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Please note that all our reports on Manchester United are now provided at Football Economy


GLAZER BID REPORTS RAISE SCEPTICISM

According to a report in the Sunday Times on 1 August, the Glazer family from Florida is pursuing plans to take over Manchester United. The report appears to be well founded, but whether the Glazers can actually carry out their plan is another matter. A series of share purchases have seen them build up the second biggest stake in United (19.17%). The biggest stake (28.9%) is held by Irish racing millionaires, J P McManus and J P Magnier, through their Cubic Expression vehicle, but they have not added to their holding since 11 February. They may well be prepared to sell up, given that they are not football experts and they may view their stake primarily as an investment.

What remains uncertain is whether the Glazers can raise the millions of dollars they would need to make the bid. Wall Street banks have been approached, but have been discouraged by the opaque structure of the reclusive family's finances. Germany's Commerzbank, which has a long relationship with the Glazers, is said to have shown more interest. The Glazer holdings have been bought at a wide variety of prices, leading one investment banker to conclude that 'the master plan may be that there is no master plan.' One option may be for the Glazers to increase their holdings but not beyond the 30 per cent mark where a bid would have to be made for the whole company. With pundits expressing doubts about United's chances for the coming season, particularly after their 3-1 defeat by Arsenal in the Community Shield which confirmed defensive weaknesses, an early resolution of the uncertainty surrounding control of the club might help on the pitch.

Share price up

On 9 August shares in United went up 2.2 per cent to 260p as rumours that Malcolm Glazer was planning a 800m takeover gained momentum. Reports suggested that he was meeting the Ireland-based horseracing duo for talks about buying their stake in the club. The Takeover Panel has waived the usual delay on Mr Glazer mounting a renewed bid for the club.

And then down ...

On 10 August the shares fell 3 per cent to 252p on reports that no meeting had been set up between Glazer and the Irish duo. This is good news at least for Shareholders United the group of fans opposed to any bid.Updated 11/8/04

CLUB CUTS TIES WITH AGENCY RUN BY FERGIE'S SON

Manchester United is cutting its ties with Elite, the sports agency run by the son of its manager, Sir Alex Ferguson, following an internal review of its player transfer policy. The review was triggered by the club's largest shareholders, JP McManus and John Magnier, who had criticised the club's internal procedures and attacked the lack of transparency in player transfer deals, which often result in agents earning millions of pounds in commission. It revealed that the club had paid no less than 13m to agents in the past three years. Sir Roy Gardner, United's chairman, effectively admitted that all was not well, even though the club claimed that it was 'satisfied' its internal processes had been adhered to throughout the period reviewed. The question is whether these procedures were themselves adequate. On this point, Sir Roy Gardner stated that there were 'things we could do better to protect the reputation of the club. With that in mind we have introduced improved internal controls and are confirming our commitment to greater transparency in transfer dealings.'

The review revealed that thirteen United players are currently represented by Elite. The review also disclosed that the agency had earned fees in the deal that saw Jaap Stam move from United to Lazio and the loan of Ricardo Lopez to Racing Santander. United players represented by Elite will not be asked to end their reltionships with the agency, although it will not be retained to act for the club when it is pursuing future player deals.

Relations between the club and Mr Magnier and Mr McManus have improved since their legal dispute with Sir Alex over Rock of Gibraltar was settled in March. The Irish pair are studying the report and will soon inform the United board whether they are satisfied with its contents.

However, some external critics have already dismissed it as a 'whitewash'. An investigation by the Sunday Times raised a series of questions about payments made in the deal for goalkeeper Tim Howard and other aspects of the inquiry. The newspaper noted. 'The report failed to explain the role played by Gaetano Marotta, a Swiss agent whose English is so poor that the club had to talk to him through a translator when it interviewed him gor the inquiry. Marotta was paid 700,000 to complete the signing of Howard from New York Metrostars ... He played no role in talent-spotting the player.'Updated 6/6/04

GLAZER UPS STAKE AGAIN

US entrepreneur Malcolm Glazer upped his stake in Manchester United to 18.25 per cent at the end of April. Some of the shares acquired by Mr Glazer were sold by Maurice Watkins, one of the club's non-executive directors. Mr Watkins, a long-term shareholder and one of the club's legal advisers, sold 1 million shares at 250p each to reduce his stake to 1.91 per cent.

The offer period initiated by the Takeover Panel in response to Mr Glazer's activities has now been lifted. Manchester United declined to exercise its right to ask Mr Glazer 'to put or shut up' by either ruling out a bid or making a firm offer. Glazer's tactic of slowly building up a stake in United has puzzled City analysts many of whom believe the shares are already overpriced, but since when did financial logic have much to do with football shares? Moreover, despite a season with its disappointments on the pitch, Manchester United continues to generate profits that outstrip the limited returns of its rivals. Plans to expand the Old Trafford stadium by another 7,500 seats should consolidate its claim to have by far the largest club ground in Britain.

One consequence of the recent share purchase activity is that the number of small but still significant shareholders has been eroded. The shareholding has become increasingly concentrated on Glazer and Cubic Expression, the investment vehicle of racehorse owners J P McManus and John Magnier.7/5/04

SETTLEMENT NEAR BETWEEN FERGUSON AND MAGNIER

It is thought that the acrimonious dispute between Alex Ferguson and John Magnier over the racehorse Rock of Gibraltar is nearing a conclusion. Reports suggest that Sir Alex would receive between 2.5m and 5m of the stud fees earned by the stallion. Such a sum would be much less than the 50 per cent of stud fees he was claiming in the action which could be worth as much as 50m a year. Any settlement, however, will not end talk of a takeover at the club or resolve the concerns expressed by many fans.

The club has announced that it is considering increasing the capacity of Old Trafford from 67,500 to 75,000. This follows the announcement that Arsenal is moving to a new stadium with a capacity of 60,000.7/3/04

WORLD'S RICHEST SPORTS FRANCHISE

Manchester United has beaten the New York Yankees to the title of the world's richest sports franchise. Accountancy firm Deloitte gave the top spot to United in a ranking of European clubs for the seventh year in succession. United generated 173m of turnover, well above the 151m made by Juventus of Italy. In a separate ranking of US sports brands, the New York Yankees came top with turnover of 150m.7/3/04

TAKEOVER PANEL INTERVENES

The Takeover Panel placed Manchester United in an offer period from February 16th after Malcolm Glazer said that he was considering a bid for the club. The offer period will last under Mr Glazer either makes a bid or declares that he is not going ahead. The panel made its decision after Mr Glazer's family releasd a statement that did not rule out a bid. Oliver Houston of Shareholders United described the supposed statement of intent as being 'as clear as the new offside rule'. It is thought that Mr Glazer will not make a move on any takeover plans for at least a month. The effect on the club of the Takeover Panel intervention will be mainly administrative. Directors will be forbidden from dealing in the club's shares and meetings with shareholders will have to be supervised by financial advisers. Shares in the club fell by four per cent to 268.25p after the announcement.

Glazer adds to shareholding

Malcolm Glazer spent 2.65m on another million United shares to increase his stake in the club to 16.69 per cent in late February. Jules Spencer, the chairman of the Independent Manchester United Supporters' Association commented, 'The latest acquisition by Malcolm Glazer may be seen as a small investment by his standards, but it is another unwelcome one as far as we're concerned. Our message now is the same as it has always been. Manchester United is not for sale.'Updated 29/02/04

END GAME AT UNITED?

With the events of the last week we have now surely entered the end game at Manchester United. Events over the next few weeks should determine who is going to control the club although fans are not giving up their battle to have a say in the future of the club. Broadly speaking, there are now two scenarios. Whether are not they mount an actual takeover bid, horse racing magnates John Magnier and JP MacManus, acting through the Cublic Expression Group, are now in a position to exert substantial influence over the club, if not control it. Another scenario is that they could sell out their shareholding to 75-year old American sports tycoon Malcolm Glazer allowing him to take control.

Glazer's seriousness is shown by the fact that he has asked Commerzbank to consider how a bid for the club might work. Keith Harris, the banker who advised Chelsea on its sale to Roman Abramovich, has been consulted. Glazer is now believed to own a little more than 17 per cent of the club. However, the sharp rise in the share price may deter him. Glazer has been nicknamed 'the Leprechaun' by Tampa Bay Buccaneers fans because of his ginger beard and high-waisted trousers. One of his sons is said to be a United fan. However, what is of more concern to fans is Glazer's association with Rupert Murdoch. They almost did a deal that would have seen Glazer buy Murdoch's LA Dodgers and have not ruled out working together in the future.

During the week Magnier and McManus spent 20m to lift their shareholding to 29 per cent. They bought the shares from Jon de Mol, the Dutch creator of the television show Big Brother . He could have sold them enough shares to take them over the 30 per cent line which would oblige them to launch a full bid. They declined this opportunity and it is believed that the surplus shares went to Glazer. It is now understood that Cubic Expression will seek two or three seats on the United board. The dispute of the raceowners with Sir Alex Ferguson over Rock of Gibraltar remains unresolved and it has been suggested that they would like to install Martin O'Neill as his successor at some stage. However, Sir Alex did have a private meeting with Celtic's owner, Dermot Desmond, who is an ally of Magnier as well as a United shareholder and could serve as a peace broker.

