Manchester United fans’ dream of the Glazer family relinquishing control of their club is not over, but merely postponed.
Sir Jim Ratcliffe and INEOS recently bought 25% of Manchester United which left many fans disappointed that the Glazers still sitting with majority control of the club.
However, The Athletic have taken a deep dive into the nitty-gritty of the deal and have come to the conclusion that Ratcliffe will most likely be working toward full ownership. They have consulted several experts about the small print in the 241-page agreement struck between the Glazers and Sir Jim.
The experts generally agreed that the shared ownership deal is designed not to be forever and most said that it gave Ratcliffe a path to full control.
The Athletic says, “their partnership has been designed to conclude in one of two ways: Ratcliffe/INEOS buying enough Glazer shares to take full control or the 100 per cent sale of the club to a third party at a very high price”.
“Andrew Green, a United fan and the head of investment at UK private equity firm Rockpool, said he believes there are two parts of the proposed deal … that signpost where this is heading”.
1) Right of First Offer (ROFO)
Ratcliffe’s right of first offer allows him to make the first bid if any shares are made available for sale. It’s different from a right of refusal, where, say Ratcliffe is allowed to simply match the best bid made. But it does, to all intents and purposes, allow him to set the price that has to be beaten. And we know this will be a high price because already “Ratcliffe has been allowed to set a minimum buy-in price of $33 (£26) a share, which is a 65 per cent premium on the current share price of $20”.
2) “Minority protections” given to Ratcliffe
This states that anyone buying the Glazers’ shares “would have to honour the deal the American family has just struck with Ratcliffe”, by having control of the club’s sports department and appointing two directors on the main board.
Green states that, “if you take those two together, the ROFO with that high minimum price plus the minority protection if there’s a change of voting power, this deal envisages Sir Jim Ratcliffe taking over at some point in the future”.
What this means is, supposing someone like another Sheikh Jassim wanted to buy 100% of United: first of all, they would have to bid a higher price for the shares than Ratcliffe would bid (and he has already promised to bid at least $33 a share when they are only worth $20). Second, even if they did pay that huge amount, the deal is that Sir Jim and INEOS would still retain control of the football operation unless he, too, agreed to be bought out. This puts him in almost full control of what happens, or, as Green adds:
“I think the whole agreement has been set up so that it ends up with Ratcliffe in total control”.
The experts were also interested in a couple of other nuances of the deal. First, it was noted that “it is not an accident that the Glazers have all sold exactly the same number of shares to Ratcliffe — 4,591,366 each — and not the same percentage of the shares” because they possess slightly different amounts. This is important because it opens the door for some Glazers to sell more (or all) of their shares to him, even if Joel and Avram refuse to sell theirs. The rest of the family have enough shares that if he picked them off, Ratcliffe could become the majority shareholder without Joel and Avram agreeing to sell any more of their shares at all.
Once again, “the agreement he has struck makes it far, far easier for him to buy them out in the future than for anyone else to do it”.
The final point is that some of the experts believe Sir Jim’s 25% can creep up and up in that or other ways, until he has a majority. It is already agreed in the document that his investment this year in Old Trafford of nearly $300 million will be rewarded with shares, already raising his percentage to 29%.
Unlike in the UK, crucially, “there is nothing to stop him under U.S. law, which is the relevant jurisdiction for an NYSE-listed company, from increasing his shareholding above 30 per cent in stages”.
Therefore, as he invests more and more into the club, both by buying class A shares and injecting more money into projects like the stadium, he can acquire a bigger share until it tips over the 50% mark that gives him the majority.
Ratcliffe’s path to controlling ownership is long and winding and there is no legal guarantee it will happen, but it is there. The deal agreed between INEOS and the Glazers has set in place a few factors that significantly favour Sir Jim taking on a bigger role down the line.
As The Athletic state, “while the Glazers have been dreadful custodians of Manchester United, they are not stupid. They know Ratcliffe will want the lot at some point and once he has figured out what the club needs from him, squared away concerns from INEOS’s bondholders about possible threats to their investments and made all the tax arrangements that are customary for billionaires, he will make them offers they will not refuse”.