A look back at the Glazer's ownership of Manchester United
Twenty league titles, three European Cups, eleven FA Cups. These are just some of the reasons Manchester United are currently the biggest club in England. Until five years ago, the argument could be made that they were the biggest in the world, but that title probably goes to Real Madrid for the time being, and only because they seem to be able to attract United’s best players at will.
United certainly aren’t far behind though, as their spending spree in the summer of 2014 proved. Players such as Angel Di Maria, Radamel Falcao, Ander Herrera and Daley Blind arrived at Old Trafford in what was the second largest transfer spending spree in football ever (€196 million, only lower than Real Madrid’s (them again!) purchases in 2009, which saw the arrivals of Cristiano Ronaldo and Kaká, among others).
What makes this impressive is that for most of their history, Manchester United were never the domestic force (albeit the best-supported club) that Real Madrid were, until the 1990s. United’s meteoric rise is a relatively new one, catalysed largely due to their success in that decade.
The presence of a dominant squad on the football pitch was joined with a massive TV deal for the whole league (the beginning of the Premier League era), and it was the combination of these two factors that really provided the base for United to begin their domestic and global domination.
May 2015 marked the 10-year anniversary of the ownership of United by the Glazer family, a move that changed the way football clubs are owned and operated. The Glazers presided over huge levels of debt but also created a structure that massively increased revenues across the board, paving the way for United’s financial dominance in the years to come.
The Glazer takeover
The explosion of the Premier League led to unprecedented windfalls in English football. Manchester United tried to take advantage of this and listed themselves publicly on the London Stock exchange, in addition to various other money-generating schemes across the world.
The public listing of the holding company meant that two Irish businessmen, who were heavily involved in horse-racing (John Magnier and J.P McManus) gradually became the largest shareholders via their company, Cubic Expression.
Sir Alex Ferguson owned a stake in Rock of Gibraltar, a famous horse that Magnier’s wife also had a stake in. Controversy then ensued over the exact ownership of the horse, with the dispute finally being settled out of court. Magnier and McManus tried to have Ferguson fired, and the club’s board of directors responded by seeking investors to buy out the 28.7% stake held by the two Irishmen in the club.
The Glazer family first became involved with Manchester United in March 2003, spending around £9 million on a 3% stake in the club through their holding company, Red Football. The Glazers steadily kept buying shares of the club, owning 15% by November that year and triggering talks of a takeover bid. By October 2004, their ownership in the club had reached nearly 30%, which would trigger a takeover bid, according to UK takeover law.
In May 2005, an agreement for the acquisition of Magnier and McManus’ 28.7% stake had been reached, taking their stake to 57%. The Glazers continued to buy out the remaining shareholders. In May 2005, their ownership reached 75%, and gave the Glazers had the option to delist the holding company from the London Stock Exchange, which they subsequently did in June of that year, making it the first time in 14 years that the club wasn’t publicly traded. The takeover was completed by the end of June, with the club being valued at £790 million.
Debt, fan protests, and refinancing
Most of the Glazer takeover was financed by various instruments of debt. The total debt was split between the Glazer family and the club itself, with around £275 million being secured against the club’s assets. This put the club in debt for the first time since its near insolvency in 1931. The prevailing high rates of interest added to insecurity about the club’s financial position at the time.
In 2006, there was a restructuring (basically a swapping of old debts for new ones) of the debt at the club. This meant that while the overall debt rose, the payments on interest dropped around 30%. Coincidentally, this deal was negotiated by current executive vice-chairman Ed Woodward. These loans were what are called PIK loans (Payment in Kind), which are basically high-risk loans that charge high-interest and roll up interest payments until they mature and were provided by American hedge funds.
This was naturally met with mistrust by supporters, who felt that the club was being used as an investment vehicle without concern for the sporting achievements. Ruud van Nistelrooy left for Real Madrid that summer, and the only transfer in was Michael Carrick from Tottenham.
Club officials pointed out that a new record sponsorship deal with AIG worth around £14.5 million per season, in addition to a forecasted 30% increase in Premier League TV money with the new deal that had just been signed, would make sure that the debt would not affect United’s sporting ambitions. United were not directly liable for the loans, as they were held against the holding company, Red Football. They went on to win the league that year, and then successfully defended the title twice.
In 2010, the Glazers announced another refinancing, with the issue of bonds worth £500 million. They raised £504 million through the bonds issue, which allowed almost full repayment of debts worth £509 million owed to various international creditors.
However, this was followed by an announcement that United’s debt levels had reached an astronomical £716 million. The bonds issued were due to mature in 2017, with an annual interest payment of approximately £45 million. The sale and subsequent leaseback of their Carrington training ground complex was also part of a restructuring at the club.
It was this period that saw the famous “green and gold” protests take place, with supporters donning the original colours of Newton Heath, the club that eventually became Manchester United. However, the Glazers were not particularly bothered by this, and the protests have generally faded in recent years.