Oliver Houston, a spokesman for Shareholders United, commented, 'These guys have already shown that they are prepared to attack the club, the manager and its fans. What we appear to have seen is an attempt to take over the club without buying 100 per cent of the shares and fans will reject any notion of it. It is about time these guys stepped out of the shadows and told us exactly what they are trying to achieve.' 'The United 4 Action' group are planning a protest against the Irish racing tycoons at Gold Cup day at Cheltenham.

The distribution of United shares is now believed to be:

15/2/04

FANS BACK FERGIE, BUT CLUB ADMITS DAMAGE

United fans made it quite clear that they backed Sir Alex Ferguson through their demonstrations of support for the embattled manager at the game against Southampton on 31 January. However, the club's chief executive, David Gill, made it clear that the continuing dispute with the Irish racing tycoons who are United's main shareholders was having a damaging effect. Gill told MUTV, 'The matter is affecting Manchester United and Sir Alex recognises that. If the case [over horse Rock of Gibraltar] came to a speedy resolution it would be in the best interests of all concerned, but that is something for Sir Alex and Mr Magnier.' The club agreed a new twelve-month rolling contract with Sir Alex during the week which effectively gives him a two-and-a-half year notice period, something that the racing tycoons were keen to avoid.

Sir Alex made it clear that he had been upset by the whole affair, particularly by letters querying potential conflicts of interest in player transfer deals. He said that it was 'distressing' and 'incomprehensible that I would abuse my position at the club. All of a sudden, because of a private matter about a racehorse, it is all coming out.' He added, 'My son has had a terrible time. People have been stealing his mail, going through his bin bags and hiding in bushes. In the end he had to call the police in.' The club announced during the week that it would disclose details of all payments to agents involved in future transfer deals in a bid to head off further criticism. This plan to shed light on the murky world in which agents operate received a mixed reaction from other Premiership clubs.

Reports have been circulating of a possible deal between Sir Alex and the racing tycoons. He would receive the proceeds of one nomination a year by the stallion every year for the duration of his career. This is estimated to be worth 45,000 a year, but could rise in value if the Rock is as successful as a stud as he was as a racehorse. However, a similar offer was on the table a few months ago and it is by no means certain that Sir Alex would accept. In any case, the racing tycoons intend to pursue what they see as a corporate governance crusade and press for answers to 99 questions it has tabled with particular reference to transfers of star players.1/2/04

RACING TYCOONS HOT UP ROW

Tensions between United's biggest shareholders, J P Magnier and J P Mc Manus, and the club's board have increased after they submitted a seven page letter querying board decisions and standards of corporate governance. If they don't get a satisfactory reply they may call an extraordinary general meeting and push for an independent auditor to probe transfer deals and payments made to agents. They are also considering a complaint to the Financial Services Authority, the main UK regulator.

They have raised concerns about the decision to pay Rio Ferdinand his full salary, understood to be 70,000 a week, while he is suspended. They have made it clear that they do not want to remove Sir Alex Ferguson as manager, but think that he should have a one year rolling contract in line with corporate governance guidelines for senior executives. The club has responded by stating that 'We believe our corporate governance policies and procedures are among the most rigorous in football.'26/1/04

DOUBTS ABOUT FERGIE'S FUTURE AS RACING TYCOONS INCREASE STAKE

Doubts about Sir Alex Ferguson's future have increased after Irish racing tycoons John Magnier and J P McManus increased their shareholding in Manchester United to over a quarter. Cubic Expression Ltd., an investment vehicle owned by the Irishmen, confirmed that it had bought 3.3 million United shares. Any investor who acquires a 30 per cent stake in a company is required to make a bid offer to all other shareholders. It also seems increasingly likely that the pair will seek representation on the board which would enable them to veto the renewal of Sir Alex's contract if they so wished. Sources close to Magnier are reported to insist that damaging Ferguson would be cavalier because he has underpinned the club's success. However, Magnier cannot fathom why Ferguson is pursuing legal action over the stud rights to the racehorse Rock of Gibraltar so doggedly.

The small shareholders group Shareholders United has reiterated its stance against any bid. Shareholders United Spokesman Oliver Houston stated, 'All fans' groups and fans at our club are united in not wanting a takeover. A single owner or block of owners in control would not be healthy. The opportunity for scrutiny and accountability would be lost and fans would have little chance of ever having a say in how their club is run. United is a 125-year old community asset and should not be treated like a stock market placing. Media moguls, currency speculators, oil tycoons and the rest should take note that our club is not for sale.' Fine words, but the fact is that the club is at the mercy of market forces and someone is going to make a bid sooner or later.

Sport First claims that Ferguson is to be replaced by Celtic's Martin O'Neill. The paper claims that 'the skids have been put under Fergie by a series of revelations over recent weeke sbaout the way United have handled transfers under his management. Critics question the role his son Jason has played in many of them. They also point out that Fergie has been repeatedly warned at board level about those concerns.'25/1/04

RUSSIAN OIL MAGNATE IS LATEST BIDDER TO STALK UNITED

Russian oil magnate Ralif Safin, one of the founders of oil producer, Lukoil is the latest person reported to be interested in buying United. He has a house in London where his daughter, one of Russia's leading pop singers, is based. There are doubts about whether he can raise what is thought to be a 700m purchase price. He has, however, apparently been in contact with a London investment bank. The news gave another boost to the shares which closed up 2.6 per cent at 262.75p at the end of December.

4/1/04

NOT MUCH NATURAL JUSTICE IN FERDINAND CASE?

Whatever one thinks of the rights and wrongs of Rio Ferdinand's eight month suspension for failing to take a drug test, the usual civil remedies for testing the procedures used do not appear to be available. Fifa boss Sepp Blatter (aka Blather) has been leaning on the FA to take a tough line in the case, having discovered a drugs problem in football that he previously claimed did not exist. It has been suggested that Old Trafford officials are less than pleased with his interventions. Moreover, he has now said 'According to the statutes of Fifa and the member associations, in this case, no recourse may be made to the courts. The highest court would be the Court of Arbitration for Sport in Lausanne.' Ferdinand can lodge an appeal which would be heard by a panel chaired by an independent QC but with two FA Council members on it. However, if United tries to get a civil court to review the case they have been threatened with suspension by the Champions League.

Ferdinand is being supported by his sponsors Nike who are standing by him and by the players' union. Highly qualified lawyers have argued that Fifa's handling of the whole affair does not stand up to scrutiny. John Hewison, a senior partner with the Manchester-based sports law firm George Davies commented. 'If it had been a criminal case it would have been thrown out because there was no way Rio was ever going to get a fair trial. The FA might claim the commission is independent but the three men who sat on it were all from the FA. It's hard to see how all the publicity that went before the hearing couldn't have influenced them in some way.'

As far as the commission is concerned, a story in the Sun revealed that one of the commission members, Peter Heard, 'co-founded a company which has made up to 1 million from FA contracts. The company, Churston Heard, was hired to find the FA plush new offices at Soho Square. Thet were also employed to sell the FA's former offices at Lancaster Gate and have handled numerous transactions on their behalf.' The Currant Bun emphasised, 'There is no suggestion of any wrongdoing by Churston Heard in their dealings with the FA - but the business seriously undermines Heard's so-called independence on the panel.'

The larger underlying issue behind this clash is the tension between Europe's big clubs represented by G-14, which includes United, and UEFA about who runs the game, an issue discussed on my Political Economy of Football page. G-1428/12/03

TAKEOVER TALK RENEWED

Shares in Manchester United rose to a three year high at the end of November on renewed speculation that the club was about to receive a takeover bid. Two chunks of 11.9m shares, representing a 4.5 per cent share, changed hands on Friday. The deal was brokered by Commerzbank with the seller thought to be hedge fund Lansdown Partners. It was subsequently revealed that Malcolm Glazer had increased his holding to 14.3 cent. Manchester United's chief executive David Gill has met with the US tycoon in Florida, a meeting that was described by the club as 'very friendly' and 'useful and productive'.30/11/03

SHAREHOLDING FANS UNITE TO FIGHT TAKEOVER BID

Shareholders United, which was formed five years ago to fight a bid by BSkyB, is mobilising to deal with any new bid for the club. The rapid changes in the shareholder base have made many fans uneasy. Oliver Houston, spokesman for Shareholders United, said, 'We didn't go through that epic battle [with BSkyB] only to see the club snatched away from the fans five years later.' Shareholders United, which owns about 2 per cent of the shares and claims its members hold another 5 per cent, wants other small investors to pledge that they will keep their shares and not sell to any would-be predator. It believes that 10 per cent would be enought to block any bid.

