Manchester United are a strange club at the moment and an even weirder business.
They are one of the world’s most popular sports teams, with the third-most expensive squad in global football and the highest operating profit. They are owned by billionaires, play to packed-out houses at the UK’s largest club stadium and have just announced they want to knock that venue down and build an even larger one for £2billion ($2.6bn).
But, according to one of those billionaire owners, Sir Jim Ratcliffe, they would have “gone bust by Christmas” if they had not made hundreds of office staff redundant, cut free lunches and stopped funding the former players’ association. They are also 13th in the Premier League, have not made a profit for six years and are £1billion in debt.
This duality was on full display last week when Ratcliffe and the club’s leadership went on a three-day talkathon that should keep the Manchester United content industry (yes, we are part of the supply chain) busy for a month.
Ratcliffe had the most to say, telling the BBC that Manchester United will be the “most profitable club in the world in three years” and the new stadium, complete with Eiffel Tower-rivalling tridents, will be “eminently financeable”.
However, club legend Paul Scholes cut through a lot of the gobbledygook about the new stadium this week when he told The Overlap Fan Debate: “Words are cheap… you can say in 10 years we’ll have the biggest and best stadium in the world — you can say anything!
“For a long time, we’ve been called the richest club in the world but I feel like we’re begging a little bit, coming out and asking for the stadium and that we need £2bn, and selling players to buy players.”
So, who is right? The hugely successful businessman in sales mode? Or the guy with no clue about how to run a company but a healthy disregard for spin and no need to curry favour with the club’s fanbase?
The Athletic has spent a week having conversations with people who have a good handle on where the truth resides on the Ratcliffe-Scholes spectrum because Manchester United are both a mess and never more than a few years of decent management and good luck away from profitability and silverware. Building a massive new stadium, with all the mod cons but without handicapping the club under more debt, is doable and would help with that return to relevance.
But it will not be as easy as Ratcliffe and the club’s executives have suggested — nothing worth doing ever is, right?
So, here are the club’s options, with some analysis of the pros and cons, and a prediction for how this will probably play out.
And here’s a sneak preview: the canopy gets canned.
A big fat cheque
There is always a bit of guesswork when estimating a billionaire’s wealth. It is often said it depends if they are trying to raise money (I’m loaded, join me!) or if they have a tax bill coming (sorry, it’s been a tough year).
Ratcliffe does not have to worry about tax too much these days, as he moved to Monaco, but that has not made estimating his fortune any easier as most of it is tied up in INEOS, the London-based chemicals-to-cleaning products firm he founded in 1998.
According to The Sunday Times’ most recent annual Rich List, Ratcliffe was worth £23.5bn last year, down from 2023’s guestimate of £29.7bn. But that reduction in riches is not because he spent £1.25bn on buying a stake in a loss-making football team, it is more to do with INEOS’s costs rising and its sales flatlining.
Even so, the 72-year-old Englishman is still considerably richer than you and me, and he has spent the last few years sprinkling his self-made fortune on fun things — football, fashion and 4x4s. He is also clearly thinking about his own legacy, as Manchester United were his boyhood team and he is the dictionary definition of local lad made good.
Avram Glazer (left) and Sir Jim Ratcliffe at last year’s FA Cup semi-final (Marc Atkins/Getty Images)
And then you have the six children of Malcolm Glazer, the American businessman who bought Manchester United for £790million in 2005 with money he borrowed and then immediately dumped on the club’s balance sheet, which meant the club paid the interest, not him.
When he died in 2014, his kids inherited Manchester United, the Tampa Bay Buccaneers, the NFL team he bought in 1995, and a real-estate business Malcolm built up called First Allied Corporation. When U.S. business outlet Forbes added up all these assets last year, it estimated the Glazers’ wealth at $10bn.
Ratcliffe and the Glazers own almost 80 per cent of Manchester United’s total shares, with the rest divided between institutional investors who bought their stakes via the New York Stock Exchange, where the Glazers partially floated the club in 2012.
Given that Sir Jim is loaded and in the mood to enjoy his wealth, and that the Glazers are very rich, too (and have already made $1.75bn from their father’s investment in English football, thanks to the share sales, dividends and management fees they have banked over the last 20 years), you might think they should just, you know, pay for United’s new home between them.
