SPAC FC: Could a ‘blank-cheque’ takeover company solve Manchester United’s ownership problem

From the rubble of the collapsed Super League fans of Manchester United are hoping (perhaps thinking wishfully) for a new future free from their American ownership, buy how might that play out? The list of potential buyers for Manchester United would probably be a short one. Could it be bought by a petro-state, a benevolent benefactor or controversially a media conglomerate? Perhaps a glance over to Silicon Valley reveals another solution as the club’s current owners ponder an uncertain future from their base in Florida. Amidst the rapid disintegration of the US$3.5bn Super League ploy on Tuesday night Ed Woodward announced his departure as United’s executive vice-chairman. For many fans the former JP Morgan M&A advisor is seen as the Glazer family stooge. In the words of one among countless podcast rants heard this week – Woodward is their suit but Joel Glazer wears the trousers. Rumour and media speculation has in recent days suggested that Glazer family, Manchester United’s unpopular American owners, may have eyes on the exit door too. Selling up now would likely net them a tidy fortune, even after the Super League fiasco. The Glazers bought United for around £600mln back in 2005 in a leveraged takeover, landing the football club in a debt that today remains largely unpaid (albeit over £1bn of interest payments have been made in the meantime). A takeover offer to prize Manchester United out of the American owner’s hands needs to be pitched in the order of £3-4bn, reckon common guestimates among football experts. It is a tough ask. Such a valuation leaves the club vulnerable to another unpopular owner and, moreover, scrutiny on any new buyer will now be particularly high. As another pundit put it, anybody who can afford Manchester United probably shouldn’t be allowed to buy it. Prayer for a benevolent benefactor Takeover rumours linking Saudi Arabia have done the rounds in recent years, mirroring to the so-called ‘sports washing’ model seen across Manchester at Abu Dhabi owned City and Qatari-owned Paris Saint Germain (which, as it happened, rejected the Super League). A 2020 move for Newcastle United by Saudi was blocked by the UK authorities,  so that perhaps look less likely than ever.  Regardless, in the court of public opinion, it would simply see Manchester United jump from frying pan into fire. INEOS founder Sir Jim Ratcliffe is another suitor previously linked to a Manchester United takeover. As ‘Britain’s richest man’, with an estimate net worth in excess of £20bn, the Lancashire-born Monaco-domiciled petrochemical entrepreneur has deep enough pockets to facilitate a deal, and, indeed, INEOS already has its own sports division. INEOS is a lead sponsor of Sir Lewis Hamilton’s Mercedes Formula 1 team and with INEOS TEAM UK is partnered with Sir Ben Ainslie in the America’s Cup sailing contest. Ratcliffe also has bankrolled Sir Dave Brailsford’s cycling team, acquiring Team Sky and relaunching as the INEOS Grenadiers. Adding Sir Alex Ferguson’s Manchester United to Ratcliffe’s sporting table is, however, complicated by the INEOS Football acquisition of French club OGC Nice. This potentially scuppers a deal due to European Competition rules concerning investments in multiple clubs. Fan ownership? Back in 2010, another possible takeover attempt was steered by former Goldman Sachs chairman and United fan Jim O’Neill. It was a fan-led consortium (wealthy fans) comprising bankers and lawyers, though it did not advance as far as direct talks with the American owners. Several years ago, O’Neill reflected in an interview with the BBC that his ‘Red Knights’ consortium “couldn't get enough people to support the exact philanthropic principle” behind the buyout plans, and that “if we wanted to explore it in a more commercial way then a deal could have been done." Manchester United fans were left in the meantime left fantasising for a benevolent benefactor to emerge with sufficient financial backing to take it from the Glazers. Ideally a fan or someone with ties to the club, but definitely someone that’s filthy rich. Today, Jim O’Neil – now Lord O’Neil – in a letter to Joel Glazer called for United’s owners to reform the company’s equity structure so that the American family’s shares are equal in voting rights to the company’s public shareholders. O’Neil, who subsequent to the ‘Red Knights’ was a member of Theresa May’s government, said there should be immediate corporate governance reforms and the Glazers should reduce their holding in the club to a minority stake of no more than 49.9%. He says the result would be that a greater number of potential investors could consider ownership in the club in the future. Elsewhere, the calls for a ’50% plus one’ fan ownership model reverberate increasingly loudly across social media, ‘fan cam’ youtube channels and football podcasts. The scheme is styled after the legally mandated model of fan ownership as used in Germany, where the Bayern Munich and Borussia Dortmund were notably for dismissing the Super League idea staunchly. It works by ensuring that an internal group of members, representing fans, retain no less than 50% plus one vote of all the voting rights in the organisation – external investors and commercial owners can retain the economic rights, but, not ultimate control of decision making. Political soundbites in recent days likely come with some opportunism, of course, and implementation would be challenge to say