Thursday, 23 September 2010

The Glazers and the “Rich List”: why Forbes can’t add up

The Glazer family are rich, asset rich. They own what is generally considered to be the world’s most valuable football club and an NFL franchise. But what is their net worth?

That titan of business journalism Forbes has just published its semi-annual list of “400 Richest Americans”. Malcolm Glazer (and family) come in at no. 136 with an estimated net worth of $2.6bn. They comment:

“Owns NFL's Tampa Bay Buccaneers (team valued at $1 billion); controls English soccer's Manchester United, worth $1.84 billion (the sport's most valuable team burdened by a near 50% debt load). Inherited watch business from father at 15; formed real estate company First Allied. Today owns more than 6.7 million square feet of retail space. Opening of Glazer Children's Museum in Tampa slated for September. Sons now manage family assets.”

Given that the two key assets in this calculation are sports teams, it’s handy that Forbes also provide its own valuations for those, the most recent being their 25th August 2010 valuation of the Tampa Bay Buccaneers and their 21st April 2010 valuation of Manchester United.

Forbes’ sports valuations are always calculated as “enterprise value”, that is the combined value of debt and equity (unless the debt relates directly to stadium construction which is not relevant in these cases). Forbes also helpfully show what proportion of this “team value” estimate relates is debt.

The debt figure for United in their April valuation ($844m or c. £540m) clearly doesn’t include the PIKs which is a pretty major oversight. We know that the PIKS were around £228m at 30th June, so even if only 80% are owed to 3rd parties, that’s another c. $283m of debt they’ve missed (£228m x 0.8 x $1.55 exchange rate). That would takes the net equity value of the two sports clubs to $1.6bn:


So where do Forbes get the other c. $1bn in their estimate of the Glazer fortune from?

Forbes mention First Allied Corporation, but they clearly haven't looked at it in any detail as they seem to believe that the company “owns more than 6.7 million square feet of retail space”.  This is indeed the number of the main page of the First Allied website, but when one looks at county or mortgage records for the sixty-four centres First Allied say they own, the actual square footage is only 4.7m....

This 4.7m square foot of space is generating around $6m per annum in cash flow at present (that isn’t an estimate, it’s from the CMBS filings each centre makes), that’s before any central business costs. Is that worth $1bn? The answer is clearly no. Only half the centres generate any positive cash flow at all. Putting them on a capitalisation rate of 8.5% yields a value of around $70m. Which still leaves a $889m hole in Forbes’ big number.

Maybe the Glazers have over $800m just sitting around? If that were true, why not repay all the PIKs? Or invest in the Bucs playing squad? It sounds unlikely.

So Forbes end up looking pretty dumb for not being able to add up their own numbers or include $283m of PIK debt in their calculations and the Glazers look asset rich but suspiciously cash poor.

LUHG

52 comments:

drewski said...

Given the Bucs have started 2-0 (against admittedly weak opposition) and are getting excellent play from their young players, your comment about their playing squad once again reveals your ignorance about the realities of the NFL.

Stick to the comments about business and football, mate. There, you actually know what you're talking about.

John said...

Well Said,Anders keep to talking about things you understand cause its clear you Know Little about NFL and a little bit about Finance

Anonymous said...

Anders doesn't need to know anything about the NFL to comment, he's not saying who the money should be invested in exactly but answering the rhetoric over the last few years that the Bucs squad has seriously lacked investment.

United fans don't really care about the Bucs anyway, they're just an interesting barometer, nothing more.

Thanks again for the insight.

andersred said...

Hi guys,

I'm not claiming I know anything about the NFL. What I do know is that (according to figures from the players' union quoted in this article: http://bit.ly/crELWt) the Bucs have the lowest wage bill in the NFL.

Maybe that's just great strategy, I couldn't say.

The point of the post is that Forbes numbers don't stack up.

anders

John said...

And at times Anders neither do yours,instead of giving a straight and a set of figures all you have done is give a set of what ifs,Perhaps the Glazers have wealth or other businesses that do not appear in public,just a thought.And it is clear that the Glazers have the continued support of the banks and thats vital

andersred said...

Let me know which of my numbers don't add up John and I'll correct them....

anders

Anonymous said...

So this retail land, has no value as land?

andersred said...

It has value as land, it has value as a shopping centre. Gross value. The net equity value (less the mortgage debt) could well be zero or negative. Such is the world of property.

anders

prasunbanerjee said...

Dear Andy,

I am a Man U fan from India and hate the Glazers. I do follow your blog regularly and quite admire the work you put in.