You would be wrong, though.
Ratcliffe did not spend his life accumulating money to squander it quite that quickly. He is also not as flush as he would like to be: he is just about to shut down the UK’s oldest oil refinery at Grangemouth in Scotland, at the cost of hundreds more jobs. This is not the right time for him to be dropping huge sums on his favourite football team.
And Malcolm Glazer’s children simply view Manchester United as an ATM that only does withdrawals. It is an arrangement that has worked really nicely for them. Why change it?
A new partner
OK, so the two main players are not going to pay for British architect Sir Norman Foster’s latest bid for an architecture prize. Maybe they can persuade somebody else to do it, though. After all, somebody else’s money is often the best kind.
At one point, many in the UK seemed to think that Ratcliffe genuinely believed British taxpayers should chip in. Ratcliffe was admittedly a little broad-brush in his early statements about government support for his “Wembley of the North” but more recent comments from him and the club’s executives have made it clear that Manchester United must pay for their own home, on their own.
This message was also underlined by Greater Manchester mayor Andy Burnham last week when he spoke at MIPIM, an international real estate conference in Cannes.
“It is for Manchester United to fund their new home,” said Burnham. “There will be no public money and that will not change. And I want that message to be heard loud and clear.”
State support is required, though, for the wider regeneration project in which United’s new home sits as the centrepiece. There are rail freight terminals to relocate, train stations to upgrade and thousands of homes, shops and community assets to be built. More on that later, as it is very important.
The land around Old Trafford is a key aspect of Manchester United’s plans (Michael Regan/Getty Images)
In Ratcliffe’s first round of interviews last week, the ‘this is my club now’ vibes he was emitting could imply that this was the next stage in his gradual takeover of the club, with some responsibility for the building costs in return for more shares.
That is unlikely, though, as there is no point in him buying shares off the Glazers, or anyone else, as they will just pocket the money, so the only way to contribute to the building fund would be for new shares to be issued.
That, of course, would dilute the Glazers’ position even further, and it is hard to see why they would agree. While they only hold about 49 per cent of all the shares, they still have most of the class B shares, which come with 10 times the voting rights of the class A shares the institutional investors hold. So, they still control two-thirds of the votes.
There is a world where the Glazers and Ratcliffe could agree to mutually dilute their positions to create a 5-10 per cent stake for a new partner. We have seen several large private-equity funds take similar-sized stakes in NBA and NFL teams, and many of those same firms were interested in the club when the Glazers let it be known in 2023 that they were open to offers.
The problem here, though, is that Ratcliffe has done a good job of showing everyone why buying a minority stake in a European football team is not a great investment. The market has noticed.
Manchester United’s current share price is $13.83, which means the shares are worth less now than they were in 2012 when the club floated. If the stock had kept up with the rest of the index, the shares would be worth $40.
So, the chances of someone dropping a significant amount of money at the club’s door to become a junior partner to the junior partner seem remote.
I’ll pay you back, honest!
In reality, there are only two ways that anyone buys anything. You either do it with your own resources or you borrow money. And while you might think that it is always better to avoid borrowing if you can avoid it, you would be wrong.
Generally speaking, debt is a much cheaper way of doing business than using equity, because if you spend all your equity on something, it means you cannot use it to do something else that might generate more wealth. And debt also has tax advantages (a state subsidy we can all enjoy).
Once upon a time, Manchester United were, relative to the rest of the football industry, the gold-plated customer when it came to borrowing cash. Annual access to the Champions League, Premier League prize money, Old Trafford, a clever retail operation and their appeal to global sponsors meant there was plenty of money to service the Glazer bill and still have plenty left over for new strikers and famous managers.
Manchester United continue to thrive on the commercial front, despite performances on the pitch (Christopher Furlong/Getty Images)
Those days have gone. They may come back but, as of the end of last year, the club had gross borrowings of over £730m, split between a rolling credit facility, or overdraft, and a bond issue that expires in 2027. To make matters worse, they also owe other clubs £300m more in transfer instalments than other clubs owe them.
So, they are £1bn in the red already and last season paid a league-worst £36m in annual interest payments. Can you see how this might be a problem when they fill out their online mortgage calculator?
