A dried-out house plant, an item of clothing that is far too trendy, this year’s must-have piece of technology… most of us will have received well-intentioned Christmas presents like these before — and last year, Manchester United fans did too.
When confirmation finally arrived on Christmas Eve that Sir Jim Ratcliffe was buying a minority stake in their club, the Manchester United Supporters’ Trust (MUST) greeted the news in very qualified terms.
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“We welcome the investment from a boyhood red, Sir Jim Ratcliffe and his INEOS company, but many will wish his ownership stake was greater than the initially rumoured 25 per cent.
“Today might — just might — be a step forward for Manchester United after some very difficult years. But with the Glazers still in charge, people should understand that United fans will remain sceptical and wait for the proof in the pudding.”
But two days later, on Boxing Day, the first slice of that pudding arrived in the form of a 241-page document filed to the Securities and Exchange Commission (SEC), the federal agency that regulates capital markets in the United States, which is where Manchester United plc’s shares have been listed since 2012.
Now, SEC filings are nobody’s idea of a stocking-filler and most Manchester United fans were distracted by the latest sighting of green shoots at Old Trafford — a thrilling come-from-behind win over Aston Villa… which was followed four days later by the latest crop-busting deluge of disappointment, a 2-1 defeat at Nottingham Forest — so not many have read it.
But The Athletic has. Several times, in fact. And having spoken to a few experts and cross-referenced it with everything we know about how Ratcliffe built his petrochemicals empire, we think MUST’s Christmas wish for somebody other than a Glazer sibling to own more than 25 per cent of the club has been postponed, not cancelled.
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We should stress, however, that not everyone sees it this way. One of the experts said he was “extremely dubious that Ratcliffe — surprisingly — has done anything other than give (the Glazers) a big cheque to take away”.
Like most of the people we contacted, he did not want to speak on the record. Some said they could not do so for professional reasons and some wanted to learn more about the offer Ratcliffe is making for 25 per cent of the shares not owned by the Glazer family before commenting. The sceptical expert quoted above simply said he was “sick to death of the subject”.
But if there was a consensus, it was that the Glazer/Ratcliffe joint venture is not just for Christmas — but it is not forever, either. And when it ends at some point, whether that is next year or further down the line, their partnership has been designed to conclude in one of two ways: Ratcliffe/INEOS buying enough Glazer shares to take full control or the 100 per cent sale of the club to a third party at a very high price.
Andrew Green, a United fan and the head of investment at UK private equity firm Rockpool, said he believes there are two parts of the proposed deal — it is still subject to Premier League approval — that signpost where this is heading.
The first is Ratcliffe’s ‘right of first offer’ (ROFO) on any shares the Glazers try to sell. The second is the “minority protections” given to Ratcliffe — or the Glazers, if the tables were turned — if the Glazers sell enough of the Class B shares, with their super-voting powers, to a third party to give that new shareholder a majority of the votes.
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A ROFO is relatively easy to understand, as it gives the holder the ability to make the first bid if any shares are made available for sale.
It is not quite as buyer-friendly as a right of first refusal, which would enable Ratcliffe to see what someone else is willing to pay for the shares before matching that offer. But it still gives him a significant advantage over anyone else should a Glazer sibling or two decide to cash their United chips in, particularly as Ratcliffe has been allowed to set a minimum buy-in price of $33 (£26) a share, which is a 65 per cent premium on the current share price of $20.
And Green’s minority-protections point relates to the fact that anyone buying the Glazers’ shares would have to honour the deal the American family has just struck with Ratcliffe, namely control of the club’s sports department and two directors on the main board.
“If you take those two together, the ROFO with that high minimum price plus the minority protection if there’s a change of voting power, this deal envisages Sir Jim Ratcliffe taking over at some point in the future,” says Green.
“Even making a bid for something that costs as much as Manchester United is expensive, so nobody is going to do all that preliminary work just to let Ratcliffe set the price. And his minority protections mean you would only want to buy him and everyone else out, too, otherwise you would not have real control.
“But I think the whole agreement has been set up so that it ends up with Ratcliffe in total control.
“There are even reciprocal provisions for what happens if one or more of the Glazers don’t want to sell and end up in a minority position themselves. You could argue that this is just the lawyers taking a belt-and-braces approach, trying to think of every eventuality, but we also believe that at least four of the six Glazer siblings are inclined to sell up at some point.”
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According to Green, it is not an accident that the Glazers have all sold exactly the same number of shares to Ratcliffe — 4,591,366 each — and not the same percentage of the shares, as they all hold slightly different amounts. He believes this makes it possible for Ratcliffe to buy all the shares from the Glazers not called Avi or Joel, the two keenest to hang on, and gain an overall majority of the votes. And that is even after the Glazers’ Class B shares, the ones with 10 times the number of votes as the Class A shares held by the hedge funds and small investors, become A shares at the point of sale, as the company rules still dictate.
“This doesn’t mean he will definitely do this,” adds Green. “And it is perfectly right to ask why hasn’t he done it already, if this is his plan all along. But the agreement he has struck makes it far, far easier for him to buy them out in the future than for anyone else to do it.”
As Green admits, it is reasonable to ask why Ratcliffe has entered into this marriage with the Glazers, even if it is intended to be temporary, so let’s ask it: why just 25 per cent?
The first point to make here is that it is not just going to be 25 per cent. By this time next year, Ratcliffe should own 29 per cent of the club, as the $300million he has pledged in additional capital primarily for infrastructure improvements is coming in the form of two tranches of freshly minted shares, a mix of As and Bs, which will dilute the other shareholders.
