By Rohith Nair, Aadi Nair and Manasi Pathak
(Reuters) – Chelsea’s record sale last year has proved to the Glazer family that now is the right time to sell Manchester United, industry experts told Reuters, with any deal for the Premier League club having the potential to be the biggest in sporting history.
British billionaire and long-time United fan Jim Ratcliffe’s company INEOS has entered the bidding process to buy the record 20-times English champions after he failed to acquire Chelsea, who were sold for $5.2 billion in May.
United have not won the league in a decade, with the unpopular Glazers the target of several fan protests, but they are still an attractive prospect, according to Neil Joyce, CEO & co-founder of CLV Group.
The club is one of the world’s biggest sporting brands and generated 689 million euros ($750.94 million) in revenue in 2021-22.
“Chelsea getting sold in 2022 means a rate has been established on the value of a Premier League club,” Joyce said.
“If you use the traditional method of valuing a club, which could be anywhere between eight to 10 times the revenue, that kind of $5 billion number is probably on the lower end of it.”
The Glazers bought United for 790 million pounds in 2005 in a highly-leveraged deal which has been criticised for loading debt onto the club.
NOT ‘RATIONAL MARKET’
United’s net debt grew nearly 23% to 515 million pounds in September, but that will not deter potential investors, according to Joyce and Spencer Harris, Associate Professor of Sport Management at the University of Colorado.
“In a rational market, debts of this type would directly influence bids and price,” Harris said.
“But the Premier League generally and Manchester United specifically do not represent a rational market.”
The club’s valuation as a public company peaked at $4.3 billion in 2018 but Joyce said new owners could capitalise on the global fanbase to increase commercial revenue by $200 million and add $1-2 billion to the actual valuation.
“If you’re looking at United as a medium-term investment, I don’t think there’s that huge risk against the valuation they’re at today,” he added.
“If anything, you could argue they’re potentially undervalued if you look at the $5 billion mark.”
OLD TRAFFORD INVESTMENT
The Chelsea deal involved the new owners paying 2.5 billion pounds ($3.10 billion) to purchase shares while committing a further 1.75 billion pounds to invest in the club, particularly the stadium.
Tim Bridge, lead partner in Deloitte’s Sports Business Group, said United remain a significant asset but require a lot of investment to return to the top of the pyramid, starting with their Old Trafford stadium.
The biggest club stadium in England seats around 75,000 fans but is considered a relic compared to modern European arenas. Media reports suggest it would cost one to two billion pounds to renovate.
“Compared to other leading clubs, investment into capital projects such as the stadium, the training ground at Carrington and continued investment into the playing squad is very significant,” Bridge said.
“There is likely a need for any new investor to consider these at United in the future. So it may well be that the Glazers just feel this is the right time (to sell).”
United have returned to the top four under new manager Erik ten Hag to give the fans renewed hope of competing in the title race for the first time in years.
But Bridge said their resurgence would not help the Glazers drive up the price.
“Any credible investor will look at the long-term picture rather than short-term optics,” he added.
“Should they push forward and qualify for the Champions League, then that gives a significant revenue boost and is something investors will keep a keen eye on.”
($1 = 0.9175 euros)($1 = 0.8060 pounds)
(Reporting by Rohith Nair, Aadi Nair and Manasi Pathak in Bengaluru, editing by Ed Osmond)
