Between the Lines

"Of all unimportant subjects, football is the most important" – Pope John Paul II

Red Knights Likely to Come Up Against Brick Wall

Posted by hakanrylander on March 2, 2010

The Red Knights today confirmed that they are putting together a bid for United. The group, led by Goldman Sachs chief economist Jim O’Neill, said that for their proposals to be viable, they would need the backing of Manchester United fans around the world. Well, at least they most certainly have the backing of Between the Lines (That’s a done deal then?/Ed). An ideal solution would be for a number of wealthy investors to own the majority of the shares, with 10-20 percent spread among ordinary fans.

A spokesman for the Glazers has told the Guardian that “Manchester United is not for sale”. This is of course rubbish. In the world of business virtually all assets are for sale, at the right price. And I think I can guarantee that the Glazers’ attachment to United is not of the kind that will make them reject any offer.

The crucial problem is whether the Red Knights will be able to put together an offer high enough to tempt the Glazers. Unfortunately I believe there are two main reasons why they will fail to do so. Firstly, a group of City investors, however devoted to United, are likely to expect a decent return on their investment. Fair enough, but this puts a ceiling on the amount of money they will be prepared to pay for the club. Secondly, the Glazers have manouvered themselves into a position, most recently by way of the bond issue, where they are able to move a huge part of United’s cash flow into their own pockets. They probably reckon that they can keep the cash flowing for several more years with only a minimum of investment in new players. The conclusion is that the club is most likely worth more to the Glazers than the Red Knights are willing to pay.

Which leaves one option. The balance of the deal could change if it’s likely that the future revenue streams will look different depending on who owns the club. If OT is not filled for every league game, if lots of fans stop buying offficial merchandise etc the Glazers will be forced to take another hard look at the expected return on their investment. And they might just come to the conclusion that selling is the sensible thing to do.

For anyone who wants to delve further into the financial situation and the apparent Glazer strategy I recommend the excellent Andersred.


One Response to “Red Knights Likely to Come Up Against Brick Wall”

  1. The Gaffer said

    Until an offer comes in, the Glazers will say ‘not for sale’. Can Red Knights make a good enough to deal to persuaded the Glazers? Hopefully, but I’m not to optimistic…

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