However there are times I feel uncertain. I feel hypocrisy. You are from the Finance industry. The leader of the Red Knights is chap from Merryl Lynch. Can you cross your heart and swear that in your career in the industry you guys have never been part of (in some form ) an LBO ? Maybe advised a team for an LBO ? The problems faced by Man U are typical of that in any LBO. So why hate the Glazers only ? Is it because this time , the asset / entity being bought is dear to us ?

andersred said...

Hi prasunbanerjee,

I have been involved in LBOs, through two routes; having companies I have invested in being bought out in LBOs and I have also invested in private equity funds (I say this in the "about me" section of the blog).

I'm not opposed to LBOs, just LBOs of football clubs which are businesses with a key social function.

anders

Anonymous said...

But in that case anders you cant blame the Glazers for their LBO of our club - you should blame the football regulators who allow it to happen.

andersred said...

I do blame the regulators. It's a transaction that wouldn't be allowed in a lot of countries (nor in the NFL).

anders

John said...

But the Fact is when man utd was made a public company then anybody could of bought it,the fact the glazers bought it is not the point,anyone could of,regardless of where they money came from.Why did the Red Knight Group not get involved in 2005??

Anonymous said...

From what I understand, some of the RKs were involved in 2005 - they were involved in selling their shares to the Glazers for a healthy profit !

andersred said...

Hi anonymous,

Which RKsare you talking about? Jim O'Neill was on the pic board that opposed the bid...

anders

John said...

But maybe they had small shareholdings which could collectively have prevented any takeover,Look at the Irish Duo who nearly had control(28% or something)Why did the red knights or must not join with them and use might have got Fan base ownership.But my view is that football is worth too much money to alot of people for it to be handed over to total fan ownership,Maybe a place on the board but nothing more

Anonymous said...

To be honest it was just a throw away comment - I assumed some of the RK group must have been shareholders at the time and made a good profit on the sale of their shares at the time.

As you mention, O'Neill was a director so I assume he was also a shareholder and eventually sold to the Glazers?

Anonymous said...

Never mind talking about Irish clowns Perhaps Anders could explain his views as to WHY the Red Knights have taken so long to raise enough money to make a bid for the club,is it lack of funds or what?

andersred said...

Anonymous @16.21

When the Glazers went over 90% they were able to force everyone to sell anyway. I was a shareholder and I sold. There was no choice....

Anonymous @16.33

Can I refer you to this quote by Paul Marshall (from this article http://bit.ly/9Q9oSF):

"Marshall told me that the Red Knights was a settled group of interested investors, many from abroad. “The potential funding that we have uncovered is much more than we expected,” he said. Now, he added, it was a matter of waiting for the Red Knight and the Glazer valuations of Manchester United to coincide. “We are delighted to wait while the Glazers acclimatise themselves to the double dip.”"

anders

John said...

But anders you failed to address Why the red Knights(if they had a shareholding in the club)did not join together at the time of the takeover to block them and why did supporters groups fail to buy enough shares to block any takeover or not join with the Irish Guys,Why wait till after the event to complain when little or nothing can be done when they have support from banks and no effect on tickets this term judging by reading the papers 50000+ tickets out of 54000 available correct?

andersred said...

John,

The Red Knights didn't exist as a group in 2005 and the supporters clearly failed to acquire a stake. It's ancient history to a certain extent.

I wouldn't be so dismissive of the fall in ticket demand. You've gone from a situation of a huge waiting list and oversubscribed members' ballots to one with surplus season tickets and all but the big games on general sale...

This is a long game we are playing here.

anders

John said...

So why did they form then?Surely if they had an interest in the future of the club then they could of done so when Shares could be bought instead of trying or waiting(and it could be a long one) to remove the present owners,I know its alot of whys and buts,but why wait till 2009 to make an issue of the glazers in a big way

ja said...

In answer to your question John about why there was no attempt to buy the club pre 2005, perhaps the simplest answer is everyone was caught napping. A then director Greg Dyke said the board thought by keeping the club debt free, successful on the field, funding purchases when the manager asked and keeping prices affordable while expanding the ground to increase spectator numbers and revenues, they were doing everything right. If you like, that it was only less successful or distressed companies that needed new investment that would be the subject of takeovers. So there was an element of complacency. It was also the case that when the Glazers first acquired a stake they said they were not interested in mounting a takeover. The Glazers also pushed through a shareholder resolution that prevented the club from buying back shares that would have been one way of stopping the takeover. The Coolmore Two had the maximum stake permissible without having to launch a full takeover so could sit pretty till someone like the Glazers came along to give them a handsome profit. And the fiasco with SAF and Rock of Gibraltar certainly meant they had no romantic reasons to support the club if it came to a takeover battle. Anders is correct, once the Glazers had bought the Coolmore stake and other shareholdings to acquire an unassailable position, they were able to compulsorily purchase all the shares. I too, as a United shareholder, made a handsome profit, but not out of choice! Ultimately, that is all water under the bridge, hindsight gives everyone 20/20 vision. What matters is what happens from here. The Glazers are gradually destroying the club, the only questions are how long before they go, and how much will it cost to repair the damage they have wrought.