Timing has not been kind, either.
Tottenham Hotspur spent just over £1billion on their amazing new pad between 2016 and 2019, and borrowed almost all of it. However, money was very cheap then as interest rates were at record lows. They now owe about £850million at an annual rate of 2.79 per cent and that is locked in for years to come.
As a result, they are paying about £22million a year in interest but have more than tripled their matchday revenues from a decade ago to £103million, with further boosts to their commercial income thanks to all the other events they can host now and increased daily footfall.
The central interest rate in the UK and U.S. is 4.5 per cent today, so commercial rates, for the very best customers, would be two per cent above that. We have already established that United may not be in that bracket anymore, a state of affairs not helped by the usually copper-bottomed INEOS recently suffering a markdown from the ratings agencies because of concerns over its debt/profit ratios.
A better comparison for Manchester United might be Everton, who recently refinanced the £350million debt from building their stadium, which opens next season, at 7.38 per cent.
So, let’s say that Manchester United need to borrow the entire £2billion they say the stadium will cost, plus the existing non-transfer debt of £730million. At Everton’s rate, that is an annual interest cost of £200million.
Manchester United make £108million a season from home matches. European clubs have built new stadiums that have tended to double their matchday income. So, United would be knocking down Old Trafford to have less money after interest.
Let’s be sensible
Of course, nobody thinks 100 per cent mortgages are a good idea, and there is no way Manchester United will be borrowing the full amount of New Trafford’s building costs.
So, we are now down to the realistic options and there are two.
The first is based on how most of us do actually buy our houses — we put as much money down as we can in equity and borrow the rest.
In Manchester United’s case, that equity might be a contribution from the shareholders (OK, just Sir Jim, then) but will more likely be the proceeds for a stadium naming-rights deal.
Michael Weaver leads the valuation advisor team at Kroll’s London office and is an expert on naming-rights deals.
“(They) are like free money for clubs and those who do not have them are simply leaving money on the table,” Weaver told The Athletic last year. “You only have to look at the United States, where almost every stadium is named after a sponsor, to see that.
“If Manchester United sold the naming rights to Old Trafford, our analysis suggests they would earn about £15m a year but you could double that for a new stadium. If the club decides to build a new ground, a naming-rights deal for, let’s say, 10 years, would cover a significant chunk of the construction costs and enable them to borrow money for the rest at a better interest rate.”
(Michael Regan/Getty Images)
When asked about a naming-rights deal for a new stadium this last week, Manchester United chief executive Omar Berrada said: “All options are open, we’re not closing any doors.
“We obviously want the new stadium to give us additional revenues for us to be able to invest in the team, and I think that’s going to help.”
A definite yes, then, and if Weaver is right, that is £300m to knock off the construction costs, maybe more. Online bank SoFi paid $600m to put its name on the $5.5bn home of the Los Angeles Rams and Los Angeles Chargers for the next 20 years.
Manchester United still attract eyeballs. If the home of the Rams and Chargers can generate that kind of money, so can United.
The Glazers’ land grab
The 20-time English champions have something else going for them and, for this, we may have to give the Glazers some begrudging applause: they appear to have spotted the potential value of the land around Old Trafford and started buying it up a decade ago.
That land — and they own 100 acres of it — is now crucial to the Trafford Wharfside Masterplan, a joint venture between Manchester United, Greater Manchester Combined Authority (GMCA) and Trafford Borough Council. Together, they hope to convert the eastern end of Trafford Park (the world’s first purpose-built industrial park but now mainly car parks, storage units and a handful of small businesses) into Manchester’s next cool place to live and work.
To do this, the partners will build 17,000 homes, a retail area, a school, green spaces and whatever we are calling United’s new ground. According to the independent assessment of the economic impact of regenerating Old Trafford that Oxford Economics published last October, 11,700 of those homes are in the “Stadium District”, which would appear to be land owned by the club.
Working out just how much that land is worth to Manchester United these days is not easy. Land, with planning permission, in nice parts of Manchester is going for £2million an acre at the moment but you can get £7million in the poshest parts of London.
