold the following:
1. Equality of treatment and opportunity for all shareholders

2. Information available to all shareholders on an equal basis

3. Cash portion of offers must fully be financed
4. Adequate and timely information required to allow shareholders to assess the merits of
the offer
5. Highest standards for documents and advertisements
6. All parties must assure fair and orderly markets in securities
7. Target directors must not frustrate an offer and must consult shareholders
8. Oppression of minority shareholders is unacceptable
9. Directors must act only in that capacity, not as shareholders
10. Mandatory bid to all shareholders required when acquiring control
(Source: http://www.finance-glossary.com)
Exhibit 3: Bid Timetable

DAY EVENT
-28 Announcement by offeror of intention to bid for target
0 Last day for posting of offer document
+14 Last day for posting target’s written response to the offer
+21 First day on which offer may close
+39 Last day for target to announce material new information, including trading results,
profit or dividend forecasts, asset valuations or proposals for dividend repayments,
or for any material acquisition or disposal
+42 Accepting target shareholders may withdraw their acceptances if offer not
unconditional as to acceptances
+46 Last day for bidding company to revise its offer
+60 Last day for offer to be declared unconditional as to acceptances
+81 Last day for offer to be declared wholly unconditional
+95 Last day for paying the offer consideration to target shareholders who accepted by
day 81
Source: http://www.finance-glossary.com
8
107-032-1
Exhibit 4: The Share Ownership at the Time of Glazer’s First Purchase
Main Shareholders of Manchester United Approx Share Holding (%)
Cubic Expression (Magnier and McManus) 11.9
BSkyB 10.0
Harry Dobson 6.5
Lansdowne Partners 6.0
John de Mol 3.5
UBS 5.0
Legal and General 3.1
Richard Post 3.0
Maurice Watkins 2.3
Small institutional investors 23.7
Fans and other individual shareholders (35,000) 25.0
Source: http://members.tripod.com/~WynGrant/ManUtd.html

Exhibit 5: Manchester United Share Price 2003-2005

Month Month-end Close
2005 Pence
June 300
May 296.75
April 260
March 269.5
February 273
January 266
2004
December 277.75
November 275
October 280
September 259
August 261.5
July 253.5
June 259.25
May 241.25
April 245.5
March 241
February 269.5
January 267
2003
December 257.5
November 263
October 236
September 194.81
August 167.73
July 161.76
June 144.12
May 150.58
April 137.66
March 127.23
February 112.81
January 116.04
(Source: Yahoo Finance, UK)
9
107-032-1
Exhibit 6: Manchester United Leverage
31 July 31 July 31 July 31 July 31 July
LEVERAGE
2004 2003 2002 2001 2000
Total debt pct common equity 0.00 0.00 0.00 0.99 1.61
Total debt pct tot capital and 0.00 0.00 0.00 0.98 1.57
st debt
Equity pct total capital 100.00 100.00 100.00 100.00 98.97
Total debt pct total assets 0.00 0.00 0.00 0.57 0.98
Common equity pct total 61.17 58.65 55.93 57.09 60.41
assets
Total capital pct total assets 61.17 58.65 55.93 57.09 61.03
Fixed charge coverage ratio 437.05 205.92 70.56 2,178.80 76.96
Dividend payout 61.41 27.30 21.06 33.56 39.78
Cash dividend coverage ratio 4.05 5.41 5.88 6.00 5.72
Fixed assets pct common 72.16 80.25 93.37 98.41 108.32

equity

Working cap pct total capital 18.75 13.60 -15.68 -17.76 -5.67

Source: Thomson One Banker
10
107-032-1
Exhibit 7: Manchester United 5 Year Income Statement
5 YR INCOME STATEMENT
2004 2003 2002 2001 2000
Net sales or revenues 169.08 173.00 146.06 129.57 116.01

