If Manchester United are arguably the most famous football team in the world, then Malcolm Glazer’s takeover of the club is undoubtedly the most famous football club purchase in history. It was so controversial that it directly led to the establishment of a splinter club, FC United of Manchester. Why was the Glazer’s takeover so controversial, and how did they do it?
Timeline of the takeover
March 2003
Malcolm Glazer first acquired shares in Manchester United. This didn’t raise eyebrows, as he only purchased 2.9% of the club, and was one of many institutional shareholders at the time. The purchase was made through a holding company called Red Football.
2004
Throughout the course of 2004, Glazer began to increase his ownership of Manchester United, reaching 19.17% by June 2004.
By October 2004, Glazer attempted a formal takeover of the club but faced opposition from the board due to the highly leveraged nature of his takeover proposal. It was deemed as controversial because the leverage was seen to be risky to the football club’s finances.
February 2005
Through the purchase of shares, Glazer increased his ownership up to 28.11%.
30% was a major milestone in terms of Manchester United ownership, because this threshold would automatically trigger a mandatory offer for the remaining shares under the rules of business takeover in the UK.
Glazer was in negotiations with Cubic Expression who owned 28.7% of the club. This investment vehicle was owned by Irish racing tycoons John Magnier and J.P. McManus.
May 2005
Glazer eventually purchased the Cubic Expression stake, which gave him 56.9% ownership of the club, which triggered a mandatory takeover offer for the remaining shares.
Through finance leveraging, he bought extra shares to bring his total ownership up to 75% of the club by June. By reaching this threshold, he was able to de-list the club from the London Stock Exchange.
June 2005
By June, Glazer’s ownership surpassed 90%, which enabled him to enforce a compulsory purchase of the remaining shares. This granted him full private ownership of Manchester United.
Leveraged buyouts explained
The Glazer family used a leveraged buyout to finance the purchase of Manchester United. This form of financing enabled the Glazers to rely upon debt, rather than just their own assets, to purchase the club.
Leveraged buyouts involve using borrowed money to acquire a company, with the assets of the company being used as collateral for the loan. This strategy allows the buyer to take over a club with a reduced upfront cash investment. Whilst leveraged buyouts are common, they carry financial risk due to the reliance upon debt.
The Glazers Leveraged Buyout of Manchester United
Debt
The Glazers borrowed circa £540 million from three New York hedge funds, Citadel, Och-Ziff Capital Management and Perry Capital. The debt was split between the family and the club, with between £265 million and £275 million secured against the assets of Manchester United. The interest payments amounted to roughly £62 million a year.
The terms of the refinancing meant that if the Glazers were unable to repay bondholders by 16 August 2010, the interest rate on the loans would rise from 14.25% to 16.25%.
In January 2010, ‘Red Football’ had accumulated a debt of £716.5 million, which triggered widespread protests.
Equity
The Glazer family contributed £270 million of their own money, which they raised through selling other assets in their portfolio.
Why did the Glazers use a leveraged buyout?
By relying upon debt, the Glazers avoided risking too much of their personal wealth. Whilst they still had to contribute a significant equity amount, they were able to shift the financial burden of the leveraged buyout to the club itself.
Manchester United as a business was an attractive proposition for a leveraged buyout, because their assets provided ample collateral for securing loans and raising funds should they be sold off. For example, the Trafford Training Centre at Carrington was sold and leased back to the club.
Was it a success?
From Malcolm Glazer’s point of view, yes. The club’s valuation has soared from almost £800 million in the mid 2000s, to over £2.5 billion in the early 2020s.
The Glazers partially sold part of their stake in Manchester United to Sir Jim Ratcliffe in February 2024. Following convoluted negotiations, including rival bids from Sheikh Jassim, Ratcliffe purchased a 26.2% stake in the club for £1.3 billion.
Manchester United’s revenue has grown from roughly £166 million in 2005 to over £627 million by 2019.
Why was it so controversial?
Manchester United had been financially solvent since 1931. The leveraged buyout plunged the club into debt, to finance the takeover from the new owners. As the Manchester United Supporters Trust stated: “the fans will effectively be paying for someone to borrow money to own their club”.
The annual repayments of the loan exceeded £60 million. This remains a significant figure to a football club, impacting their ability to purchase players and invest in their facilities, contributing towards issues such as the leaking roof at Old Trafford.
The debt repayments ceased in the late 2010s, and were replaced by dividend payments to the Glazer family. These were over £20 million per year between 2016 and 2020. The Daily Telegraph reported that Manchester United were the sole Premier League club to “pay regular dividends of any kind” – although the practice is commonplace within business.
Are leveraged buyouts always controversial?
Due to the reliance upon debt placed upon the company being purchased, there is a degree of risk with all leveraged buyouts. For business acquisition, alternatives include asset finance or conventional bank loans.