Club chairman, Sir Roy Gardner, told the annual meeting that the club was continuing to seek a meeting with Malcolm Glazer who has built up a stake in the club. 'We are pretty confident that we will be meeting him in the near future', said Sir Roy.15/11/03

FERGIE CONTRACT NEGOTIATIONS START

Sir Alex Ferguson is to begin negotiations when his solictor returns from holiday on whether to extend his current contract at Old Trafford by two or three years. Ferguson commented, 'These things don't happen easily, there are lots of points to make. But I have two years left on my existing deal so I'm not worrying about my contract yet.' These moves would suggest that the club is not concerned about reported pressure from the so-called 'Coolmore Mafia' not to begin contract negotiations at this time.

Nice work if you can get it

Manchester United's new chief executive David Gill has exercised his option to buy 400,000 shares in the club at 159p a share. On the same day, he sold 325,000 shares at 230p, i.e., 71p more. Some of us might think this would be nice work if we could get it. But in fairness to Mr Gill, it should be said that he was simply exercising an option available to him in his contract. The club explained that he made the share sale in order to fund buying the shares in the first place and to cover the personal tax liability arising from the transaction. Mr Gill, who was formerly a finance director at holiday group First Choice, now owns 132,138 shares in the club.19/10/03

TAKEOVER FRENZY GROWS

The takeover frenzy surrounding Manchester United has grown with the news that J.P. McManus and John Magnier, the Irish horse racing millionnaires, have bought BSkyB's 9.9 per cent stake in the club for about 62m. The purchase, made through their Cubic Expressions vehicle, increases their holding to 23.15 per cent. The Irishmen insist that theirs is a 'trophy shareholding' which, if all goes well, will be handed down to their children. They will not sell the shares for a quick profit, nor are they interested in acquiring a controlling interest. However their enhanced shareholding does mean that they will able to block any rival bid. As one analyst commented, 'Whatever happens next, they are the kingmakers. No one will be able to do anything without talking to them.' United's shares closed 5.4 per cent higher up 12.75p at 247.75p, although they fell back to 235p the following day. The stock market value of the club has doubled since the beginning of 2003. The Takeover Panel is understood to have been monitoring the club's share price closely following a series of prices spikes just before some of its big investors increased their stakes.

In an evident reaction to the doubling of McManus and Magnier stakes, two other shareholders increased their shareholdings in the club. Malcom Glazer increased his stake from 5.8 to 8.94 per cent by buying shares in several tranches, including one block of 1.5 per cent from hedge fund Lansdowne Partners. On October 20th it was announced that he had further increased his stake to just under ten per cent. It was unclear where he bought the shares from. Jon de Mol, creator of the Big Brother television series, increased his stake through his Talpa Beheer investment vehicle to 4.11 per cent. The latest share dealings appear to have increased the likelihood of a battle for control of the club with more than 30 per cent of it now held by three investors and six outside investors controlling almost half the shares. Other significant shareholders are mining millionnaire Harry Dobson with 6.5 per cent; hedge fund Lansdowne with a reduced shareholding of 3.72 per cent (but subsequently increased again); solicitor Maurice Watkins with 2.3 per cent; and Celtic chairman Dermot Desmond with 1.5 per cent. A mysterious American called Richard Post owns 1.5 per cent. Mr Glazer still looks like the most likely bidder. Commentators have suggested that Mr de Mol is more interested in getting a good price from whoever wants to own the club.Updated 11/10/03

Lansdowne boost stake

Hedge fund Lansdowne Partners increased its stake in Manchester United to just over four per cent at the end of October. Lansdowne has been buying and selling shares in the club for the last eighteen months and held nearly six per cent in June. Lansdowne has been linked to purchases of shares in the club by Malcom Glazer, including a 1.5 per cent block he acquired in October 2003.2/11/03

'Coolmore Mafia' want seat on board

Horse racing tycoons John Magnier and J P McManus would like a seat for one of them on the United board according to the Sunday Times . Known as the 'Coolmore Mafia', they are said to be happy with the way that the club is being run. However, they might be concerned about the board's offer of a new contract to Sir Alex Ferguson at a time when he is taking legal action against them to settle a dispute over the racehorse Rock of Gibraltar. The dispute is over the considerable stud fees that the horse earned. No formal contract is thought to have been drawn up but Sir Alex is understood to believe he is entitled to half the fees which could be worth as much as 50m a year. A statement issued by Coolmore Stud said that it considered the action to be without merit and it would be vigorously defended.

Company law does not give the pair any automatic right to a seat on the board. If the board refused to let them on, they would have to get the backing of half the shareholders at the annual meeting. However, United might decide that it was wise to have them on side against any predatory moves by figures such as Malcolm Glazer.12/10/03

Mystery investor buys shares

Manchester United shares hit a two year high on October 3 after one mystery buyer purchased three million shares, or about one per cent of the company, in the last hour of trading. The shares closed up 7.4 per cent at 218p. On 6 October they rose another 8 per cent to 235p, valuing the company at $1bn (611m), a two-and-a-half year high. There was speculation about whether Malcolm Glazer, owner of the Tampa Bay Buccaneers, had added to his stake. If he was behind the transactions, he would have to disclose his new stake to the club within forty-eight hours. It would give him a seven per cent stake in the club. Information on Mr Glazer's other shareholdings, which include television stations and restaurants, is vague. However, he has a reputation as a corporate raider who has pursued several high profile companies over the past twenty years. Rumours are also circulating that a possible purchaser might be Russian billionnaire, Boris Berezovsky, seeking to emulate his compatriot Roman Abramovich. The club is planning to issue notices to establish who the owner of the shares is.Updated 7/10/03

Malcolm Glazer

PRIVATE EQUITY BID UNLIKELY TO SUCCEED

Keith Harris, the financier who advised Ken Bates on the sale of his stake in Chelsea to Russia's Roman Abramovich (who did consider a bid for United) has sounded out a leading private equity house about a possible bid for the club. Mr Haris is a lifelong Manchester United fan and former Football League chairman who now heads the investment bank Seymour Pierce. The consensus of City experts is that the bid is unlikely to succeed. Buying the club would be a complex deal that many private equity groups would never contemplate.

Perhaps more significant are reports that the Irish horse racing millionnaires, J P MacManus and John Magnier, are preparing to offload their stake in the club. The reports initially led to a 4 per cent fall in United shares on 4 July, but they later recovered.6/7/03

IS BECKS DEPARTURE AN OWN GOAL?

This was the question posed on the front page of the Financial Times on 11 June after United announced that they were planning to sell their most valuable playing asset, David Beckham, to Barcelona for a fee estimated at 30m. In the final outcome, Beckham went to Real Madrid for a basic fee of 25m (17.6m) payable over four years with a further 10m conditional on Real's performance in the Champions League.

After the initial announcement, the club was immediately plunged into a row with Beckham's advisers who said that he did not want to go to Barcelona. What was quickly apparent was that was going to leave Old Trafford. The tensions with Sir Alex Ferguson about his celebrity lifstyle had become too difficult to manage. The Financial Times compared Sir Alex Ferguson's famous 'mind games' which involved keeping Beckham on the bench in key matches as 'more like the ritual humiliation practised by Maoists during the Cultural Revolution.'

The markets certainly thought that the club is strong enough to survive Beckham's departure, marking up the shares by 4.6 per cent. The club would be realising a large sum on an asset that was produced through their youth system and does not appear on the balance sheet. The argument that United would sell fewer shirts if Beckham left does not stand up. The club's 303m thirteen-year shirt and merchandising contract with Nike pays yearly, guaranteed returns regardless of which players are employed by the club.

Nevertheless, there are marketing downsides to his departure. It means that the club will probably depart on their debut American tour next month without their most bankable asset. Beckham is one of the most iconic individuals in global sport and arguably he would be going before the club had used his potential to the full. His fame in Asia, especially Japan, is unparalleled. Losing him would be a blow to the club's Asian plans.

The Financial Times commented, 'He is now a fully fledged sports brand of his own, with his pop-star wife Victoria, his unique fashion sense and ever-changing hairstyles extending his appeal well beyond the pitch.' He could probably earn even more at Real Madrid, a club that has a less rigid wage structure because it is not bound by the confines of a public company. They might also be able to make better use of his image. The club has pioneered a number of unique 'image rights' deals with top stars such as Figo and Zidane. It has used such deals, whereby it organises marketing endorsements for the players, and takes a share in the profits, to justify the huge outlay required in buying them.

