How Singapore Managed to Score Man United Listing
Robin Chan & Magdalen Ng – Straits Times Indonesia
The story of Manchester United’s $1 billion initial public offering starts with its billionaire owner Malcolm Glazer, who had been looking for ways to erase his mounting debt.
The world’s most famous football club may be on a winning streak on the pitch, but its owner was losing the battle against its finances.
Short on cash, Glazer had completed a successful 504-million British pound ($830.6 million) bond issue early last year, but despite that, by the end of March this year 478 million pounds of debt had piled up.
It was well known that the Glazers were looking at other ways to service their debt, and the idea of a partial listing of shares on a stock exchange came up.
Early this year, when it seemed that the global economy was back on a steady footing, the Glazers looked at the proposal in earnest and hired investment bank Credit Suisse.
There was no shortage of takers for the football club ranked by business magazine Forbes as the world’s most valuable, at $1.86 billion, and the second most valuable sports brand in the world.
The listing destination was whittled down to three markets: London, Hong Kong and Singapore.
Credit Suisse and the Glazers met exchange officials from all three markets, making several visits to Singapore.
With the huge fan base in Asia, of 190 million out of an estimated 330 million worldwide, and a buoyant regional economy, Asia seemed the better bet.
But between Hong Kong and Singapore, both the Swiss investment bank and the American billionaire preferred the former.
A globally renowned stock exchange with huge retail interest and big brand name listings that include HSBC and Prada, Hong Kong was “the path of least resistance,” said one person with knowledge of the deal process.
“The bankers were quite dismissive of Singapore from the beginning,” he added.
It appeared to be a done deal. Hong Kong would add the Manchester United IPO to its lengthening string of successes.
But Singapore Exchange (SGX) chief executive Magnus Bocker and his team had other ideas.
They had, after all, seized a plum listing of the Hutchison Port Holdings Trust from its own Hong Kong home market earlier this year, bagging the biggest listings deal, at $5.5 billion, in the first quarter.
Also, while SGX may have failed to buy the Australian Securities Exchange as a result of political opposition, the indefatigable Bocker felt the audacious bid had put Singapore firmly on the global map.
Days before Manchester United was to submit an application for a listing on the Hong Kong Stock Exchange (HKex), they were intercepted.
Having sent feelers through their international offices, Bocker and his team flew out to meet the Glazer family and make a last ditch attempt to change their minds.
Somehow, they succeeded.
“On reviewing facts, the Glazers believed Singapore had a superior pitch,” said a person involved in the deal.
“There was a train that was clearly heading for Hong Kong and that filing was supposed to be done about two to three Mondays ago,” confirmed another source.
“That is the strength of the coup for Singapore as a whole.”
Once the decision was made, an application was put in for a listing last week, setting off a scramble by other banks to get a piece of the pie.
The exact contents of the SGX pitch are unclear.
But the challenge for SGX was to clear the misconceptions about Singapore being a small and domestic-focused market.
One source said: “Once they got their foot in the door, they merely presented the facts.”
Among them: that trading on the SGX is highly liquid and that the exchange has an international presence with 56 percent of its revenue from outside of Singapore.
In fact, the claim was that Singapore would offer a wider base of international investors than Hong Kong, which is more closely associated with the Chinese market.
A senior banker who had been involved in pitching for a role in the deal said that the SGX also argued that the IPO would attract not just Singapore investors, but wealthy individuals from South-east Asia too.
Singapore, as a growing private banking hub for the region, would be a suitable place to market their shares from, he added.
“Tony Fernandes [of AirAsia] recently bought Queens Park Rangers,’ said the banker.
“There are a lot of wealthy football fans out here.”
In fact, the Glazers may have also met various potential “cornerstone” investors in the region, including Singapore investment firm Temasek Holdings.
Billionaire Peter Lim could also be interested in becoming a cornerstone investor. He is a diehard Manchester United fan with regular VIP box seats at Old Trafford, and has built up a close friendship with David Gill, chief executive of Manchester United. Last month, the two met in Singapore to support Lim’s sports scholarship.
Another factor in Singapore’s favor was that Manchester United’s slate of global sponsors are also largely Asian, or are companies which have a large Asian presence.
It is believed the Glazers could have seen Singapore as a more appealing place from which to attract such global sponsorship, because there are more multinational corporations headquartered here than in Hong Kong.
Since news of the Singapore deal emerged, however, various reports in the Hong Kong press have painted it as a matter of the HKex rejecting Manchester United.
An Apple Daily report said that the HKex deal stumbled because the Glazers wanted to keep decisions over player transfers out of shareholders hands, and also wanted to keep details of player salaries private.
Star forward Wayne Rooney, for example, is believed to be paid as much as 160,000 British pounds a week.
The Glazers also wanted to introduce a “poison pill” clause to prevent a hostile takeover bid for the football club.
Apparently, Hong Kong would not budge on these demands, the report said.
But a source with knowledge of the SGX pitch claims these demands were not made.
Another story making the rounds is that HKex did not want to list a loss-making firm.
Manchester United made an overall loss of 84 million British pounds in the 2010 financial year because of huge interest payments on its debt, despite an operating profit of 101 million pounds.
Debunking this, Rachel Eng, managing partner at WongPartnership, a local law firm that specializes in IPOs, said: “Both sets of rules [in Hong Kong and Singapore] technically permit the listing of loss-making companies.
“I do not think one should jump to the conclusion that Manchester United is not able to list in HKex just because it has a negative bottom line.”
Lawyer Raymond Tong, partner at Clifford Chance, said neither of the listing regimes is “better than the other.”
It is understood, however, that the SGX was probably willing to give special concessions to the club, including an accelerated listing process.
But while the club appears on track for an early listing in October, with pre-marketing next month to gauge investor interest and come up with a price range, there are still uncertainties clouding the picture.
For one thing, commentators are sceptical about the $1 billion valuation of what will be an approximately 30 percent share.
A volatile market could also still put off this headline-grabbing deal.
To increase its chances of success, a long list of banks has been carefully chosen, to help market shares around the region.
The list includes Credit Suisse as the sole global coordinator and JPMorgan Chase and Morgan Stanley as joint bookrunners.
Co-lead arrangers are China’s BOC International, Hong Kong’s CLSA Asia-Pacific Markets, Malaysia’s CIMB and Singapore’s DBS.
It has been a riveting few weeks for SGX officials, bankers and sports fans here. And if there is a lesson to be learnt from all of this, it is that — just like in football — always play to the final whistle.
Reprinted courtesy of Straits Times Indonesia. To subscribe to
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