Manchester United (NYSE:MANU) stock has been under the spotlight in recent months after the unpopular Glazer family, which owns 69% of the club, announced that they were open to selling.
News of a potential takeover sent the share price soaring towards the end of last year. In fact, the stock is now up 54% over 12 months.
I’m not normally one to buy stocks on a bull run, but there are several reasons why I think investors should be buying Manchester United stock now.
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Takeover seems likely
As we know, a takeover is the most likely outcome at this time, although the share price fell on Monday amid concerns the sale might be in jeopardy.
There are two bids and one offer for financing — only the financing offer would see the Glazer family remain at the club.
Sir Jim Ratcliffe has bid for 69% of club, meaning he and INOES would take all of the Glazers’s shares in the club. It would be funded through financing and there are reports that Ratcliffe would eventually seek to purchase the shares listed in New York.
In theory, if this offer were to go through, New York listed shares would be valued in line with the amount paid for the Glazers’ 69%.
Meanwhile, Qatari Sheikh Jassim bin Hamad al-Thani has submitted a bid for 100% of Manchester United. This would see listed shares bought by the Qatari investor.
The Glazers are believed to be looking for a sale price of £6bn, with the club valued at £2.9bn on the New York Stock Exchange. If the Sheikh were to match the asking price, there would be considerable upside for shareholders.
Valuing premier league clubs
Valuing football clubs can be difficult because they don’t tend to make money in the same way that normal companies do. And if they do make a profit, you’ll often hear fans demanding more money be spent on transfers.
One way to value a football club is the Markham Multivariate Model.
| Club value = (revenue + net assets) x [(net profit + revenue) ÷ revenue] x (% stadium filled) / (% wage ratio) |
However, I think this model is increasingly ineffectual at the top level of the game. Here’s why.
Firstly, clubs aren’t purely bought for financial reasons. Sometimes it’s about prestige or just bankrolling your hometown club to the top of the league — just look at Chelsea under Abramovich or Berlusconi at AC Milan.
But there’s also sportswashing — using sports to improve reputations tarnished by wrongdoing. These parties may be willing to pay a premium for the prime sportswashing opportunity. And, they don’t get much better than a top flight English football club.
Secondly, I think it’s time to start looking at the English Premier League as the de facto ‘Super League’. 15 of the top 30 clubs in the world by revenue are in the Premier League, and the championship’s commercial allure is growing considerably faster than other leagues.
The threat of relegations makes EPL clubs cheaper than NFL teams. However, I see exponential growth in the EPL and its clubs — that’s why I’d buy United stock if I weren’t a Liverpool fan.
In 15 years time, I’d expect to see most of the world’s star footballers playing in an EPL where the stadiums increasingly resemble the mammoth US arenas.
