The hostile bid is back. And you don’t get much more hostile than the feelings of Manchester United FC (MUFC) supporters towards Malcolm Glazer, the Flor-idian who is trying to take over the company.
Glazer’s gnome-like appearance has given the club’s fans and the sports pages plenty of opportunity to poke fun – although few fans will be quite so amused about the unorthodox takeover bid tactics on display.
Having said that, numbered among the ones who will are Crowell & Moring partner Nick Towle, chairman of supporters’ group Shareholders United, and Weil Gotshal & Manges partners Will Rosen and Ian Hamilton, who are advising Shareholders United on a pro bono basis.
You can add to that the Freshfields Bruckhaus Deringer partner leading the charge for MUFC and the junior Takeover Panel official monitoring events for the regulator (neither of whom would want to be named).
There may even be a few MUFC fans at Glazer’s law firm Allen & Overy (A&O) who might privately like to see a bid from the man known as ‘the leprechaun’ fail.
However, contrary to what you read in your Sunday papers, there is absolutely no chance that A&O considered dumping Glazer. No way.
The Law Society’s rules, put simply, state that unless a client is engaged in improper or illegal activities – and there is no suggestion that Glazer’s activities are anything other than unpopular – you have to stick by them.
Incidentally, A&O was not Glazer’s first choice. The ‘Tampa Bay Buccaneer’ tried to instruct at least one other magic circle firm before a US contact of his suggested he try A&O.
But while Glazer might be a bit weird, he’s not exactly a bad client for A&O’s corporate department, which with MUFC and HBOS’s look at an Abbey takeover, is finally starting to have a good run.
But Glazer was not a good enough client to keep his other advisers – JPMorgan and Brunswick – onside.
The writing was on the wall when the MUFC board said on 25 October that it would not support Glazer’s offer because, as a house, JPMorgan is averse to funding hostile takeovers.
But Glazer’s decision to remove three MUFC directors at the annual general meeting (AGM) on 12 November, presumably in the face of the advice of JPMorgan, left little room for anything other than a hostile takeover.
But Brunswick? It could hardly have been an ethical issue – PR firms don’t tend to have many scruples when it comes to picking their clients. But PR firms live and die on their relationships with journalists – and should a PR tell the press their client is going to do one thing and then that client does another, it does not reflect well on the PR firm.
And then there is the Cazenove factor. A week before the AGM, Cazenove and JPMorgan agreed a landmark joint venture. Cazenove is advising MUFC on the takeover. And Brunswick acts for Cazenove, which it represented on the JPMorgan tie-up. Perhaps not the best time for the trio to be on opposite sides of a deeply hostile bid.
Tactically, the MUFC board’s decision not to recommend a Glazer bid on 25 October looks like a masterstroke, and you have to give credit to Cazenove and Freshfields for much of that.
Nevertheless, it raised eyebrows in the City. When MUFC chief executive David Gill bounced Glazer, he said: “Given its views on the importance of an appropriate capital structure, the board has decided to inform all shareholders that it would regard an offer which it believes to be overly leveraged as not in the best interests of the company.”
Glazer has no cash of his own and would mortgage the club up to the hilt in order to pay off the loans he needs to buy it; he wants to securitise ticket revenue from MUFC games and do a sale and leaseback of the club’s Old Trafford ground. At the moment the club has no debt on the balance sheet.
Some argue that Glazer’s plans would leave the club in a worse state of financial health than it is at the moment. Football clubs can be precarious businesses – you need only look at Leeds United, which borrowed so recklessly that it went under.
But whether Gill should have turned down Glazer on that basis is another matter entirely. The primary duty of the board is to existing shareholders, and an offer of 300p a share was a good deal for them.
Gill has said publicly that he was acting on the advice of his advisers when he turned down Glazer’s offer. A source in the MUFC camp says the board’s duties under common law were a “developing concept” and could include duties to employees and other stakeholders, such as customers.
Experts agree that there is some room to consider other parties’ interests, but to make a decision based on them would be a major divergence from current practice.
But MUFC’s public statements could be a fudge. Only when a formal offer is on the table does the board have a duty to advise its shareholders on what to do. Until then, it can do what it likes. Freshfields’ advice might be very different if Glazer launched a formal offer under the Takeover Code.
Since JPMorgan dumped him 10 days ago, Glazer has pounded the City pavements looking for the remaining money, reportedly around £500m, but as yet no bank has stumped up.
Now Glazer is in an uncomfortable position. He has also borrowed what could be £200m from Commerzbank to finance his current holding of 28 per cent of MUFC. Of course, there will be interest payments clocking up on that borrowing, although his lawyers at A&O decline to comment on when they might be due.
Some of the shares were bought at a whopping 285p, much more than they would be worth if his bid collapsed – so extricating himself won’t be easy either.
It looks like the Tampa Bay Buccaneer has bitten off more than he can chew.