Manchester United’s profit forecast has been cut after the club’s early exit from Europe’s premier football competition. This highlights the challenges facing billionaire Sir Jim Ratcliffe in his attempt to turn around the club’s fortunes.
Ratcliffe has agreed to purchase up to 29 percent of Manchester United at a price of approximately $1.6 billion on Christmas Eve. This ends a sales process lasting more than a year, during which Qatari Sheikh Jassim bin Hamad Al-Thani had bid to buy the entire club.
Ratcliffe’s investment gives him the control over football operations, while the American Glazer family retains the majority stake in the club and the overall control.
United announced on Wednesday, following its failure to advance in this season’s Uefa Champion League, that it expects to earn between £125mn and £150mn in adjusted ebitda for the year ending June 30. This is down from an earlier range of £140mn to £165mn. The revenues will be between £635mn-£665mn. This is lower than the earlier forecasts of £650mn-£680mn.
The club’s early expulsion from the tournament it won three times will mean that the club listed on the New York Stock Exchange, will earn less in broadcast rights.
The Ratcliffe deal valued United at $6.3bn including debt. This is the largest shake-up of ownership since 2005 when the Glazer family bought the club in a leveraged purchase for £790mn.
United won trophies throughout the first decade under the Glazers, including several Premier League titles as well as one Champions League. The club’s fortunes changed when Sir Alex Ferguson left the club in 2013.
Manchester City became the dominant English club after Sheikh Mansour bin Zayed al Nahyan, Abu Dhabi’s royal, took control of the club.
The Ratcliffe agreement allows Glazers to retain control of the club and make at least $900mn by selling 25 percent of their B shares (which have more voting rights).
Negotiations were complicated because the A shares are held by a number of minority shareholders, including UK stock picker Lindsell Train as well as US activist Eminence Capital.
Glazers, who still hold B shares, will have roughly 49 percent of the total stake once Ratcliffe has taken his entire 29 per cent. Minority shareholders will hold approximately 22 per cent.
United’s share price fell almost 4 percent on Wednesday after the company cut its profit forecasts.
The Glazers who own the Tampa Bay Buccaneers NFL team in Florida first stated that they would be open to offers of purchase or outright sale by November 2022.
According to Wednesday’s filings, Ratcliffe initially expressed interest in acquiring control stakes at $22 per share back in February of last year.
The figures also show that US merchant banking Raine Group will earn $31.5mn by advising the Glazers in the Ratcliffe transaction. The bank will also be advising on the £2.5bn purchase of Premier League club Chelsea in 2022.
Ratcliffe, Sheikh Jassim bin Hamad al Thani, son of Qatar’s richest man, were rivals in their bids, but the British billionaire changed his bids several times before winning over the Glazers.