Cost of goods sold 78.27 80.49 15.69 22.12 20.13
Depreciation, depletion and 28.43 28.30 24.57 16.69 18.14
amortisation
Gross income 62.38 64.21 105.81 90.76 77.73
Selling, general and #N/A #N/A 70.80 50.48 44.97
administrative expenses
Other operating expenses 32.90 36.12 19.09 19.01 15.61
Operating expenses - total 139.60 144.91 130.15 108.30 98.85
Operating income 29.48 28.09 15.92 21.27 17.15
Extraordinary charge – pre- 0.00 2.20 0.86 2.07 1.30
tax

Non-operating interest 1.32 0.31 0.49 0.74 0.68

income
Pre-tax equity in earnings -0.35 -0.89 -0.50 -0.60 -0.98

Other income/expense - net -2.48 14.22 17.77 2.46 1.46
Earnings before interest and 27.97 39.54 32.81 21.79 17.01
taxes (ebit)
Interest expense on debt 0.06 0.19 0.47 0.01 0.22

Pre-tax income 27.91 39.35 32.35 21.78 16.79

Income taxes 8.49 9.56 7.31 6.84 4.84

Current domestic income 8.66 9.31 8.45 8.53 6.90
taxes
Deferred domestic income -0.18 0.26 -1.14 -1.68 -2.07
taxes
Net income before extra 19.42 29.78 25.04 14.94 11.95
items/preferred div
Net income before preferred 19.42 29.78 25.04 14.94 11.95
dividends
Net income available to 19.42 29.78 25.04 14.94 11.95
common
11
107-032-1
Exhibit 8: Manchester United Cash Flow Statement
5 YR CASH FLOW 31 July 31 July 31 July 31 July 31 July
STATEMENT 2004 2003 2002 2001 2000
Net income/starting line 29.91 26.77 15.42 19.43 15.68
Depreciation, depletion and 28.43 28.30 24.57 16.69 18.14
amortisation
Depreciation and depletion 6.59 7.28 6.92 6.51 5.05
Amortisation of intangible assets 21.84 21.02 17.65 10.17 13.09
Other cash flow -10.06 -11.12 -8.96 -6.04 -6.65
Funds from operations 48.28 43.95 31.03 30.08 27.17
Funds from/for other operating 0.49 3.53 2.42 13.97 1.76
activities
Dec (inc) in receivables -0.29 -5.36 1.47 -3.16 -2.44
Dec/(inc) in inventories -0.01 -0.01 2.01 1.80 -0.70
Inc (dec) in accounts payable 0.79 8.90 -1.06 15.34 4.91
Net proceeds from sale/issue of 4.26 0.00 0.00 0.00 0.00
com and pref

Other proceeds from 4.26 0.00 0.00 0.00 0.00

sale/issuance of stock
Disposal of fixed assets 18.16 13.36 1.17 5.62 0.76

Decrease in investments 0.17 0.96 0.00 0.00 2.70
Other sources - investing 0.00 0.00 13.01 0.00 0.00
Cash dividends paid - total 11.93 8.13 5.27 5.01 4.75
Common dividends (cash) 11.93 8.13 5.27 5.01 4.75
Increase in investments 0.00 0.00 0.00 0.13 0.40

Reduction in long term debt 0.00 0.00 0.00 1.86 1.72
Capital expenditures additions to 6.92 6.43 15.09 9.23 33.69

fixed assets
Additions to other assets 44.81 18.98 25.09 47.50 20.55
Other uses - investing 0.00 0.62 0.00 0.00 0.00
Other uses - financing 0.23 0.00 0.00 0.00 0.00
Inc (dec) in cash and short-term 7.47 27.64 2.17 -13.66 -28.72
investments
12
107-032-1
Exhibit 9: Manchester United 5 Year Balance Sheet
Scaling Factor: millions GBP Currency: GBP
5 YR BALANCE SHEET
2004 2003 2002 2001 2000
Assets
Cash and st investments 36.05 28.58 0.93 0.00 12.42
Cash 36.05 28.58 0.93 0.00 12.42
Receivables (net) 25.33 14.56 21.48 10.12 7.96
Total inventories 0.22 0.21 0.20 2.21 4.01
Raw materials 0.06 0.06 0.03 0.06 0.03
Finished goods 0.16 0.15 0.16 2.15 3.98
Other current assets 15.54 28.14 9.30 10.46 8.74
Current assets - total 77.13 71.48 31.91 22.79 33.13
Long-term receivables 1.76 13.22 1.50 #N/A 1.00
Investment in unconsol 1.18 1.19 1.79 1.79 -0.65
subsidiaries