FutureBrand, the brand consultancy, estimates that 30 per cent of non-European football fans follow clubs because they like individual players. 'If Beckham leaves, the number of United international supporters will probably decrease', claims FutureBrand's Samantha McCollum. Such a fall would have a knock-on effect on the size of television audiences for United matches screened oustide the UK. However, the club's media rights deals at home and overseas are currently agreed collectively. The club wants eventually to take control of overseas media rights and sell them itself. Selling Beckham could therefore have an effect on these potential revenues.Updated 22/6/03

FSA Investigation

The Financial Services Authority is investigating the way in which the club announced the deal to sell Beckham to Barcelona. The club issued a press release at the weekend confirming that it was in discussions with a number of clubs. However, it waited untul 8.30 a.m. on Monday before issuing a formal release on the stock market's regulatory news service. Shares in United rose nearly 5 per cent on Tuesday when the club released its additional announcement about the prospect of a deal with Barcelona. On this occasion it is understood that no formal statement was made to the Stock Exchange.16/6/03

SHARES CONTINUE TO PERFORM WELL

The club's shares continue to do well. By the end of May, the share price had risen 47 per cent over the year, standing at 154.25p, their highest level since September 11 2001. Although the club was not on the field for the European Champions League final at Old Trafford, they still made a cool 1 million from it. The financial crisis in football actually helps a buying club like United as it means lower outlays on players. David Pope at Brewer Dolphin commented, 'The trend is for fund managers to buy into higher beta leisure and media stocks. The value of TV contracts and sponsorship moves in conjunction with the economy.'1/6/03

CLUB STRENGTHENS DEFENCE AGAINST TAKEOVER BID

Although Manchester United is relaxed in public about the possibility of a takeover bid, it has taken a significant move to strengthen its financial defences. Cazenove, the City of London's most powerful broker, has replaced HSBC as the club's financial adviser.

Following its exit from the Champions League at the hands of Real Madrid, but with its chances of winning the Premiership looking good, some crucial decisions have to be made about the team. Manager Sir Alex Ferguson has been told that he will have to sell players before he can buy. David Beckham, perhaps more crucial in marketing terms than in terms of the time he spends on the pitch (although no one could deny the brilliance of his free kick against Real) is increasingly being linked with Real or Inter. Inter Milan is interested in Ryan Giggs. Selling Beckham and Giggs would be financially more beneficial to the club than having them leave on a free transfer when their contract runs out. Two players, Laurent Blanc and David May, who earn about 1m a year will leave in the summer when their contracts expire.

The club's long-run financial strategy remains sound. It rests on three main revenue streams. Matchday revenues are 46 per cent of turnover. However, they cannot be grown much more as there is a limit to the number of people that can be fitted into the stadium. The commercial revenues stream is very promising given the thirteen-year contract with Nike that gives them the right to run all aspects of the merchandising business from key rings to kit. A low-profit high costs in-house merchandising operation has been replaced by a high margin business. It is hoped that merchandising will eventually account for a third of the club's revenues, with a third also being contributed by gate revenue and media income. The media division is the club's highest margin business. It requires little extra investment and has the best potential for growth. The club does want to change the way in which money is distributed by the Premier League, an issue that is bound to be controversial. United would prefer a 'fan descriptor' model for the pay-per-view rights which would pay the club according to how many of the fans paid to watch each game. The MUTV digital television venture with BSkyB and Granada only has 75,000 subscribers at the moment is losing money. The club has invested 1m in MUTV and has had to write off 282,000 of losses associated with the venture.

The club estimates that it has 11 million fans in the UK, but at least 16 million in Asia, the region with the greatest untapped potential. The club now has the name of 1.5 million fans on its database of which only 0.2 million are from outside the UK. The club aims to grow the total to 3.5m in a couple of years and 6.7m by 2007. The club hopes that two-thirds of the million will come from outside the UK, a feasible target given United's global image.27/4/03.

US MARKET KEY TO GLOBAL BRAND STRATEGY

The United States is the richest domestic market in the world, but 'soccer' remains primarily of interest to young women and Latinos. Breaking into this market is key to United's strategy of building a global brand. Hence, the club is embarking on a four city tour of the States in July. The tour will take United to Seattle, Los Angeles, New York and Philadelphia for exhibition games against Celtic, Juventus, Barcelona and Mexico's Club America. United will play Juventus in New York with its Italian-American traditions and Club America in the ethnic melting pot of Los Angeles with its large Latino population. Three of the four games are already sold out.

Some analysts think that the success of the tour will in part depend on whether David Beckham is still with the club, although the club would insist that the strength of its brand is not reliant on one player. The excellent film Bend it Like Beckham has been a considerable success in the States. Ironically, at a time when Tony Blair has been offered a cameo role in The Simpsons , it has been decided to drop a similar offer to Becks. The show's producer commented, 'soccer isn't big in the US. He's not really famous enough'.

Another approach might be to find an American star. The club has recently signed Jonathan Spector, a seventeen-year old defender from Chicago. However, there are doubts about whether he will really make the grade.21/4/03.

Deal with Barclaycard

Barclaycard, the leading credit card issuer in Europe, has signed a deal with Manchester United to promote club-branded credit cards around the world. Barclaycard is attempting to develop a global business and hopes to tap into United's global fan base. It is understood that the club has been paid less than 5m for the agreement. The new deal excludes the UK where the club already has a deal in place with MBNA, the US credit card company.21/4/03.

LATEST RESULTS CONFIRM STRENGTH OF CLUB

Although they show a 34 per cent fall in pre-tax profits in the six months to 31 January, the latest results for Manchester United emphasise the strength of the club. In its comments on the results, Investors Chronicle noted , 'It's a sporting brand with global appeal, as well as a highly-profitable business. And, almost uniquely for the UK sector, it has genuine and sustainable growth prospects. Because of the power of the brand, the club is able to secure sponsorship with other top corporate brands. What's more, the club's broadcasting rights have yet to be fully exploited, and its extremely-strong balance sheet should help ensure it can buy the best players to maintain its dominance of the English game.'

Pre-tax profits for the six month period slipped from 30.9m to 20.3m, reflecting the record-breaking purchase of Rio Ferdinand. However, chief executive Peter Kenyon has ruled out an acquisition of a similar scale in the future. He commented, 'We don't see ourselves spending 30m on a player in the future. We don't see these transfer values being maintained by the general football market.'

Profits at the operating level before player trading rose 32 per cent to 31.1m, boosted by a 12m profit contribution from the club's new thirteen-year 303m kit contract with Nike. Although player wages rose by 5m, with a total salary bill of 39.7m, salaries represent 43 per cent of turnover, well within the limit recommended by Deloitte and Touche. If David Beckham does go to Real Madrid or Barcelona, the club will be well placed to replace him.

Although it continues to support collective domestic selling of television rights, the club wants to sell its own rights to overseas television companies as well as to mobile phone groups that could show video clips of goals and other highlights. Income from overseas rights is currently pooled and distributed between the twenty Premiership clubs, but United has an obvious interest in exploiting those rights itself. The club expects a verdict in the next two months from the Office of Fair Trading investigation in to the price-fixing of replica kits. If found guilty, it could be hit by a hefty fine.7/4/03

IMMEDIATE BID RULED OUT, BUT BURST OF TAKEOVER SPECULATION CONTINUES

The Takeover Panel has assured Manchester United that Irish horse racing billionaires J P McManus and John Magnier have no plans to make a bid for the club and were not working with any of the other key shareholders. They are now the biggest shareholders in the club after they upped their stake to 10.37 per cent. This does not mean, however, that some form of bid can be ruled out in the longer run. As the Sunday Times Business News commented, 'It is becoming harder and harder to believe that the enthusiasm of so many wealthy and over-active individuals doesn't herald some form of corporate activity sooner or later.'

News of new minority shareholdings in the club renewed speculation about the possibility of a takeover bid. A number of wealthy individuals whose interest in the club is sporting rather than financial now hold around a third of the shares. If they got together - and it's a big if - they could be in a position to mount a bid. At least the speculation has lifted the share price which has crept up from a low of around 90p in December to 131p at the end of the first week of March, a rise of 15 per cent in the week and 23.8 per cent in the year to date. However, this figure has to be compared with a peak of 402p in 2000. To put things in perspective, the club was briefly worth 1m then, but was valued at 294m by the stock exchange in March 2003. Nevertheless, the club has generated almost 150m in cash over the last decade. The solidity of its revenues gives it real appeal to investors in a depressed market.

The new shareholders are:

Other key shareholders are:

Reviewing the club's financial strength, the Sunday Times Business News commented, 'the market value is 345m and the company was virtually free of debt at its last balance-sheet date. Given its cash-generative nature, and that major building projects are completed, it looks cheap for a business that makes more than 30m of basic operating profit. It is also, of course, the owner of a name that is perhaps the most-recognised British brand in the world.' The Sunday Times suggests that the stock appeals to the Irish racing tycoons as gamblers. 'It has two classic ingredients of a good bet - limited downside and lots of potential upside.' Updated 16/3/03

MUTUAL PLANS RAISE DOUBTS

Plans to turn United into a mutual organisation run for and answerable to the fans have been greeted with some suspicion. Fears have been expressed that there may be a commercial or investment dimension to what has been presented as an altruistic idea.