Anonymous said...

"I'm not opposed to LBOs"
"I was a shareholder and I sold"

So you faciltated the Glazer buy-out and are now feeling guilty??

ja said...

Anonymous
"I'm not opposed to LBOs"
"I was a shareholder and I sold"

So you faciltated the Glazer buy-out and are now feeling guilty??"

Do you simply not understand English?
LBOs can have their place, but not in football which is not a 'normal' business.
The Glazers were able to compulsorily purchase all shares. Compulsorily means you could not stop them.
if you don't understand, go to some English classes or buy a dictionary.

John said...

Do People understand,The Fans could of blocked the takeover back in 2005 by joining/clubing together and purchasing a blocking stake but no they took the Glazers money and now want to complain about it,And anders you claim to be of been a shareholder well at what point did you sell and what kind of money did you make by selling out,and am i right in understanding that you played a role in putting in place these pik loans or in helping the Glazers with Finance at the time?Did you meet the Glazers or there reps at any stage and why did it take you so long to speak up

Anonymous said...

@John
Very good points.
Anders' motivations have been a concern with this blog from the beginning.
The feeling is there that he is more anti-Glazer than pro-United.

The willingness to promote a season ticket boycott to hurt club finances is suspect especially when the Red Knights themselves accept the Glazer were never going to sell.

andersred said...

John, what the hell are you talking about?

"And anders you claim to be of been a shareholder well at what point did you sell and what kind of money did you make by selling out,and am i right in understanding that you played a role in putting in place these pik loans or in helping the Glazers with Finance at the time?Did you meet the Glazers or there reps at any stage and why did it take you so long to speak up"

I sold my £500 of shares when they were compulsorily purchased by the Glazers, it's the law. The money has been in the MUST Phoenix fund ever since.

I had no role in putting in place the PIKs nor did I have anything to do with any of the financing. I was on the other side of the barricades flash mobbing the megastore in 2005...

I have never met any of the Glazers though I'd like to as I have a couple of things to say to them!

and Anonymous,

I can assure you I am far more pro-United than anti-Glazer. I'll be in Valencia on Wednesday cheering on the lads so come and say hi if you're there.

anders

John said...

So anders you had nothing to do with the Glazer takeover at all?Correct?At what stage did you become involved with must?and why all the focus on companies that have no effect on Manchester?Have you ever requested a meeting with the Senior Management of the club to discuss your issues and perhaps you could publish proof of such a request the same way you have with Letters From Mr David Gill and yourself.And what are if any your links with must and the red knights?

Just trying to build a clear picture of yourself and your views expressed here

Si, East Manchester said...

Either John is a WUM or he's been living on Mars for 5 years. YCNMIU.

ja said...

John
What do you mean by 'Manchester'. Manchester is a city in the north of England and a metropolitan county. Within its boundaries are several professional clubs, including Manchester City, Manchester United, Oldham, Bury, Bolton, Rochdale to name just 6. If you knew the slightest thing about England or football, you would know this. You also seem to have no idea of company law and share dealing in England. So where are you coming from?
Just trying to build a clear picture of yourself and your views expressed here.

John said...

What are you on about ja,All i asked was if Andy was a shareholder and at what point did he sell?What is wrong with that?All i have asked is what part if any andy played in the takeover as i thought he had,All i have asked is if Andy has Asked or seeked a meeting with the Senior Management team at manchester United?All i have asked is what links does Andy have with must and the red knights?
What is wrong with the questions above,i dont find any thing wrong with them and perhaps andy will take a period of time to address all the Questions above


group?

ja said...

John
Andy has already answered your questions. Now perhaps you can answer mine? Namely what is your background as you appear to have no understanding of football and no understanding of geography in England and no understanding of company law in England. So again, what direction are you coming from? And why the sudden interest when you have clearly made no attempt to do some research of your own.

Anonymous said...

@Ja
John is not putting himself forward as a supposed expert in anything. Why would he need to explain himself to you?

Anders is not an accountant but that doesn't stop him giving a view on the financial position of United.

Anders' view should be seen as that of a fund manager valuing a company.

He should not be seen as an expert on financial results as much as an accountant would be.

Where was Anders when the Glazers were buying the club?

