The Glazers are unlikely to ever be liked, let alone loved, by fans of Manchester United. The fiercely private US family that bought the famous English soccer club 10 years ago has been widely depicted by the team’s fans and the British media as seeking to bleed the club dry after leveraging it up with debt.
Yet the Glazers are now assuaging some of their critics, with the club saying they plan to bankroll new player signings after securing their place in the qualifying round for the UEFA Champions League — they failed to qualify in the 2013-2014 season for the first time in 19 years. Crucially, the Glazers’ transformation of United into a commercial cash machine might give them an advantage over rivals.
There have been modest signs of hope for investors in the club’s New York-listed shares, which have outperformed the S&P 500 so far this year, gaining 2.3 percent against the index’s rise of 1.7 percent as revenue and cash flow are expected to climb. The shares have lagged the market since United’s 2012 initial public offering.
Photo: EPA
‘COMMERCIAL ENGINE’
“My view is Man United are better off for the Glazer’s ownership. Building the commercial engine they have built will continue to serve the club well,” said Philip Hall, managing partner at Spotlight Equity Partners, who advised other US investors on purchases of Liverpool and Sunderland soccer clubs.
Last week, consultancy Brand Finance declared that Manchester United had regained their position as the most valuable soccer brand in the world in annual rankings, moving up from No. 3 last year. The value of their brand soared 63 percent in the past year to US$1.2 billion as executive vice chairman Ed Woodward and the Glazers “capitalized on the brand’s growing power to establish a worldwide fan base and a range of sponsorship deals unrivaled in their number and value,” according to Brand Finance chief executive officer David Haigh.
On the pitch, this season’s performance improved enough to help United finish in fourth place in the English Premier League, up from what for United was a shockingly low seventh the previous season.
While still unacceptable to fans given the side has been synonymous with winning trophies for much of the past two decades, the improvement is enough to secure inclusion in the qualifying round for the Champions League, the continent’s elite competition. With that comes more match-day revenue from extra games, increased sponsorship money, additional club merchandise sales and a boost to TV income.
However, crucial to growth is the way in which United are using the allure of what they say are 659 million people following the club around the world to secure sponsorship deals.
A world record £750 million (US$1.17 billion) 10-year kit deal with Adidas, signed last year, underlined United as commercial leaders in soccer. That followed a seven-year US$559 million shirt-branding deal with General Motors’ Chevrolet.
GLOBAL SPONSORS
Commercial income it to eventually make up more than half of revenue, up from 29 percent when the Glazers arrived, brokerage Jefferies said, citing the club’s 17 global sponsors now versus 10 in 2012, and 95 total categories earmarked for marketing from 40 three years ago.
That could give United a leg up on rival clubs because the increased commercial revenue allows them to push up wage and transfer bills while remaining within their means. That satisfies new regulations designed to prevent clubs from spending more than they earn in attempts to buy success.
The club’s fortunes are being shaped at sales offices in London and Hong Kong.
At an unmarked building near the Ritz hotel in London’s posh Mayfair District, United employ about 60 people to win new commercial deals.
United’s sponsorship appeal stretches from beer, wine and watches to tires, paint, noodles and office equipment — across partners in many nations. They even have telecommunication company sponsors in Azerbaijan and Thailand.
As part of the Adidas deal, the club have retained retail rights to their own store, online sales and product licensing, and are likely to expand and outsource to third parties and take a royalty, Nomura analysts say.
A new digital media platform has also been slated.
United’s commercial progress led the club to raise their full-year earnings forecast last month, and Jefferies analysts see United’s revenue growing by one-third to £521 million in the twelve-month period ending on June 30 next year.
New York-based hedge fund manager Ron Baron, who owned 40 percent of the shares not controlled by the Glazers at the end of last year, told CNBC in January he expected to double or triple his money on United over the next four to five years.
Malcolm Glazer, the family patriarch who made his fortune in real estate and stocks, bought United in May 2005 for £790 million, after entering the sports business in 1995 with a takeover of American football team the Tampa Bay Buccaneers.
The leveraged nature of the deal — United took on loans of £525 million to finance the acquisition by a businessman and his family who were unknowns in the UK — made many United supporters angry.
‘DIE, DIE GLAZERS’
An effigy of Malcolm Glazer was burnt in the street during mass protests, and his death last year was celebrated by some on the terraces. Three of his six children, Avram, Joel and Bryan, who have managed the investment since Malcolm suffered a stroke in 2006, have also had a bad reception. Fans chanted “die, die Glazers” at the club’s Old Trafford ground, forcing family members to escape in an armored police van on one occasion.
A dip in performance after legendary manager Alex Ferguson retired in 2013 has not helped relations, with some fans alleging the club has been more interested in servicing debt rather than investing in new players.
Despite the improved prospects, there is plenty that could go wrong.
The worst-case scenario would be if expensive new players fail to perform, the club suffers an early exit from the Champions League and they fall down the Premier League table. Player costs would bite into financial results and the club could descend into a long-term decline.
For shareholders there is also a danger the Glazers sell United shares when they need to raise money as has happened in the past. That could hit the share price.
In a statement to mark the 10th anniversary of the Glazers takeover, the Manchester United Supporters Trust (MUST), which has campaigned against the Glazers’ control, said that while it is impossible to imagine worse owners, there are signs the club is seeking to improve relations with fans.
“Despite the huge damage inflicted over the last 10 years, things are undoubtedly beginning to look positive again in 2015,” MUST chief execuitve officer Duncan Drasdo said.
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