The world’s richest football club, Manchester United, is filing an IPO to list its shares for sale in the Singapore Stock Exchange, with the proceeds going toward expanding the club’s Asia business, as well as paying down club debt.
The football club initially intend to conduct the IPO in Hong Kong Stock Exchange, but switch to Singapore later, according to people familiar with the transaction. Singapore and Hong Kong are the financial gateways to Asia for Western businesses.
“Manchester United believes Singapore offers the best financial apparatus in Asia, with the ability to use a dual share structure. This make most sense for the business. The club could not have done that in Hong Kong and it is an important reason why Singapore was chosen. But it is not the main reason,” a club insider said.
The club hopes to raise as much as $1 billion from the IPO in Singapore. Prior to the announcement, Manchester United on Thursday posted a strong set of earnings, recording a 9.6% rise in full-year net profit and an 18% reduction in net debt.
Manchester United said that earnings before interest, tax, depreciation and amortization for the year to June 30 were 110.9 million ($180.2 million), compared with 101.2 million last year.
The club also posted record revenue of 331.4 million, up 45 million in 2010 on the back of increased activity from sponsorship deals, attendance and broadcasting.
Manchester United was bought out and delisted from the London Stock Exchange by U.S. tycoon Malcolm Glazer in 2005 in a deal worth 790 million, since then it has struggled to service the 700 million debt taken on to finance the leveraged buyout. However, in the Thursday report it said that net debt had been cut to 308.3 million, from 376.9 million last year and that its cash balance was 150.6 million.
Manchester United has in excess of 100 million fans in Southeast Asia and is boosting commercial ties in the region, most recently signing a sponsorship deal with Honda Motor Co.
Analysts in Singapore, however, are now cautioning that listed football clubs generally do not provide good returns. Others point out that MU’s financial performance over recent years has been less than stellar.
But for many Singaporean fans, just owning a piece of Manchester United will be enough.
Manchester United’s British fans protested in front of its HQ against the listing in Singapore
The English club has fanatical support from fans in this region and its expected listing here will probably tap on mass appeal rather than fundamentals.
Gabriel Yap, Executive Chairman, GCP Global, said: “In the last five years, they made only 10 million pounds in terms of net profit level.”
United’s financial performance is also inconsistent and shareholders are unlikely to see dividends post-IPO.
Mr Yap added: “When you make two years of profit out of the last five years, it is very hard to find sustainable return-on-equity. The player’s moods, ability to play, and whether they will get injured again are intangible assets which have to be recognized in the accounts. This amount is actually huge and it ranges between 60 million pounds to 80 million pounds, so as you can see that erodes the profits substantially.”
If it is starting to sound like investing in a football team is not a good idea, it is probably because it isn’t.
Terence Wong, co-head of Research, DMG and Partners, said: “If you look at the European football club index, it has been flat over the last 10 years.”
Manchester United has hired Credit Suisse, Morgan Stanley and JP Morgan Chase to manage its IPO. Swiss banking giant Credit Suisse’s Singaporean branch, who is mandated as sole global coordinator and bookrunner on the IPO, said it is expected to involve a sale of around 25% of the club, valuing the whole company at $4 billion.
The Glazer family will retain control of the rest 75% share.