Property, plant and 125.09 125.53 128.33 122.71 124.51

equipment - net
Property plant and equipment 164.18 158.44 160.12 149.24 144.19

- gross
Land #N/A #N/A #N/A 9.77 3.67
Buildings 116.34 116.20 113.89 94.70 73.18
Machinery and equipment 32.20 29.49 30.15 26.14 25.60
Accum depreciation 39.08 32.91 31.79 26.53 19.69

Accum depreciation - 7.87 6.66 5.32 3.94 1.78
buildings
Accum depreciation- 22.55 18.46 16.29 13.13 10.05
machinery and equipment
Accum depreciation - other 8.67 7.79 10.19 9.46 7.86
pp&e
Other assets 78.23 55.30 82.21 71.12 32.32
Intangible other assets 78.23 55.30 82.21 71.12 32.32
Total assets 283.40 266.71 245.74 218.41 190.30
Liabilities and shareholder equity
Accounts payable 12.66 12.58 21.58 10.67 11.43
ST debt and current portion of 0.00 0.00 0.00 1.24 1.86
LT debt
Income taxes payable 6.13 8.52 9.81 10.80 9.65
Dividends payable 3.70 8.65 6.39 3.61 3.43
Other current liabilities 22.15 20.46 15.68 18.62 13.35
Current liabilities - total 44.64 50.20 53.46 44.94 39.71
Provision for risks and 1.55 0.00 0.00 2.92 #n/a
charges
Deferred income 45.23 47.93 45.48 42.66 30.60
Deferred taxes 5.33 5.51 5.25 2.15 3.84
Other liabilities 13.30 6.66 4.11 1.05 0.00
Total liabilities 110.04 110.30 108.29 93.72 74.15
Shareholder equity
Non-equity reserves 0.00 0.00 0.00 0.00 1.20
Common equity 173.35 156.42 137.44 124.69 114.95
Common stock 26.22 25.98 25.98 25.98 25.98
Capital surplus 4.01 #n/a #n/a #n/a #n/a
Other appropriated reserves #n/a #n/a #n/a #n/a 0.50
Unappropriated (free) 0.60 0.50 0.50 0.50 #n/a
13
reserves
Retained earnings
Total liabilities and s.h.e
283.40
142.52
266.71
130.36
245.74
110.97
98.22
218.41
88.47
190.30
107-032-1
14
107-032-1
Exhibit 10: Financing Structure
The deal to buy Manchester United required financing of £812 million. It was made up of the
£790 million offer price at 300p-a-share and £22 million for fees and commissions for advisors
and bankers. Of the £790 million, £265 million was debt secured against Manchester United’s
assets, such as Old Trafford stadium, with £275 million coming from pay-in–kind loans (PIKs).
The rest of the financing was provided by the Glazer family equity in Manchester United.43
Financing Amount (£ million) Interest %