It appears there was little or no objection from him when he was profiting from their purchase.

andersred said...

Enough of this rubbish,

I had a small personal holding in Manchester United plc (a few hundred pounds) in 2005 which I bought as a small attempt to STOP a takeover. I didn't want to sell it but was forced to do so because that is the LAW in such takeovers. The money is now sitting in the MUST Phoenix fund in the hope that one day it can be used to buy a stake in the club.

You obviously don't understand the difference between accountants and fund managers. It is the job of fund managers to ANALYSE companies and their results. It is the job of accountants (auditors) to help companies draw up their accounts.

You have no idea what I did or did not do in 2005, but I was involved in a small way in the protests and attempts to stop the takeover.

My only link with the Red Knights is through my role as an advisor to MUST.

I hope that is clear. This blog is not about me, it is about football finance and the Glazers. Either engage on those issues or don't comment at all please. Unlike various people hiding behind "Anonymous" log-ins it is 100% clear who I am.

anders

John said...

It is not rubbish Andy, all I am doing is gaining a bigger picture of yourself and background .YOU answered must of my questions but you failed to address as to if you have raised your issues or that of must with senior management of the club. Now in your job as a fund manager what would your Professional view of any bid containing many individuals for Manchester Utd?
My view is that debt in business is important and would be the case in many businesses around the world. All you need to be able to do is service that debt and maintain the support of your banking partners, which it seems the glazers have been able to do. HOWEVER I understand that many fans feel that this is a problem but in reality it happens in many cases in business including my own
I look forward to your next post and maybe can I suggest you look at what the Glazers own personally. It might be interesting

Pat said...

@Anders
I thought it was the job of financial analysts to "ANALYSE companies and their results".

What exactly is it that fund managers "manange"??

andersred said...

Pat,

What point are you trying to make here?

Fund Managers have to analyse companies to decide which to invest in. Analysts (buy side or sell side) also analyse companies. So do corporate financiers. A minority of people in these roles are accountants. You don't have to be an accountant to work in such roles. In my career I have done corporate finance, been a buy side analyst and a fund manager.

But so what?

If you have a problem with the analysis I publish on here then let's debate that. Point out what you disagree with. If you aren't willing to do so, take you poorly spelt comments elsewhere please.

anders

John said...

And any answer to my questions with regard to debt and investing in manchester utd along with IF must or yourself have ever asked for a meeting with the Senior Management Team of the Club and could you provide evidence of such a meeting

Pat said...

@Anders
Ha ha, thanks for the spelling lesson - I love your grammer: "take you poorly spelt comments".
An English major you're not but thanks anyway.

The whole point that has been made is that your background is on the investing side of things i.e. the VALUATION of companies.

Thus, this is why your emphasis is on EBITDA even though Interest is a REAL expense, Tax is a REAL expense, Players need to be replaced (Amortisation), and the stadium/Carrington needs to be maintained/upgraded from time-to-time (Depreciation).

EBITDA is a good measure for valuing a company but not necessarily for assessing performance. It leaves too many important items out.

Milneonthewing said...

Good work Anders. I've been reading the blog for months now and just wanted to say how much I enjoy it. You're doing something worthwhile.

Also you're obviously hitting a nerve as the smear campaign appears to have begun in earnest on this comment section. So keep up the good work.

I think it's obvious what someone's motives are when they try to imply that a compulsory sale of share is somehow "profiteering".

John - If you want to retain any credibility as a genuine poster on this blog, I suggest you volunteer some information on the reason for your interest. You seem remarkably hostile towards a blog that is essentially published financial data, with someone's opinion on it. You must be running out of stamps writing to the Financial Times, if that is your true raison d’ĂȘtre.

John said...

My Interest is As a fan of a Football Club and also a Business that has been the victim of alot of one sided Press over the past year.
Yes Andy is a well educated Guy and i am Full of respect for what he has done with this Blog.Now i disagree with some of his Figures in terms of Valuation of the Club and that of Other Glazer Family Interests and by publically taking sides in this Debate.All i have done is ask Andy a number of Questions which Andy has Kindly amswered.Now I Dont Claim to be a Finance Expert at the Same Level as Andy But i Do think that Andy has been Somewhat One sided in his reporting,Not disputing that his Figures are Mainly Correct.All i ask is that Andy comes clean so to speak and Outlines his Views on The Proposed Takeover Of this Proud Club and Hugely Successful Business by a large Group of Individual Investors in the Same depths he has Outlined his views and Educated Opinions of the Glazer Family Ownership of the Biggest Brands in World Football.
I work in a Senior Management Role Of a Property Management Company In Ireland



in world football and Business.