The man behind the proposals is Dermot Desmond, an Irish multi-millionnaire. He is friendly with two Irish businessmen, J P McManus and John Magnier, who bought a 8.6 per cent stake the club in 2001. They in turn are friends with Sir Alex Ferguson. Desmond commissioned a study from investment bank Goldman Sachs to see how the club might be transformed into a trust. The basic model would be similar to that of the Wellcome Trust which funds medical and scientific research.

The club's shares, which are close to a five year low, would be debt secured against its (highly reliable) future revenue streams. However, anything that could be portrayed as an Irish takeover of the club might attract negative publicity. Much will depend on the attitude of Sir Alex Ferguson. It is believed that at the time of the BSkyB bid he secretly met bankers to explore the possibility of mounting a rival offer.23/12/02

REDS TO SUE LAZIO

Manchester United have launched legal proceedings against Lazio to secure 12m owed as payment for last year's transfer of Jaap Stam. The proceedings were intiated after evidence of mounting problems in Sergio Cragnotti's business empire. Shares in his food group Cirio, which has a 35 per cent stake in Lazio, were suspended in early November. In a statement, United said that it had 'initiated legal proceedings in respect of the outstanding promissory notes from SS Lazio and in respect of the guarantee of the debt by Cirio Finanziaria SPA, a member of the Cirio group.' The club is understood to have already paid tax on the transaction.

Manchester United have made it clear that they would not be interested in taking a player in full or part settlement for the money that is owed them. Lazio also owe Valencia 7.5m and it has been suggested that the debt could be settled through the return of Stam or the transfer of another player like striker Hernan Crespo or midfielder Gaizka Mendieta. United's chief executive, Peter Kenyon, slammed Lazio in an outspoken interview: 'The industry is built on people honouring contracts, whether that's a club to a player or a club to another club. The minute that integrity goes then the industry is in a sad state. I am disgusted by the whole matter. It's immoral.' Kenyon faced angry questions on the missing Stam money from shareholders at the club's annual general meeting in mid-November.

CLUB'S RESULTS PLEASE CITY

As share prices plunged to new lows on 30th September, shares in Manchester United went up by 5.26 per cent to close at 105p following good news on annual profits. However, they slumped again in the week ending 5 October to 99.75p, a long way from the 400p highs of 2000. There was speculation in the market that the stock was being 'shorted', possibly by a potential new buyer hoping to get on the board on the cheap.

Nevertheless, the City was particularly pleased that the club had decided to make a 1p special dividend payout, making the total 3.1p. The dividend move can be seen as a response to calls from analysts for football clubs to reinvent themselves as yield stocks to reawaken investor interest. Something needed to be done because Nike could theoretically buy the club for less than the 303m over thirteen years it agreed to pay two years ago for the right to supply club replica kit. At one time the club became the first 1 billion football club in terms of its market capitalisation.

Pre-tax profits for the year to 31 July, swelled by player trading profits, rose to 32.3m from 21.8m on turnover up 13 per cent to 146.1m. Debt is not an issue as it is for so many clubs. As the Nike merchandising deal cuts in, operating profit from commercial and merchandising operations should rise from about 9.5m this year to more than 24m next. Fears about the value of media rights are often exaggerated. Even if the value of the Premiership contract does not increase, or even goes down, when it is re-negotiated, clubs like United should be able to extract more from overseas rights to Premiership matches.

On the downside, the club does seem to be losing control of wages and salaries with the bill going up by 39 per cent in the first half of the year. They may now level off more. The transfer market has also softened, although this is a double-edged sword, since the value of players the club may want to sell will be falling as fast as that of their transfer targets.

NEW BID RUMOURS SWIRL ROUND UNITED

New rumours of a takeover bid have swirled round Manchester United following the sale of almost all the remaining 6.6 per cent stake of Martin Edwards. It has been suggested that Mr Edwards and Sir Alex Ferguson have not seen eye-to-eye over the manager's role at the club. Mr Edwards did not know who was buying his stake. It was purchased by Harry Dobson, a director of Ovoca Resources. Mr Dobson is a member of the Irish horese-racing fraternity that includes J P McManus and John Magnier, who through their Cubic Expression vehicle own 8.65 per cent of the club. They are close associates of Sir Alex and have business contacts with Dermot Desmond, the Irish entrepreneur with a stake in Celtic. Mr Dobson said that he had bought the stake as an investment. 'It is the best value stock in an out-of-favour sector.'

UNITED IN ONLINE BETS DEAL WITH LADBROKE

Manchester United has struck a four-year deal with Ladbrokes that will allow fans in East Asia and around the world to bet online on its website. Revenues from United fans will be split equally. South-East Asia is one of the biggest betting markets in the world. Compared with horse racing, where margins are around 14 per cent, football offers margins of up to 50 per cent through more complicated bets -for example, on the first scorer of in a game.

Chris Bell, the chief executive of Ladbrokes, commented, 'Domestically alone, United are far more powerful than any other club and attract far more bets.' He said that he expected the deal to be worth a significant seven-figure sum over its lifetime. City analysts were less excited, commenting that those who wished to bet online were probably already doing so.

In another commercial development, United have announced that they have teamed up with Nike to create a new range of clothes and accessories for babies and toddlers. Brooklyn Beckham will be able to have his own mini-wardrobe of football gear.

NEW INTERNET PORTAL FOR ASIAN FANS

Manchester United has struck a deal with Terra Lycos, the internet portal (which provides the platform for this page) to create 'online communities' from its millions of Asian supporters. Under the four year deal, Terra Lycos will build a Chinese-language 'online destination' for the football club in China. The Chinese website will initially replicate services available on United's UK internet offering. Chinese fans will eventually be able to buy club-branded goods on the site. Terra Lycos will also become one of the club's main sponsors and will act as its sales agent in Asia.

Manchester United estimates that it has more than fifty million supporters around the world. The club must find ways of turning such fans into customers if it is to continue to be able to pay the wages of its top stars. United's managing director, David Gill, commented, 'When we launched our interactive subsidiary company, Manchester United intreactive, we did so with the stated objective of connecting with more of our fans around the world. We want to build online communities for our fans so they can interact with us and with each other in their own languages.'

CLUB ACCUSED OF FIXING KIT PRICES

Along with the Football Association and nine sports companies Manchester United has been accused of fixing replica kit prices by the Office of Fair Trading (OFT). The club's involvement is linked to the sale of kits at its Old Trafford stadium shop. David Pope, analyst at United's house broker Brewin Dolphin commented, 'This is a retailer's issue rather than a football club one. The only reason that Manchester United is on the OFT's list is because it has a string of stand-alone stores.' Peter Kenyon, Manchester United's chief executive, is a former Umbro (one of the companies complained against) board member, but ties between the two companies will be severed next season when United begin a 300m kit contract with Nike. The OFT can levy fines worth up to ten per cent of the guilty company's UK turnover. In United's case this would amount to the cost of a much needed first class defender. However, such an outcome would be a worst case scenario.

Themed cafes in Asia

A new commercial initiative taken the club is the opening of ninety themed cafes in countries throughout Asia. Designed as 'casual family-style venues', the first outlets are planned for Beijing and Singapore by the end of the year. It is also planned to operate in Indonesia and Malaysia, capitalising on the club's popularity in a region with an estimated 30 million Manchester United fans. The cafes will be operated by Manchester United Food Beverage Concepts, an affiliate of FJ Benjamin, one of the club's Asian partners. The company will pay the club a 'franchise fee' for a ten year licence to operate the 'Reds' cafes.

BIG PROFITS BOOST

Manchester United has reported a 79 per cent rise in interim profits in the six months to 31 January. Pre-tax profits were 30.9m, but this included a 16.3m profit on the sale of players (including Jap Stam and Andy Cole). This compares with pre-tax profits of 17.3m last time when profits on player sales raised less than 2m. Turnover climbed 14 per cent to a record 82.5m.

At the operating level the picture was less encouraging. Group profits slipped to 15.2m, putting the operating margin below twenty per cent. Administrative expenses were up 29 per cent to 48.1m. The largest component of this was 9.5m relating to player wage costs. This resulted both from new acquisitions (Juan Sebastian Veron and Ruud van Nistelroy) and new playing contracts negotiated with key players. The club is expected to conclude a deal soon with David Beckham worth 80,000 to 100,000 a week.

The overall wages and salaries bill soared by 39 per cent from 24.2m to 34m. This brought the staff costs to turnover ratio up from 34 per cent a year ago to 42 per cent. It was indicated that this was expected to rise to 50 per cent by the end of the year, generally seen as the maximum prudent level, but still below the figure for many clubs. Some analysts expect the club to slip into the red in the second half, although this is likely to depend on how well it does in the Champions League.

SHARES BOOST AS FERGIE STAYS

Manchester United shares rose 3p against the background of a 1.4 per cent fall in the Footsie as the club announced in a terse statement to the Stock Exchange that Sir Alex Ferguson is stay on as manager. He is expected to sign a new contract worth at least 2.5m a year. He feels that there is unfinished business for him to complete. The search for a successor was running into problems with a number of favoured candidates ruling themselves out including England's Sven Goran Erikkson, Ottmar Hitzfeld from Bayern Munich (the candidate favoured by Fergie) and Celtic's Martin O'Neill. The final blow came when it was announced by Roma that Ciro di Martino would honour his contract which expires next year.