Bank loans 265 6
Additional bank loans 32 Unknown
Preference shares 210 20

Preference shares 65 14
Equity 240 Not applicable

Totals 812

Sources of Financing (http://news.bbc.co.uk/2/hi/business/4542913.stm)
The £265 million debt carried an annual interest rate of about 6%. The PIKs had a higher yield
(see below). According to London Stock Exchange data, the £265 million of debt was a
syndicated loan acquired from JP Morgan, the lead bank. JP Morgan charged Glazer interest
margins starting at 2.75 percentage points over the benchmark interest rates, 0.5 percentage
points more than on most seven year loans at the time.
Within Glazer’s loan package of £265 million in acquisition financing, there was an allowance
for £50 million for working capital and £40 million for capital expenditure, such as
improvements to the Old Trafford stadium, according to the 23 May offering document sent to
investors. The £50 million of working capital had to be repaid by May 2012, while the £40
million capital expenditure financing was repayable in instalments. However, this £90 million
additional liability was increased to £109 million due to the £19 million bridge facility repayable
by 31 March 2006.
With the additional loans, Manchester United’s debt, excluding PIK financing, was £374
44
million. In addition to the seven-year credit, the financing package called for margins above
2.75 percentage points on an eight-year loan and exceeding 3.25 percentage points for a nine-
year deal. There was also an £85 million second-lien loan with a margin of 6.5 percentage
points. Second-lien loans rank lower for repayment in the event of a default.
The £275 million in PIK notes was secured against Glazer’s family assets, which included
Glazer’s stake in Manchester United, interests in his US property including shopping malls and
the Tampa Bay Buccaneers.45 The PIK notes were sold at a discount to three New York hedge
funds, Citadel Investment Group, Och-Ziff Capital Management Group and Perry Capital
LLC.46 Any default on redeeming the PIKs could lead to the Glazer family stake being
transferred to the hedge funds that took up the notes. The PIK notes pay interest of 18%,
which accumulates and pays out when they mature in 2015, according to the subscription
agreement. There was also an unspecified premium charged on the notes if they were repaid
within two years. The three hedge funds bought preference shares. While Glazer would pay
interest on the shares, he would have the option to buy them back at a later date.47 Glazer
would have to make annual payments of 20%, or four times the current interest rate, on £210
million of the PIK securities and 14% on the remaining £65 million. The preferred securities
gave the hedge funds, Citadel, Perry Capital and Ochs-Ziff the right to take a 30% stake of
Manchester United’s equity in 2010. The deal also gave the three funds appropriate
representation on the Manchester United board.48
15
107-032-1
1
‘US bid talk lifts Man Utd Shares’, BBC News, 14 February 2004
2
RTE Sport Sunday, James Boylan, 2 March 2003
3
‘Manchester United Shares Rise after tycoon increases stake’, World Soccer News, 2 October 2003
4
‘US tycoon Glazer increases share in Man Utd’, James Boylan, 26 September 2003
5
RTE Sport, James Boylan, 2 March 2003
6
See Canadian Broadcasting Corporation website
(http://www.cbc.ca/sports/columns/newsmakers/malcolm_glazer.html)
7
Red Football United is the investing vehicle for Malcolm Glazer. The holding company was created with
the specific purpose of launching a takeover bid of Manchester United.
8
http://www.manutdzone.com/funstuff/unitedsgreatestcrises.html
9
‘ManU bid talk hits fever pitch after Glazer’s grab’, Miles Costello, The Daily Mail, 29 November 2003
10
‘Glazer named as buyer of £30m Man Utd stake’, Andrew Cave, The Daily Telegraph, 29 November
2003
11
Ibid.
12
Ibid.
13
‘Manchester United confirms Malcolm Glazer hold 14.31 pct of company’, AFX International Focus, 1
December 2003
14
‘The Russians are coming: Oil Billionaire revealed as potential bidder for Man Utd’, The Guardian, 30

December 2003
15
‘Irish tycoons raise stake in Man Utd’, Louisa Hearn, Financial Times, 9 December 2003

16
‘Manchester United’s many suitors eye up competition’, Frank Fitzgibbon, The Sunday Times, 14
December 2003