the least. Boris Johnson’s vow to thwart the Super League grabbed some headlines and distracted audiences slightly from his own sticky news cycle, nonetheless, Secretary of State for Culture, Media and Sport Oliver Dowden intends there to be a ‘fan-led’ appraisal of the football industry and football club ownership. At the very least creates the space for dialogue around reforms and possibilities for new legislation. A cynic might however suggest that a fan hoping that this Conservative government might repatriate football club ownership from international billionaires and oligarchs for redistribution across the English working classes might be on a level with the hope of winning the FA Cup at a club like Accrington Stanley [who are they]. How else could Manchester United be acquired? Well, precedence is against the prospect of a corporate buy-out. A failed takeover by Sky preceded Alex Ferguson’s fallout with Irish businessmen JP McManus and John Magnier. The bitter row, over who owned the rights to champion racehorse semen, is credited by many people as a significant factor in the Glazer family buying United. The Irishmen sold their 28.89% stake in United to Glazers for €335mln prior to the 2005 takeover. Previously, McManus and Magnier built their stake by taking up shares from Rupert Murdoch’s BskyB in 2003. Sky had at one stage held 35.4% of United before the UK’s Monopolies and Mergers Commission blocked a takeover in 1999. At that time Sky was also working on a money-spinning pay-per-view scheme, which proved too hot to handle amidst fan backlash – of course this was in the banter-filled old days before they employed Gary Neville and Jamie Carragher as part commentators and moral arbiters. Looking at the football industry now, it is clear that media rights remains the crown jewel asset. Much of the Super League kerfuffle centred around the desire among owners of the top European clubs to control and directly monetise their media and broadcast rights. A great deal of speculation pointed to worldwide subscription-based streaming service or digital pay-per-view being in the offing. Manchester United is after all an entertainment company, at least according to the prospectus for its 2012 float onto the New York Stock Exchange. Of course, that’s a bit rich given the club would soon after play some of the most insipid football in its history under managers David Moyes, Louis can Gaal, and Jose Mourinho. Any company interested in buying the Manchester United would no doubt be doing so because of the lure of lucrative broadcast revenues – it and would stand to reason that a large media company would be a natural buyer. Jeff Bezos most certainly has enough cash and Amazon is already in the football streaming business, with rights to English Premier League fixtures. It is hard to imagine a greenlight for such a deal, however, and most likely streaming companies such as Amazon Prime would more likely look to partner whole leagues and federations like UEFA rather than messing about buying up even the World’s Largest Club alone. Who else could buy? So, at £3bn to £4bn the ask is way too large for a gofundme. But, what if there was a way that many investors could pool together capital in order to go an acquire a large multi-billion pound business like Manchester United? As it happens in 2021 there is absolutely such a thing, though football’s ‘legacy fans’ may have to hold their noses a while as this is also a particularly Americanised fad. The early weeks of the year were fevered US markets with excitement around SPACs. A SPAC (Special Purpose Acquisition Company), otherwise known as a “blank cheque company”, is essentially cash-shell company that is tasked to acquire a business on behalf of multiple shareholders. It is a bit like an IPO but in reverse. The money is listed and then bankers find a company to essentially float into the shell by acquisition. Typically, SPACs are given some cash upfront and are promised more funds when a deal is agreed – in other words they’re given a blank cheque to go do a deal. Some SPACs are formed with specific acquisition targets in mind, though they remain undisclosed to avoid layers of disclosures and compliance in the IPO. Others are pursued with little more than a blank cheque and feint promises. SPACs are very big business, albeit mostly in the United States, though regulatory pressure could see this cool in time. It is a capital market phenomenon that this month saw its biggest deal yet with Grab, a south east Asian rival to Uber, being snapped by a SPAC in a deal that valued the business at US$40bn. Reproductive and sexual health company Hims and Hers, a start-up that began selling Viagra online before expanding into anti-baldness cream and female wellness, landed a SPAC deal with a US$1.6bn value, after a US$280mln raise. In 2019, fantasy sports betting start-up DraftKings was merged with a US$500mln SPAC which paved the way for it to be traded in New York with a US$23bn market cap. Elsewhere, Virgin Galactic found its way onto the NYSE via a SPAC. In 2021 to date more than US$75bn of capital has been invested into SPACs with the tally reaching close to the entire funding last year already. Failing that, a good old fashioned dilutive share sale could give United the funds to repay debt, revamp its ailing stadium and shave down the Glazer ownership. It would be as sexy as sideways pass between Scott McTominay and Fred, but, just like the not-so-dynamic duo might also be bluntly effective. Football business, bloody hell.