Man U’s mooted IPO valuation in league of its own

August 24, 2011

By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON — Manchester United’s flotation ambitions put it in a league of its own.

English soccer’s reigning champions are one of the biggest names in world sport, and they excel at turning that cachet into lucrative sponsorship deals. But a possible $1 billion initial public offering in Singapore would outstrip even the hefty takeout multiples paid by the current owners.

It’s been six years since the Glazer family took Manchester United private in a debt-laden deal that earned the billionaires the undying enmity of many fans. Now they are considering a Singapore listing. Nothing’s official yet, but the talk in the market is of a $1 billion issue for about 30 percent of the business.

It’s not clear whether the IPO would raise new money. But suppose the listing is roughly two-thirds existing shares and a third new shares. That values Man United’s equity at just over $3.3 billion. Using about $300 million of new money to pay down its current $560 million net debt would imply an enterprise value of nearly $3.6 billion. That would value the club at about 19 times EBITDA, which JPMorgan estimates at about 114 million pounds ($187 million) in the year ending June 30. That multiple is comfortably above most other football deals — and the Glazers’ previous buyout, at about 16 times EBITDA, using figures for the 12 months ending Jan. 31, 2005.

That’s not to say Manchester United wouldn’t be a good investment at the right price. Sponsorship deals are nearly all profit, and overseas broadcasting rights are increasingly valuable. An Asian roadshow offers a chance to talk up the prospects for both, particularly in emerging markets. And by soccer’s crazy standards, Manchester United has got the humongous wage bills under control, below half of revenue.

But not every aspect of the investment case reinforces a premium valuation. Prospective buyers are being offered a minority holding in a company headquartered 7,000 miles away in a sector lacking dedicated analysts or meaningful listed peers. All that argues for a discount. The real comparables may be the likes of Prada and Samsonsite: both are high-margin Western companies whose powerful brands create big barriers to entry for rivals. They trade at 11.7 and 13.6 times current EBITDA respectively after recent Hong Kong listings. If Manchester United is to fetch more, buyers will have to act as fans first and investors second.

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