With United back on track in what is admittedly a close contest for the championship, the news was welcomed by fans. The Shareholders' United pressure group said it 'had always hoped he would stay on.' The news was also likely to have pleased Irish horseracing magnates JP MacManus and John Magnier who know Sir Alex well and have a significant stake in the club. The only downside is that the shares boost still left the club valued at 364m compared with the billion plus level of March 2000.

BUDWEISER DEAL IS LATEST ADDITION TO GLOBAL STRATEGY

With Manchester United's crushing defeat of Southampton signalling that they are still very much in contention for the championship, the club has signed an important new sponsorship deal with Budweiser. The beer is the best seller in the US and is expected to assist the club in a planned tour of the US in 2003. It fits in with the strategy of seeing overseas growth as the driver of future success. The club's clear preference is to form new marketing and sponsorship deals with global rather than UK-based brands. For Budweiser it provides opportunities in key markets where there is a significant following of the club such as Asia and Scandinavia.

The sponsorship is thought to be worth about 1 million over a multi-year deal. Budweiser will become one of the club's 'platinum sponsors' and replaces Carlsberg, a UK-only lager, as the club's official beer. The deal with Carlsberg is thought to have been worth about 250,000 a year.

RED DEVILS GO ON CHINESE CABLE

Manchester United has had a long-run China strategy and it received a boost with the news that the club's own television station, MUTV, has been added to CCTV5, the government-owned sports cable channel. It offers four-and-a-half hours of MUTV a week. CCTV5 has sixty million subscribers and it is confident that the deal will boost audience figures. It will try to sell them Nike kit, web access, and pay-per-view television.

There is little immediate financial benefit to the club from the deal. However, it is part of an effort to build up support for United in China. It is already estimated that there are between 5.3 and 8 million supporters. The writer of this page visited China in 2001 and was impressed by both the booming prosperity of the economy and the sophistication of the coverage of Premiership football on Chinese television. China's participation in the World Cup will no doubt boost interest further, so this is a good time to make a move into this growing market.

A pitch in a training complex near Kunming in Yunnan, China, photographed by the author on a visit earlier this year. This complex is sometimes used by the Chinese national team when training. Land is so intensively used in China that football pitches are in short supply, leading basketball to be a favourite participation sport.

CLUB TOPS GLOBAL 'RICH LIST' AGAIN

Against the background of continuing worries about United's up-and-down performances on the pitch, the club come take some comfort from the fact that it has topped the annual global football 'Rich List' published by Deloitte and Touche. With a turnover of 117m in 1999-2000, it is the fourth consecutive time it has topped the list. Real Madrid were second with 103.7m and Bayern Munich third with 91.6m. Among English clubs, Chelsea were next with 76.7m (excluding travel agency and property slaes) while Arsenal were ranked third on 61.3m.

FANS' WORRIES SURFACE AT AGM

Fans' worries about Manchester United's recent performance surfaced at the club's annual general meeting in mid-November. Probably the doom and gloom has been overdone a little by journos looking for a story. United have failed to dominate the Premiership in the early part of the season before and gone on to win the championship. The 2-0 win over Leicester, aided by a superb piece of kidology by keeper Barthez is a step in the right direction.

Nevertheless, many fans are worried and those of them who are small shareholdres had the chance to express their concerns at the meeting. Keith Thorpe said they had been misfiring for the last twelve months and accused them of 'cherry-picking their performances.' He was applauedd by the floor when he said, 'What we have seen over the last twelve months has been shocking. Don't go down the road of using the excuses that we sold Jaap Stam or that Steve McClaren has gone because the performances were putty when they were here.'

Chairman-elect Roy Gardner had to put up with a wry comment from the chair of pressure group Shareholders' United, Jonathan Michie. Congratulating the director on the job he had done as chair of the nominations committee, Mr Michie stated that his decision to nominate himself as chairman showed the strong leadership qualities people had come to expect at Old Trafford.

Mr Gardner almost got himself into trouble when a small shareholder asked whether he believed United should remain an independent company and whether he would resist any bid. Mr Gardner concentrated on talking up the club's tremendous future, suggesting that if it continued to perform well, the issue of takeovers could be avoided. It was left to outgoing chairman Professor Sir Roland Smith to give the right answer. If someone came along with a tremendous offer, Sir Roland said, the directors would have to consider it 'very, very carefully.' Fiduciary responsibilities could not be ignored.

The financial vultures are circling. Stephen Ford from stockbroker Collins Stewart commented, 'The big question mark for me is what happens if they don't qualify for the Champions League next year. All of a sudden, that is not an impossibility.' The Financial Times commented, 'The short answer to Ford's question is that profits would nosedive, presumably, with the company's share price. That, in turn, could leave United as a virtual sitting-duck for a takeover, with all the uncertainty that such a status implies.'

The Champions League generated 19.2m of operating profit for United in the year to the end of July 2001, equivalent to 60 per cent of the club's total before player amortisation. Forecast pre-tax profits of 23.5m for the year to July 2003 could plunge to 5m (before player trading) without Champions League football. This could rise to 10m given a decent Uefa cup run. This page takes the view that these fears are misplaced as United will qualify.

CENTRICA CHIEF EXECUTIVE SET TO BE NEW CHAIRMAN

Roy Gardner, the chief executive of Centrica, is set to be the new chairman of Manchester United from next March. He will replace Sir Roland Smith who has chaired the club since it was floated in 1991.

Mr Gardner, who has been a director since 1999, beat off stiff competition for the job. Other candidates included another United director, Philip Yea, and Keith Harris, chairman of the Football League and a member of the Wembley National Stadium board. One point in his favour has been the success he has made of diversifying Centrica away from its core gas business into a range of other consumer service activities, including the acquisition of the Automobile Association. Mr Gardner has a fanatical United supporter since childhood. Centrica has a box at Old Trafford.

One other recent development is that the United board has met John Magnier and J P McManus, the Irish horse racing millionaires who recently became the second largest shareholders in the club.

CLUB IS AT CRUCIAL TURNING POINT

This year and next year will be one of the most crucial in Manchester United's modern history. We are not just talking about what happens on the pitch, although that will have a crucial impact on how things go financially. Until a successor to Sir Alex Ferguson is appointed, there is bound to be some uncertainty about the club's footballing future. Our main focus in this commentary is, however, on its financial strategy.

At first sight the latest (2000-01) annual results look good, as indeed they are. Profits were up 30 per cent. A big factor in this outcome was a 26 per cent increase in gate receipts. All the games played at Old Trafford were sold out while its average attendance of 67,100 has been confirmed as the highest in European club football for the 2000-01 season. This help to produce a 12 per cent increase in turnover to 130m. Pre-tax profits for the year to 31 July were 21.8m, up from 16.8m. Yet the shares have slumped in value to around 125p, little over half their value at the start of the year. Of course, shares generally have fallen. But United have some specific problems that give rise for concern.

In an effort to ensure European success, the club made some great buys of players such as Juan Sebastian Veron and Ruud van Nistelroy. However, this will impact on the player amortisation charge. It is likely to rise to around 17 million compared with 10.1 million in the year just ended. Admittedly, the club made a profit on the sale of Jaap Stam to Lazio. But whatever the particular reasons behind this decision, United cannot rely on player sales as a general strategy to balance the books.

The underlying problem is that growth in costs, particularly player wages, is outstripping growth in turnover and squeezing margins. Having renegotiated a number of contracts, the club is expecting the cost of players' wages to go up by 25 to 30 per cent this year. The long term strategy relies on what the Financial Times called 'hard-to-quantify revenue streams from areas such as financial products, the website and Manchester United TV.' Stephen Ford of Collins Stewart commented, 'In the short term, profits are going to drop quite dramatically.' But what about the long term?

The long-term strategy

So let's take a look at the long-term strategy. Much depends on the ability to exploit United's unique status as a global brand. You can find people who claim to support United almost anywhere in the world. No doubt there are supporters on Pitcairn Island in the Pacific. But the key to financial success is to get these distant supporters to spend money on club products. At the moment probably only one in a hundred of the half a million 'fans' actually buy some kind of product from the club whether it is a ticket, a shirt or a subscription to Manchester United TV. There is certainly no lack of products to choose from (over one hundred), although one may question whether some of them are undermining the strength of the band. The latest example is a children's red toothpaste which comes in a 'striking free-standing Old Trafford stadium package.' OK, it's backed by the British Dental Association, but will the profits really justify something which may make it look as if the club is stretching the brand too far. As the Financial Times commented, 'What will United think of next? Fabien Barthez anti-dandruff shampoo? Laurent Blanc anti-ageing cream?'. At least chief executive Peter Kenyon admits, 'This is not about sticking the badge on and charging 10 per cent more than what is currently in the marketplace.'

