All to play for in United v Glazer clash

Gavin Stamp
BBC News business reporter

Manchester United wants to break the deadlock in the takeover saga

Manchester United is gearing up for a bitter and prolonged fight with Malcolm Glazer.

The US tycoon, who wants to buy the world's richest football club, made his intentions clear last week when he blocked the re-election of three directors to the United board at its AGM.

Mr Glazer wants United to restart takeover talks but his own plans have been hit by the withdrawal of his main financial backer, investment bank JP Morgan.

Will Mr Glazer press ahead with a hostile takeover bid or back down?

Own goal?

£800m is a hell of a lot of money for anybody Harry Philip, Inner Circle Sports

Some observers, including former Football League chairman Keith Harris, believe that a potential takeover bid is now dead in the water.

Other analysts are more cautious, believing that Mr Glazer's ambitions have suffered a major setback but not a fatal blow.

"It is a big blow but it is not insurmountable," says Vinay Bedi, a football analyst with stockbrokers Wise Speke.

"There will always be somebody else he can turn to."

For Harry Philip, managing director of consultancy Inner Circle Sports, Mr Glazer's tactics show he is not going to go away without a fight.

"To be prepared to lose all his advisors signifies that Glazer is pretty serious and willing to be bloody-minded about it," he says.

Proof of funding

Mr Philip feels that no amount of pressure, whether in the form of demonstrations by supporters' groups or the attentions of a City regulator, will deter Mr Glazer.

JP McManus and partner John Magnier are set to play a key role

However, he says that the US tycoon must answer serious questions about how he can fund a bid for United which would cost in the region of £800m.

"£800m is a hell of a lot of money for anybody," says Mr Philip. "That is almost ten times more what Roman Abramovich paid for Chelsea."

Mr Glazer had reportedly secured debt funding through JP Morgan to buy the 72% of shares in the club that he doesn't already own.

It is believed Mr Glazer was planning to use income from future ticket sales as security against the loan, an approach opposed by the club and most of its fans.

Mr Philip believes Mr Glazer will have to persuade United that he has an alternative source of funding before it agrees to talk to him again.

United's future will be determined across the Irish Sea or the Atlantic Professor Bill Gerrard, Leeds University Business School

"The first thing that he has to do if he is still intent on acquiring the club is to raise capital either by finding someone to back him or through asset sales."

Given the anger that Mr Glazer's involvement has caused -worried fans targeted JP Morgan among others in a series of protests -Mr Philip says it is questionable which banks would be willing to back a high profile hostile takeover.

That may leave Mr Glazer having to sell before he could hope to buy.

Irish connection

In such a situation, attention would inevitably focus on the Tampa Bay Buccaneers, the tycoon's American football team.

Mr Glazer has claimed it is worth £400m but NFL rules prevent him from using it as collateral in any acquisition.

"The question is whether he will sell the Tampa Bay Buccaneers in order to raise the money he needs," says Mr Philip.

Bid backers may be put off by protests by United fans

Wherever the money comes from, most analysts agree that Mr Glazer's relationship with John Magnier and JP McManus, the Irish businessmen who hold a 28.9% stake in the club, remains crucial to the outcome of the saga.

"United's future will be determined across the Irish sea or the Atlantic," says Professor Bill Gerrard, professor of sport management and finance at the Leeds University Business School.

Commercial questions

Mr Glazer held talks with the Irish businessmen last month about a deal which would have reportedly seen him buy the duo's stake for 300p a share.

The talks broke down, although it is not clear whether this was because of a fundamental difference over price, or because of a more technical disagreement over how the deal would be structured.

GLAZER'S MAN UTD DEALINGS 19 October, 2004 - buys 1.27m shares for £3.6m, ups stake to 28.11% 18 October - buys 6m shares for £17m, stake now 27.63% 15 October - Spends £45m to increase holding to 25.3% 24 June - Buys 2.41m shares, stake now at 19.17% 26 April - Increases stake to 18.25% with purchase of 4.1m shares 25 February - Buys 1m shares at 285p each, raising holding to 16.69% 12 February - Holds 16.31% share in club after buying 5.4m shares 28 November 2003 - Spends £30m on buying a 4.5% share in United raising stake to 14.31% October -Raises stake in club three times to a total holding of 9.66% 26 September -Mr Glazer tells stock market he holds a 3.17% stake in Manchester United

"I believe it was the structure of the deal, not the amount of money, that was the sticking point," says Wise Speke's Mr Bedi.

"I always believe that when two parties can agree on a price but not on the terms of a deal that they will eventually be able to conclude a deal."

United is seeking an urgent meeting with Mr Glazer and the Irish duo amid concerns that the takeover saga could seriously destabilise the company.

The Old Trafford outfit remains, by common agreement, the richest football club in the world.

The club claims that it has seventy five million fans worldwide. With operating profits of more than £58m last year and plans to increase capacity at Old Trafford to 75,600 by 2006/7, the club's financial future looks rosy.

'Some slack'

However, many analysts believe United's shares are hugely overvalued and that United's financial pre-eminence is being challenged both at home and in Europe.

"There has been a feeling in some quarters that United is big and profitable in a football sense but that there is a lot more value that could be generated," says Leeds University's Professor Gerrard.

Professor Gerrard says David Beckham's sale to Real Madrid and the club's focus on raising its profile in North America have raised question marks over its commercial strategy.

"There is a sense about United that maybe there is some slack and that the club could be run more effectively."