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Capitulating to the Glazers

2010 June 22
by Paul Vallely

Well, in the end, I did it. I thought for a few idealist months about joining the boycott. But on the last day I capitulated and renewed my Manchester United season ticket. But this is not about football. It is about chocolate, or how you get the money to buy either of them.

The reason I delayed renewing my son’s and my season tickets was to protest at the massive amount of debt which have been laid upon the club by the Glazer family, the American businessmen who took advantage of British takeover laws to buy United in 2005, borrowing most of the £700m they paid for it. They would not have been able to do it if the law had been changed in the way that a group of British businessmen recommended last week.

Borrowing to buy is called a leveraged buy-out. Such deals have been common in the City for decades and have reached mega-deal proportions in recent years. What is dodgy about them is that often the buyer borrows against the assets of the firm he is about to buy. So a firm which was in profit – Manchester United was the richest club in the world – takes on the debt its new owner incurred in buying it.  Something similar happened when the US multi­national Kraft took over the highly successful British chocolate-makers Cadbury. They didn’t just borrow $7 billion (from a British ban) to do it; they did it in a hostile takeover in the teeth of the opposition of Cadbury’s management.

Such deals rarely get off the business pages. What made Man Utd unusual was that the Glazers wanted to borrow even more money in January so they had to open the club’s books. Outraged fans then learned that they had put the club £700m in debt. Worst still they had extracted £400m from the club in fees and interest and put not a penny in. Ticket prices are up by  a third. And the £80m they earned from selling the star player Cristiano Ronaldo has not gone to buying replacements but has disappeared into the debt blackhole. A BBC Panorama documentary last week exposed that the Glazers other businesses are in far more in debt than was supposed.

Fans intuitively suspect there is something immoral at the heart of all this. Perhaps that’s because a football club is more than a commercial enterprise; it’s something in which individuals and a community invest loyalty and identity. But the people of Bourneville feel something similar. Kraft have reneged on a promise it made, during the takeover bid, to keep open the Cadbury factory in Somerdale. And a brain drain has begun, with five senior Cadbury executives quitting their jobs.

Last week a survey showed that half of Britain’s top executives back the introduction of a “Cadbury’s Law” to increase the amount of shareholder support needed to approve a takeover. Or it could allow only long-terms shareholders a vote, to prevent short-term investors like hedge funds buying shares to help opportunistic predators gobble up perfectly viable British businesses.

Such a law is needed urgently. Analysts predict many more takeover as corporate America takes advantage of sterling’s weakness to buy British companies on the cheap – with deals going through on short-term share price along, with small regard for the impact on British jobs and the surrounding community.

I held off buying my ticket until the last minute to prevent the Glazers having the use of my cash several months before necessary. If I’d been a hardliner I wouldn’t have renewed at all and gone to watch the games on the telly in the pub. But that would have meant sacrificing the dad-and-lad-bonding that is a key part of the match experience. There are some things that an individual cannot achieve. But a change in Britain’s takeover laws could change all that without too much difficulty.

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