Steve said...

Good article, Anders, this is well thought-out and is yet another piece that ably dismantles the myth that the Glazers are rich, responsible businessmen.

I think some of the people on here don't disagree because they are plonkers but rather for one or both of the following reasons:

1. They love their club so much they decieve themselves into thinking we're just as strong as before and just can't bring themselves to face the truth.

2. They haven't managed to understand the financial details outlined in the blog.

All this makes me feel sorry for those who don't see what's coming but also angry that more people won't wake up to the truth.

John said...

My interest is as Fan of the Biggest Club and Business in world football that has been the Victim of alot of bad press and one sided reporting on weekly Basis for the past Year,Now i have great respect for andy and what he has done with this Blog and i dont Claim to be any sort of finance expert but andy has been somewhat onesided in his reporting.All i ask is that Andy explores in the same Detail and Depth the Affairs of Members of the Proposed Takeover Group as he has the Glazer Family.I work in a Senior Management role of an Irish based Property Management company

fattmatt said...

The Glazers are here to stay. They are waiting for the Nike sponsorship and merchandising deal to be renewed. This will pay off their PIKS and other high interest loans.

Milneonthewing said...

John - Thanks for your response, although personally I've never been a fan of the business just the club. I agree that much of the reporting has been slightly one-sided, but I would describe it consistent. I think this is because there is little in the way of financial good news coming from the club. (Unless you count "There's nothing to worry about - please keep buying shirts and tickets").

There has been a virtual zero net spend in the last three years and the team is going backwards. I wonder if anders is able to tell us how much revenue is hit by the team finishing 3rd/4th or 5th.

The statements made by the club are patronising at best. They ask to be treated like a business, without regulation. Yet if the fans did treat it like any other business they would have gone bust a long time ago. They are profiting on the rich history and cultural significance of an institution which I agree with you SHOULD be the biggest in the world. Under this regime it will not be. Their aim is for the minimum amount of success necessary to maintain revenue.

In response to your request that Anders explores the takeover group in the same depth, I would say;

1) That's a massive group of individuals. You can see the amount of work that's gone into this site, where would he get the time?

2) It obviously matters less who's putting 10 million into the club and getting a 1% share than a family who own the club outright.

3) They don't own MUFC, the Glazers do. When that changes maybe he'll refocus his attention

I realise you don't count yourself as a financial expert (neither do I), but you must have a grasp of figures in a senior management role. Look at the debt now, look at what it will be in 7 years, look at the lack of investment by the Glazers both on and off the field, look at the advances made by competitors at the same time. Now ask yourself the question "are they good for this club?"

Milneonthewing said...

Fattmatt

Nike's deal is up in 2015, Aon's in 2014. The PIK debt will be rolling up all the time. 5 years is a long time at 16.25%. And let's assume they better the £300M they got paid by Nike, who's going to pay that up front? And even if they do pay it up front and the Glazer's pay off the PIK debt. That's 30 million plus per year they won't be receiving in income that they currently are. Where do they make up the shortfall?

fattmatt said...

Last time the Nike sponsorship and merchandising deal was announced in 2000 nearly 2 years before the start. If the glazers can repeat this they can then borrow against the future earnings and pay the PIKS early in say 2013 for just over £300M (if they pay the 80% the hedge funds still own).
The Nike deal was £300M in 2002 so the next deal will perhaps be £500M+? Nike also agreed to pay half the net profits to MUFC for the first 5 years last time if they stayed in the top half and played in Europe (perhaps Anders knows how much this generated)

andersred said...

Hi fattmatt,

The 50% profit share hasn't generated any money for United at all. It's 50% of dividends from Manchester United Merchandising Ltd (a Nike subsidiary). That company runs the megastore (and online store), United soccer schools and licences the brand to other manufacturers. It has never paid a dividend.

anders

ja said...

collapse of stout party (fattmatt).

Anonymous said...

John,

For someone who is a Senior Manager you have yet to grasp the concept of where capital letters appear in a sentence.

My brother is a Corporate Director for a bank, he agrees with Andy's analysis and I assume he knows a lot more about Corporate Finance that you do.

If you are wondering about Andy's position on previous issues then I would suggest you go through the history and read the Blog and comments from the beginning.

Thanks

kinanda said...

Could somebody spare a minute to give me some info?

I was left some shares in MUFC, I know the last few were force-sold to the Glazers. When was this? How can I find out how much they were sold FOR, and where was the money put if the shareholder could not be contacted at the time? (had Alzheimers, not me, the person who gave me them)
ANY HELP much appreciated, have spent long time Googling all this and can't find out much.