Hedge funds that retain a minority stake in Manchester United are preparing to engage in a legal battle if the Glazers shut them out of the ongoing takeover proceedings.
The United takeover process is still going on. Months after the Glazers announced their intention to seek strategic investment for the club, which did not rule out a full or partial sale of the club, a resolution is still yet to be found.
The principal bidders for United, Sheikh Jassim Bin Hamad Al Thani and Sir Jim Ratcliffe, are still locked in a fight to take over the reins at Old Trafford.
Both are keen to acquire a major stake in the club. While Sheikh Jassim wants to buy 100% of the club, Sir Jim wants to acquire at least 51%. This would allow the INEOS billionaire to have control. Some of the Glazer siblings would still retain a minority stake in the club but would potentially be entirely bought out in a few years.
According to Breakingviews, Ratcliffe’s proposal has elicited concerns among some of United’s investors.
Breakingviews reports that the ongoing United saga may end up into an all-out scrap, needing to be settled in court.
“Hedge funds are laying the groundwork for a legal fight if the $3 billion soccer club’s controlling Glazer family tries to shut them out of any sale,” the outlet says.
“One hedge fund with a large stake in the club is making legal preparations in case Ratcliffe launches an offer that involves only buying the Glazers’ super-voting Class B shares, a person familiar with the matter told Breakingviews.”
“Such an approach would effectively exclude minority investors from the takeover. A separate person familiar with the situation told Breakingviews that hedge funds were already studying past precedents under Cayman Islands law, where Man U[nited] is incorporated, to figure out how they might build a case against any manoeuvres by the Glazers or Ratcliffe.”
Breakingviews explains that the Red Devils’ share structure is the main issue. Around two-thirds of the total equity comprises Class B shares. These are owned by the Glazers and carry 10 votes.
The rest of the club’s equity comprises publicly listed Class A shares. They carry one vote and are primarily held by investors such as said hedge funds threatening litigation.
Amidst suggestions that Sir Jim could seek to acquire enough Class B shares to guarantee himself control without offering other investors financial compensation, there is cause for worry.
Breakingviews adds, “The Glazers could even seek to change the club’s articles of association to make sure Ratcliffe’s acquired shares retain their super-voting rights.”
“The hedge funds have some grounds for their pushback. Manchester United’s 2012 initial public offering filing notes that Cayman Islands law gives shareholders the right to challenge deals and to receive “fair value” for their shares as determined by a judge.”
Breakingviews suggests that Sir Jim may not have enough funds to undertake a rebuild of Old Trafford, which is in a pathetic state.
This would almost force Sir Jim’s hand to lump more debt onto the club so as to oversee the project. There’s also no assurance that the British businessman will not pay dividends as the Glazers have done for many years.
There is a chance that United’s minority investors may be left with worthless shares that are of significantly less value than they currently are.
For United fans, this is just yet another spin to the takeover that has gone on for too long. With the transfer window opening in a few days, the lack of clarity threatens Erik ten Hag’s transfer plans.