The key to global brand success is really the 20 million fans in Asia. Stores are already open in Singapore and Kuala Lumpur and are planned for Thailand and Indonesia. The website is to revamped to go multilingual with the addition of several Asian languages early in 2002. One key target is to penetrate the Chinese market where there are eight million fans in three provinces. As I noted on a visit to China earlier in the year, urban China, even the provincial capitals, is an increasingly prosperous, cosmopolitan place with a strong interest in the Premiership.

Fans will only be able to see eighteen matches in their entirety this year on MUTV, albeit after the event. Of key importance is the long-term alliance with Nike which will come into operation from August 2002. The US compant is granted certain exclusive sponsorship, licensing and merchandising rights. In return the club gets guaranteed payments of 20.8m a year in years one to four of a thirteen year deal.

United is football's only blue chip stock. With its present share values, predators may be interested. The Cubic Expresion Company, the joint vehicle of J P McManus and John Magnier, has lifted its holding from 6.77 to 8.65 per cent. Watch this space.

Financial services launch

The club is attempting to counter the drop in merchandising sales (as the deal with Umbro comes to an end) by expanding its range of financial services. It has launched a new MU Finance range in conjunction with Bank of Scotland, Zurich Financial Services, Britannia Building Society and MBNA, the credit card provider. In an unusual and innovative move, savings and interest rates will be tied to the club's performance. Savers will receive a bonus in years in which it qualifies for the Champions' League.

The challenge is to convert an estimated 50 million world wide fan base into customers. At the moment the average fan contributes less than 3 a year to club turnover. But the question remains, in what sense is someone in Yunnan (I take this example because I went there recently) who identifies with United a fan? And how much can they afford to spend on a shirt? An extreme case, perhaps, but many analysts think that the club faces a race against time if it is to avoid a drop in profitability. This is an important period for the club with the impending depature of Sir Alex Ferguson. Further comment will follow later in the week.

IRISH TURF MAGNATES TAKE UNITED STAKE

Two Irish turf magnates, J.P. McManus and John Magnier, have acquired a 6.77 per cent stake in the club through their offshore company, Cubic Expressions. They already had some shares in the club, but now their holding is second to the 9.9 per cent stake of BSkyB. They claim that the stake is an investment, acquired to take advantage of United's undervalued share price. United's market capitalisation has fallen from a high of 1bn last year to 416m. They have refused to comment on whether they intend to launch a bid for the club. The Financial Times commented, 'But the covert way they went about building their stake raised questions about their intentions.' Some analysts believe that a takeover bid would be welcomed.

When the club was first informed of what was happening, the board's initial reaction was that it was a hoax and no such company as Cubic Expressions existed. When it became clear from share dealings that the effort to acquire shares was for real, both United and analysts were in the dark. The wilder rumours circulating on the stock exchange included a mysterious consortium of buyers from East Asia, an important part of the global fan base, or members of 'the Arab horse racing fraternity.' United issued what is called a 212 notice, a device used by companies to trace shareholders and eventually traced Cubic to a nominee list account at the Bank of New York.

Mr McManus and Mr Magnier are both friends of Sir Alex Ferguson, who shares their interest in racing. Among their business associates are Dermot Desmond, the Irish entrepreneur who owns a significant holding in Celtic, and who has been linked with a bid for United. Another person with whom they are linked is the Bahamas-based billionaire, Joe Lewis, a former shareholder of Enic, the company that now controls Spurs.

Both Mr McManus and Mr Magnier are offshore tax exiles. Mr Magnier's Barbados villa is said to have a swimming pool on the third floor. He is the owner of Coolmore, Europe's most commercially successful stud far. Mr McManus, who started life driving a JCB, is a former bookmaker and famous gambler known as the 'Sundance Kid' in racing circles. It will be interesting to see what, if anything, happens next.

PRE-SEASON BOOST FOR UNITED FANS

United fans have received two good pieces of pre-season news. The signing of Juan Sebastian Vero from Lazio for 28.1m is a new British record. The previous record was set when United signed Ruud van Nistelroy from PSV Eindhoven. The Financial Times commented that the signing 'provides further evidence of the club's financial superiority over its domestic peers.'

United's ability to pay Veron between 70,000 and 80,000 a week will be boosted by increased income from a raft of new Premiership broadcasting contracts worth 1.6 billion over three years to the twenty Premiership clubs. As this page has emphasised, United is the only British club with a truly global brand with an estimated fifty million fans worldwide. An Asian tour at the end of July forms an important part of efforts to develop the international fanbase.

The other piece of good news is that Sir Alex Ferguson will stay on at the club after he retires as team manager at the end of the season (after a home game against the page editor's own club, Charlton Athletic). There seemed to be a real risk that Sir Alex might even resign at the end of the year when some directors suggested that 1 million a year might be too much to pay for the maestro to stay on in an ill defined role. Shares in the club fell when it appeared that he would not stay on after the end of this season. However, he has now agreed to stay on in an ambassadorial role, promoting the interests of the club and trying to increase its global fanbase. Such a role will ensure that he will not cast a shadow over his successor in the way that Matt Busby did.

All seems set for a good season with United clear favourites to retain the Premiership title and with hopes of achieving more in Europe. Also, their role as hated 'moneybags' team may well be taken over by Fulham.

Brokers are sceptical

Despite the good news, City analysts are divided over whether United shares represent a good punt. Old Mutual Securities give a buy recommendation. They admit that player wages remain the key issue in football, but United are better placed than most to deal with this. The new 2002-3 Nike sponsorship deal will help boost revenues. They expect pre-tax profits before player trading of over 30 million. UBS Warburg give a buy recommendation as well, but with more qualifications. They think that revenue increases are impressive, but consider it is difficult to say what the wage bill will look like in two years' time. In the meantime, interest in the shares may be subdued. Collins Stewart go for a sell recommendation. United has excellent brand value, but this relates to the ability to televise matches and these rights belong to BSkyB for the next three years. Over the next two years costs will rise faster than revenue, putting constant pressure on profits. To sum up: revenue growth is impressive and United is good at keeping costs under control, but there are doubts about how revenue growth will show up in the bottom line.

FANS DUMP SHARES

Just before the Spring Bank Holiday, shares in Manchester United slumped to their lowest level since the failed BSKyB takeover bid in 1998. On May 24th shares plunged another 8.25p to 158.75p. Brokers reported a wave of selling by panicked private investors and disgusted fans.

The club has been the centre of speculation since the public tiff with manager Sir Alex Ferguson. It became apparent that Ferguson would have limited funds to spend in his last year as manager. Negotiations for him to become a 'global ambassador' for the club broke down, ostensibly over money, although there may have been fears that his continuing presence would cast a deep shadow over his successor. No plans for appointing his successor appear to be in place, with his chosen successor, number two coach Steve McClaren, set to depart.

Some commentators see these difficulties as exemplifying the clash between the club as a business which wants to maximise profits and the club as its fans see it. However, institutional investors have remained calm. The club is still the strongest brand in football. Institutional buy orders are lined up if the price falls below 150p.

UNITED ARE EUROPE'S TOP SPORTS BRAND

Research by FutureBrand has shown that Manchester United are Europe's top sports brand. On a global level they come second to American Football team, Dallas Cowboys. The European list was dominated by football clubs and Formula One teams, with Real Madrid and Bayern Munich in second and third place. The ranking of these two sports reflects the fact that they attract most income from broadcasting rights.

The report emphasises the importance of a loyal local fanbase and recommends that as United expands its interests overseas, it would be well advised to maintain good relations with local supporters. The report states, 'A strong passionate local fan base is the single most important factor driving brand value.

YANKEES LINK UP GETS MIXED RECEPTION

The announcement of a link up between the two world's biggest sports brands, Manchester United and the New York Yankees, has received a mixed reception from analysts and supporters. The Yankees have taken three of the four last World Series titles, but it is far from clear what they get out of the deal. United get enhanced access to the North American market as part of their effort to build a global brand, but the Yankees have admitted that there was little benefit in promoting baseball in the UK.

The two clubs will pool marketing resources and share sponsorship contracts. They will also sell each other's merchandise. United will tour the States in 2003, a tour that will now probably be organised by Yankees representatives. However, Major League soccer continues to struggle in the US. One problem is that it is less popular than other sports with television because it offers few opportunities for commercial breaks. The strongest grass roots support for the game, outside of the Hispanic community, is among young girls and women at college (where there are good facilities for them as part of an equal opportunity deal required by law).

Speaking for Shareholders United, an influential group of shareowning supporters, Oliver Houston stated, 'Football should not be run solely to serve the needs of overseas marketing juggernauts. I hope the alliance between the prawn sandwiches and hot-dogs is a success but urge that any increase in revenue be ploughed back into the football club. I hope that it will be able to be discussed by the shareholders in a way that the Nike deal was not.' Houston also noted that there were signs that United had been overstretching themselves commercially, citing the closure of the club's Red Cafe restaurant in Dublin and adding that the branch in Singapore was in difficulties.

