LONDON: A group of Manchester United fans accused the American Glazer family of milking the English Premier League football team for cash after IPO terms revealed they planned to take half of the proceeds of its flotation.
Fans from the Manchester United Supporters Trust (MUST) questioned why all of the money being raised was not being used to reduce a debt pile that they say is holding back the team's performances on the field.
The club and the Glazers each will be selling half the IPO shares in an offering that will raise as much as $333 million (212.3 million pounds). The club's proceeds from the IPO will be used to reduce its debt of 423 million pounds as of March 31 to 345.4 million pounds ($664 million to $543 million).
"Supporters are going to be very angry about this," said Duncan Drasdo, chief executive of MUST, a group lobbying for fans to play a greater role in the ownership of the club.
"The Glazers have already cost United more than 550 million pounds in debt related fees and now another slap in the face as they help themselves to half of the proposed IPO proceeds," he added.
"Clearly this has nothing to do with benefits for Manchester United and is all about giving the Glazers quick access to desperately needed cash at the expense of our football club."
MUST has fought a long campaign against the Glazers, who bought the club for 790 million pounds in a highly-leveraged deal in 2005 and also own NFL team the Tampa Bay Buccaneers.
Discontent has grown after United, English champions a record 19 times, failed to win a trophy last season - their first barren year since 2005.
They missed out on the title to local rivals Manchester City, whose owner Sheikh Mansour Bin Zayed Al Nahyan, one of Abu Dhabi's ruling family, has ploughed an estimated 800 million pounds into the club.
A recent survey commissioned by United said it had 659 million followers globally, almost one in 10 of the population, but it still remains at the mercy of performances on the pitch, with revenues hit last season by an early exit from the lucrative European Champions' League.
However, the club's global appeal was underlined when it signed a new seven-year shirt sponsorship deal with General Motors' Chevrolet. The deal begins in 2014 and one source said it could be worth up to $600 million.
Meanwhile Manchester United set the terms for its U.S. initial public offering on Monday saying it will offer 16.67 million shares at between $16 and $20 each, which values the club at $3.3 billion at the top of the range.
Manchester United has been struggling with a hefty debt burden ever since being acquired by the family of Florida-based businessman Malcolm Glazer and his family in 2005.
The club and the Glazers each will be selling half the IPO shares in an offering that will raise as much as $333 million. The club's proceeds from the IPO will be used to reduce its debt. The Glazers will remain in a dominant position after the offering with 89.8 percent of the Combined class A and B shares.
The IPO may be a tough sell in the United States given the lack of U.S. publicly traded sports teams to compare Manchester United against and given that many Americans don't regard soccer as a top sport.
The company's latest financials may also give investors pause. Revenue for the fiscal year 2012 is expected to 315 million pounds to 320 million pounds ($495 million to $503 million), down 3 to 5 percent from the previous year, the company said in its S-1.
Operating expenses also increased 4 to 5 percent as a result of a jump in player and staff compensation.
Shares are highly priced based on earnings of a range of 21 million to 23 million pounds in the year just ended. This makes the price to earnings ratio based on both A and B shares at a very steep 95 times.
"It could be challenging to justify such strong multiples for a company that needs to spend a lot of money to generate success," Ken Perkins, an analyst with Morningstar said. "Even if their performance is good their price may be a bit high."
The details of the sale were announced just as it was revealed that the club had signed a 7-year sponsorship deal with General Motors Co to have the Chevrolet brand on their shirts starting in 2014. The deal is worth roughly $600 million, Reuters reported.
The club had filed to raise up to $100 million in its IPO of Class A stock earlier this month.
Manchester's United will kick off a two-week investor roadshow on Wednesday, with stops expected in the United States, Europe and Asia, according to a source familiar with the company's plans who was not authorized to speak publicly about them.
The roadshow stops will be done concurrently, with two separate management teams covering different geographies. One will be responsible for meeting with investors in the United States and the other with investors in Europe and Asia. Pricing is expected on August 9.
The team chose to list in the United States after scrapping listings in Singapore and Hong Kong. It had originally looked to raise as much as $1 billion in Singapore.
"I'm a little concerned that the offering couldn't be done initially and now all of a sudden it has a heartbeat," said David Menlow, president of IPO Financial which tracks IPOs. "The mentality with sports teams is that people like owning a piece as a trophy investment, but will it live up to expectations?"
The Glazers also own the U.S. football team the Tampa Bay Buccaneers. They will retain control after the sale because their Class B shares will have 10 times the voting power of average investors' Class A shares.
Jefferies Group Inc is the lead book runner in the syndicate, which also includes Credit Suisse, JPMorgan Chase, Bank of America Merrill Lynch and Deutsche Bank. The company will list on the New York Stock Exchange under the ticker "MANU."
Morgan Stanley bowed out of bringing the deal to market when Manchester United decided to list in the United States.
($1=0.6365 pounds) - Reuters