Man Utd IPO values club at $2.3B, less than expected

Reuters

Posted at Aug 10 2012 10:19 AM | Updated as of Aug 10 2012 11:07 PM

Manchester United Ltd said its shares priced at $14 apiece in its U.S. initial public offering on Thursday, valuing the British soccer club at $2.3 billion, significantly below what its owners were hoping.

The team priced 16.7 million shares, as planned, and raised $233.2 million, about $100 million less than it had hoped. It will start trading on Friday on the New York Stock Exchange under the ticker "MANU" with the team's management expected to ring the opening bell at the stock market.

While the deal still makes it the largest sports-team IPO on record, the club value is much below what the club and its owners, the Glazer family, were expecting: as much as $3.3 billion. But one analyst said shareholders were still paying up.

"I'm surprised it wasn't more of a discount," said Ken Perkins, an analyst with Morningstar. "Our value was around $10. It's still a rich price -- they're asking people to pay up a lot to take on a lot of operational and financial risk."

The lower proceeds are a setback for the club, which is planning to use the money to pay down a pile of debt that was put on the team during the 2005 leveraged buyout by the Glazer family. Manchester United's debt load stood at over 437 million pounds ($682 million) as of June 30. The Glazers bought the previously debt-free club for 790 million pounds ($1.2 billion).

The Glazers, an American family whose interests include shopping centers and the Tampa Bay Buccaneers football team, will also take in less money from the share sale. The Glazers, who are selling half of the shares in the offering, have not said what they intend to do with the money.

Some fans of the team have protested the IPO, criticizing the Glazers for only using half of the deal's proceeds to pay down debt. They argue that this hefty debt load has led to reduced financial flexibility which came at the expense of investment in players and the team's performance.

Manchester United expected to price shares in a range of $16 to $20. The deal would have raised $333 million if it priced at the high end of its range.

Valuation had been a key question going into the IPO. Last year, the club tried to go public in Singapore but aborted the deal. Morgan Stanley, which was part of the underwriting syndicate, quit, with the owner's valuation expectations being one of the reasons.

This time around, the underwriters led by Jefferies Group Inc pitched the club to potential investors not as a sports franchise but as a global consumer brand.

Different banks in the syndicate used vastly different comparisons for the club, ranging from media companies such as Walt Disney Co, e-commerce companies like Amazon.com Inc and branded consumer names similar to Michael Kors Holdings Ltd, sources previously told Reuters.

Other banks in the syndicate include Credit Suisse , JPMorgan Chase, Bank of America Merrill Lynch and Deutsche Bank.

The deal tops off a mixed week for IPOs in the United States. Earlier this week, Outback Steakhouse operator Bloomin' Brands Inc raised $176 million, selling fewer shares than expected and pricing below the expected range. Peregrine Semiconductor Corp raised $77 million, pricing shares at the low end of its expected $14 to $16 range.