Paul Wedge, analyst with Colins Stewart, commented 'It looks a little like mutual backslapping. Profits are falling at United and will this agreement help them to sell more shirts? Probably not.'

Sir Roland Smith has delayed his departure as chairman until March 2002 as the club enters an uncertain period. This means he will be in place to oversee the appointment of the replacement of Sir Alex Ferguson as team manager.

GLOBAL BRAND PROMOTED - BUT JOBS GO IN MANCHESTER

One of Manchester United's great commercial strengths since the founding of the Premiership has been that it is possibly the only British club that has the potential to develop as a genuine global brand (although Arsenal, Chelsea and Liverpool, perhaps Spurs and Everton, might seek to do so as well). Nevertheless, out of a 116m turnover in the last reporting period, less than two per cent (2.2m) was generated outside the UK. Now the club is looking for licensing partners with expertise in local markets. They would take over responsibility for its overseas stores which already exist in Ireland and Singapore and are planned for Bangkok and Kuala Lumpur. It wants to open outlets (at 'a mall near you'?) in North America where it believes there are good growth opportunities. A good commercial strategy no doubt, but it will mean 48 redundancies in Manchester, although it is hoped that these will be voluntary. (A cynic might say that this means that it is hoped that any unpleasantness will be avoided by people going quietly). Chief executive Peter Kenyon commented, 'Although this has been a difficult decision to take, the restructuring of merchandising is designed to ensure the business is best placed to meet the challenges of the future.' Think about it for a minute.

EDWARDS TO STEP DOWN

Martin Edwards is set to step down as chief executive at United this summer. His deputy, Peter Kenyon, will take his place. The change will bring to an end forty years of family control at the club.

Edwards has been unpopular with some supporters and it has been suggested that his relationship with Sir Alex Ferguson has been strained. Mr Edwards was heavily criticised for backing BSkyB's failed takeover of United. Andy Walsh of the Independent Manchester United Supporters' Association said, 'Mark Booth stepped aside as chief executive of BSkyB after the botched bid. Now Martin Edwards is paying the same price.' Michael Crick, vice-chairman of Shareholders United commented, 'His total failure to communicate with fans has made him deeply unpopular with the people who are, in effect, his customers. Peter Keynon appears to be learning from his mistakes.'

Mr Edwards' resignation could usher in a new type of leadership for United. Mr Crick welcomed Mr Kenyon as one of a 'new generation of football administrators' with solid business backgrounds. Mr Kenyon was formerly chief executive of sportswear suppliers Umbro.

VODAFONE ON THE SHIRT

The club has concluded a record breaking 30 million sponsorship deal with the world's No.1 telecommunications company, Vodafone (who recently took over German giant Mannesmann). The 7.5m a year contract is three times bigger than the current agreement which Sharp which ends in May. It is larger than what up to now has been the biggest sponsorship contract in world football, the 5.9m a year deal between Tele+/D+ and Juventus. It is hoped in the near future that United fans will be able to access news and information, but also clips of goals and match action, on their mobiles. United deputy chief executive Peter Kenyon claims that the club has been able to develop a new type of deal, a proper commercial partnership instead of the usual club-sponsor relationship.

At one time it looked as if a deal on a 30 million four year sponsorship might be reached with Emirates, the Middle East airline. Speculation also focussed on global internet brands such as Yahoo and Amazon.com.

The new deal will help United meet the cost of rising player wages. The wage structure is bound to be affected by the new contract with Roy Keane worth more than 2 million a year. The expected rise in wage costs was one reason why the club's broker, Merrill Lynch, slashed its forecast for 2000 pre-tax profits from 20m to 13m.

Edwards Sells Up

United Chairman Martin Edwards became 41m richer in October when he sold more than half his stake in the club to City institutions. The sale reduces his holding from 14 to 6.5 per cent. The sale brings the total he has raised from selling his family's United shares over the past three and a half years to 71 million. He must be relieved that the sale of his then 51 per cent stake in the club to Michael Knighton did not go through ten years ago. The sale price was just 10 million. Knighton has ended up another less well known northern club which has benfitted from his contacts with extraterrestials.

BID SPECULATION SWIRLS ROUND UNITED

Hardly had the controversy about Manchester United's departure from the FA Cup at the request of the Government and the FA subsided when speculation about a bid for the club saw its shares soaring in mid-July. The club's stock market value rose by 17 million over 48 hours in the week ending 9 July.

Although there were runours that the Sultan of Brunei might be interested in the club, most of the speculation focussed on a group of wealthy Irish race horse owners with the key figure seen as Joe Magnier (who happens to train manager Sir Alex Ferguson's best horse. The Financial Times reckons, however, that the real brains behind the bid is the financier Dermot Desmond who 'has a reputation as an investor who can move markets.' Another individual mentioned in press reports is Swiss domiciled millionnaire and former bookmaker J P McManus.

Some press reports suggest that should Magnier acquire the club he might wish to make it a private company which would fit in with the way he runs his hugely successful bloodstock operations. Meanwhile, the club is refusing to make any official comment on the bid speculation, perhaps because it fears another adverse reaction from fans.

China Trip Boosts Brand

The last phase of Manchester United's pre-season tour to China was as much about promoting the club's brand in the world's largest potential market as it was about football. Of course, China may have a quarter of the world's population, but most of them are too poor to buy a club shirt or even a key ring. And many of them that do buy something will go for one of the counterfeit United products which are already widely available in China.

However, the strategy is clear. 'We are looking to extend the Manchester United brand and merchandising activities into Asia', said Michael Farnan, managing director of Manchester United International. Satellite television in Beijing, Shanghai and Guangdong has already brought Premiership games to over 200 million people. Future plans include 'Red Cafes' to watch games live (not exactly what Mao had in mind when he said 'The East is Red') and stores in Beijing and possibly Shanghai.

IT IS NO!

Contrary to many predictions, the Department of Trade and Industry announced on 9 April that they had blocked BSkyB's takeover bid for Manchester United. Minister Stephen Byers said that the deal could operate against the public interest and should be prohibited. Opponents of the bid emphasised that the Government had listened to what the fans had to say. Certainly it is a setback - but perhaps no more than that - for the apparently unstoppable advance of corporate forces from oustide the game in modern football.

The findings of the Monopolies and Mergers Commission were based on solid competition grounds, the key argument being that the merger would adversely affect competition between broadcasters. However, Stephen Byers commented, 'They also examined wider public interest issues concluding that the merger would damage the quality of British football.' Within minutes of the decision United shares fell by 12%.

United are World's Richest Club

A survey by 4-4-2 magazine confirms what many people have long suspected: Mancehster United are the world's richest club. The magazine comments, 'They are not just the richest club in world football, they are by far the richest - and certainly the most valuable franchise in world sport.' Their 1996-7 turnover is at just under 88 million more than double that of the next richest Premiership club (Newcastle United).

Monopoly Probe for Murdoch Bid

British Sky Broadcasting's bid for Manchester United was referred to the Monopolies and Mergers Commission by the Government at the end of October. According to competition experts, it was unusual for the director-general of fair trading to cite 'concerns for the wider public interest' as a factor behind the recommendation that the bid be referred. It was clear that a number of cabinet ministers, including Chris Smith and Gordon Brown, were becoming worried about the bid in terms of the implications for fans and the plight of smaller clubs. Sports minister Tony Banks voiced 'concerns held across government about the dangers inherent in allowing football clubs to be bought up as commercial commodities. As soon as football clubs become plcs, they find themselves subject to predatory takeovers. Yet they can't be treated like products in a marketplace as allegiances to them are based on cultural affinities.'

Rupert Murdoch himself reacted badly to the referral, suggesting that the government was being swayed by 'a few paranoid hacks in Fleet Street.' The bid was in his view being referred for 'political' reasons rather than because of competition worries in order to quell supsicions that his newspapers' support of Labour in the 1997 election was making the Labour Party look too kindly on News Corp's business interests. The DTI dismissed the notion that the decision was politically motivated, maintaining that Peter Mandelson is 'not swayed by pressure from any quarter.' Nevertheless, it is thought likely that trade secretary Peter Mandelson will eventually let the deal go ahead. A 'close ally' is quoted in the Financial Times as stating, 'Manchester United, while the world's most famous football club, is not some kind of immaculate national treasure. It is a business and is listed on the stock exchange.'

'Intense public interest' affects monopolies probe

Intense public interest in the Manchester United monopolies probe has led the Monopolies and Mergers Commission to break with previous practice and reveal for the first time in its history the range of issues it will examine. Michael Crick, the co-founder of the Shareholders Against Murdoch group said the MMC had 'raised the important issues and seemed to be taking a very wide interpretation of what public interest means.'

The main issues to be examined are:

Reports in January 1999 suggested that BSkyB was under pressure from the competition authorities to give up its exclusive grip on Premiership television rights in return for being given permission to acquire United.

Last updated 10/8/04


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