17
‘Irish team eyes seat on board of Man United’, Matthew Garrahan, Financial Times, 11 February 2004
18
‘Glazer to consider bid for Man Utd’, Matthew Garrahan, Financial Times, 17 February 2004
19
‘Man Utd placed in “offer period” as Glazer decides’, Charles Pretzlik, Financial Times, 17 February
2004
20
‘Glazer exempt from Man Utd Takeover restrictions’, Chris Flood, Financial Times, 31 March 2004
21
‘Glazer backs away from bid for Man Utd’, Peter John, Financial Times, 31 March 2004
22
‘Glazer increases Man U stake’, Matthew Garrahan, Financial Times, 27 April 2004
23
Ibid.
24
‘Glazer in fresh move on Manchester United’, Peter Thal Larsen, Financial Times, 15 October 2004
25
http://worldsoccer.about.com/cs/theposts/a/manmalc.htm
26
‘Man Utd ends talks with Glazer over share offer’, M. Garrahan, Financial Times, 26 October 2004
27
‘Man United braced for a stormy AGM’, Matthew Garrahan, Financial Times, 6 November 2004
28
‘Glazer in fresh move on Manchester United’, Peter Thal Larsen, Financial Times, 15 October 2004
29
‘Glazer’s move on Manchester United fails’, Lina Saigol, Financial Times, 15 October 2004
30
Spurned glazer scores against Man Utd
31
‘Man U chairman vows to cut ties with JP Morgan’, Peter Thal, Financial Times, 15 May 2005
32
‘Red Devil’, The Economist, 19 May 2005
33
‘Glazer keeps address secret after Man U fans threats’, James Mackintosh, Financial Times, 19 May
2005
34
‘Glazer bearing down on goal of Man Utd bid’, Matthew Garrahan, Financial Times, 15 April 2005
35
‘Man Utd board spurns Glazer bid’, Matthew Garrahan, Financial Times, 22 April 2005
36
‘Man United supporters tackle major investors in attempt to thwart Glazer’, Matthew Garrahan,
Financial Times, 30 April 2005
37
‘Malcolm Glazer wins control of Manchester United’, Paul Davies, Financial Times, 12 May 2005
38
‘United we stand’, The Economist, 24 February 2005
39
‘Manchester United to delist next month’, Paul Davies, Financial Times, 23 May 2005
40
‘United board bows to Glazer buy-out’, Matthew Garrahan, Financial Times, 25 May 2005
41
‘Glazer’s Man Utd holding lifted above 90%’, Matthew Garrahan and Paul Davies, Financial Times, 14
June 2005
42
‘Glazer Man Utd stake exceed 75%’, BBC News, 16 May 2005
43
‘Utd deal could spell £894m debt for Glazer’, , Peter Smith, Financial Times, 16 May 2005
44
‘Glazer puts plans for United on the table’, Ashling O’Connor, The Times, 24 May 2005
45
‘Exotic new bonds can spell trouble’, Gillian Tett, Financial Times, 16 May 2005
46
‘Glazer guards against an own goal’, Mathew Garrahan, Financial Times, 16 May 2005
47
http://www.malcolmglazer.com/Manchester_United_board_set_to_back_Glazer_bid.asp
48
http://www.timesonline.co.uk/article/0,,2-1648580,00.html
16

Manchester Case

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Manchester Case

Uploaded by

Copyright:

Available Formats

107-032-1

‘The Manchester United Buccaneers’?

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Malcolm Glazer – owner of sports teams

Glazer’s battle preparations in 2003

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Public confirmation of Glazer’s interest

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

• Shareholders United, along with the Independent Manchester United Supporters

Glazer further increases his stake

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Fans support the club

Second takeover attempt

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

we don’t want someone like Glazer to take over Manchester United.’

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

1. Equality of treatment and opportunity for all shareholders

2. Information available to all shareholders on an equal basis

Exhibit 3: Bid Timetable

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Purchased for use on the SMM233 M&A, at Cass Business School.

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Net sales or revenues 169.08 173.00 146.06 129.57 116.01

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Interest expense on debt 0.06 0.19 0.47 0.01 0.22

Pre-tax income 27.91 39.35 32.35 21.78 16.79

Income taxes 8.49 9.56 7.31 6.84 4.84

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Increase in investments 0.00 0.00 0.00 0.13 0.40

Capital expenditures additions to 6.92 6.43 15.09 9.23 33.69

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Purchased for use on the SMM233 M&A, at Cass Business School.

Accum depreciation 39.08 32.91 31.79 26.53 19.69

Financing Amount (£ million) Interest %

Additional bank loans 32 Unknown

Preference shares 210 20

Equity 240 Not applicable

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

Usage permitted only within these parameters otherwise contact info@thecasecentre.org