Nobody thinks that will be enough to plug all the holes in Old Trafford, bring the club’s Carrington training ground up to the “best in class” standards Manchester United profess to keep, or give whoever ends up picking the men’s team a fighting chance of mounting a more consistent challenge for silverware. So more money will be required.
Ratcliffe has built his fortune by smartly using borrowed money to buy businesses and run them better than their previous owners, so there will likely be more borrowing at Manchester United, particularly relating to whatever renovation option is taken at the stadium. But there is nothing to stop him from pumping more of his wealth into the club, too, and further diluting the Glazers’, who have not put a penny of their money into the club since 2005.
Equally, there is nothing to stop him under U.S. law, which is the relevant jurisdiction for an NYSE-listed company, from increasing his shareholding above 30 per cent in stages.
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“There is no equivalent of the UK’s ‘mandatory bid’ rule that states if you acquire more than 29.9 per cent of a UK public company, you have to make a cash bid for the rest of the shares,” explains Andrew Umbers, the co-founder of Oakwell Sports Advisory and a former chairman of Leeds United.
“So, Ratcliffe could continue investing more new capital into Manchester United and he wouldn’t be required at any point to make a bid for the shares he doesn’t already own.”
He could also, as many have speculated, pick off the Glazers one by one.
What he absolutely cannot do — and this explains some of the reticence we picked up when discussing this topic — is line up such deals on a nudge, nudge, wink, wink basis. That way lies litigation.
Although most of the professional investors who have bought shares in Manchester United since November 2022 have done so because they thought there was a good chance that someone was going to pay a large premium for at least some of those shares (a good bet, then), a few will have inserted themselves in the process in the hope that either the Glazers, their buyer or both make a mistake by forgetting that all shareholders have to be treated equally.
Any suggestion that Ratcliffe has already done a secret deal to get his hands on more Glazer shares will set the legal hares running. In fact, making sure this process has not already darkened a courtroom’s door is one of the reasons it took so long.
The tender offer, which will be massively oversubscribed, to buy 13million Class A shares, a quarter of the total, from the hedge funds and investment firms is the solution Team Ratcliffe came up with. Those investors can now look forward to being able to sell him at least a quarter of their shares for a healthy profit. He will be determined that that is as far as his generosity to them will go.
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The other reason it took until 4pm on Christmas Eve to sort this out is that the Glazers are no longer in total agreement on what to do with the languishing English football giant in their portfolio. Unlike his bidding-race rival, Qatar’s Sheikh Jassim, Ratcliffe realised this and revised his offer several times, giving the Glazers far more money than anyone thinks they deserve for not going away but buying himself two seats at the table, a chance to run the football operation and what amounts to 18 months of exclusivity with those wavering Glazers.
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This is where we should zoom out and take a broader view of what might happen.
A good place to start would be 2018, the first time Ratcliffe decided to spend a sizeable chunk of his fortune on reviving the fortunes of a flagging British sports team. In this case, it was the Sir Ben Ainslie-led challenge to win sailing’s America’s Cup and the price tag was £110million.
Ainslie, Britain’s most successful Olympic sailor, had been introduced to Ratcliffe by a friend who bought and sold super yachts for the very rich. Ratcliffe already had two of those but was looking for something even more challenging to spend his money on.
Still smarting from defeat in his first attempt at winning the America’s Cup in a British boat the year before, Ainslie told Ratcliffe that he needed to increase his budget by at least 30 per cent to have a fighting chance. His previous effort had been bankrolled by a small syndicate of British businessmen, which included ‘Air Miles’ pioneer Sir Keith Mills and Carphone Warehouse co-founder Sir Charles Dunstone, with Land Rover as the main sponsor.
The original pitch to Ratcliffe was for him to join the gang. Ratcliffe said “yes” to funding Britain’s most expensive bid for the America’s Cup but “no” to the gang. Ainslie could have his money but it would have to come entirely from INEOS. Mills, Dunston, Land Rover and several other backers were quickly dropped.
Joint ventures, Ratcliffe told CNN, “just make life more complicated”.
And that is the 71-year-old’s approach to business, too. Ratcliffe has done dozens and dozens of deals during his career but very few of them have been joint ventures.
The notable exception is the relationship his company has with Sinopec, which started in 2022 when INEOS approached the Chinese firm with an offer to buy a 50 per cent stake in a huge chemicals plant in Shanghai that had originally been a joint venture between Sinopec and BP.
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Sinopec said it would have to be a 51/49 split in their favour. INEOS said no. Sinopec thought about it and said, “OK but only if we do these two other 50/50 joint ventures, too.” INEOS accepted that deal but not before suggesting a fourth 50/50 project, which Sinopec agreed to.
This story, and several others just like it, is told in a book about INEOS that was published last year to mark the 25th anniversary of its creation. It reflects the man the Glazers have invited into the boardroom.
And while the Glazers have been dreadful custodians of Manchester United, they are not stupid. They know Ratcliffe will want the lot at some point and once he has figured out what the club needs from him, squared away concerns from INEOS’s bondholders about possible threats to their investments and made all the tax arrangements that are customary for billionaires, he will make them offers they will not refuse.
Still need convincing? Well, Ratcliffe has already done something no Glazer has ever done: held an all-staff meeting at Old Trafford, telling them that Manchester United have been bumping along for too long, things are going to change, he is in it for the long haul and he does not care if he makes money on this particular punt or not.
That last one might have been him over-egging it a bit but the crowd was certainly impressed. More on that to come, no doubt, but this feels like the start of something new and exciting, not the continuation of something broken.
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(Top photo: Manchester United/Manchester United via Getty Images)