It appears unlikely Manchester United will want to get into the housing business, so they will probably sell the land to the developer, or group of developers, that the Trafford Wharfside partners appoint to build their urban paradise.
There will be no trouble with the planning permission, either: GMCA boss Burnham is setting up a mayoral development corporation to drive this project forward. This means fast-tracked planning decisions, compulsory purchase orders to bypass ransom strips and land bankers and, very probably, access to cheap central government-backed credit.
United are going to need a good chunk of their land for their stadium but you can possibly see how they might be able to make another £500m out of their share of Trafford Wharfside. Add that to the naming rights and the amount the club would need to borrow is coming down all the time…
The clever option?
OK, here is what I really think is going to happen.
Having sold the naming rights for at least a decade and done a deal for the residential property, Manchester United will then set up a special purpose vehicle that will own and operate the new stadium. This company will initially be a wholly-owned subsidiary of the club and it will have all of the stadium’s costs and revenues on its books.
Instead of trying to sell a small stake in the overall business, the club will sell a significant minority stake in this stadium company.
An example of this is what Porto did last year, when they sold 30 per cent of their stadium’s commercial rights to Spanish investment firm Ithaka for 25 years in a deal worth £55m to the Portuguese club.
Barcelona, of course, have been doing similar deals, in a more chaotic, everything-must-go fashion with their various revenue streams, including a recent agreement to sell most of the hospitality boxes in the renovated Camp Nou to investors from Qatar and the United Arab Emirates for the next decade.
Despite their recent struggles on the pitch, Manchester United would be negotiating from a stronger position than Barca and Porto, simply because of the huge revenues they can almost guarantee as members of the Premier League. All of the world’s biggest private-equity firms that like sport — Ares, Carlyle, Elliott, Sixth Street and so on — like Manchester United. And both the Glazers and Ratcliffe have long relationships with the world’s biggest banks.
This is what Ratcliffe was getting at when he told the BBC that “the financing is not the issue”. This special purpose vehicle would borrow the money and service the debt. The minority investor would take its return on investment from the company’s profits. Manchester United would pocket the rest.
How the new stadium might look one day (Manchester United/Foster + Partners)
If they can double their matchday revenues and keep the club’s total debt below £1.5bn, the new stadium can contribute to the greater cause and not be a millstone.
However, this is not going to happen if Ratcliffe insists on the big-top design that Foster appears to have found in his Qatar 2022 sketchbook.
While it might be nice to have a stadium with three 200-metre spires that can be seen from the outskirts of Liverpool, a translucent glass-and-steel canopy that “harvests energy and rainwater” and a public plaza twice the size of Trafalgar Square, it would still be pretty cool to have a smart new ground without its own umbrella.
According to documents shared at this month’s final meeting of the Old Trafford Regeneration Task Force, which Ratcliffe asked to make an independent assessment of whether it was better to redevelop the existing ground or build a new one, Foster’s canopy means the club will need to buy more land than previously expected from Freightliner, the logistics company that owns the rail terminal to the west of Old Trafford that United and their partners need to relocate.
GMCA and Trafford Borough Council will have to go back to Freightliner and “test its receptiveness” to selling more land. The issue will not be that Freightliner might need it to continue its operations in Trafford Park (like everyone else involved, it wants to move to a far better site near St Helens, that is equidistant between Liverpool and Manchester), it will be that Freightliner simply wants a bigger share of the Trafford Wharfside upside to leave.
Lose the canopy, and the spires, and you save an estimated £300million in building and additional land costs.
Also, do not be surprised if a new plan is announced next year for a 90,000-seat stadium, or perhaps one even a tad smaller. As with every architect firm that has actually delivered a sports stadium on its own — Foster + Partners has not — the last 10,000 seats are your most expensive as they are at the top of the stadium, and therefore quite difficult to build. Plus, you cannot charge much for them.
There is a reason most NFL stadiums are around the 65,000-70,000 mark and none is bigger than 82,500. There just isn’t much point.
The good news here, though, is that by losing 15,000 seats and the canopy, Manchester United might actually have a chance of building this thing for £2bn. No amount of prefabricating and floating down the canal is going to keep Foster’s flight of fancy on budget otherwise.
(Top photo: Manchester United, Foster + Partners)
