Shareholders United Press Release

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From Shareholders United forum:

SHAREHOLDERS UNITED PRESS RELEASE.


http://www.shareholdersunited.org/
P. O. Box 146, Manchester, M16 8XW

2 May 2005
FOR IMMEDIATE RELEASE

“IT’S HANDS IN POCKETS TIME”

There has been overwhelming public interest in the story in the Sunday Times yesterday about the proposal to set up a leveraged investment trust (LIT) for Manchester United (MU) supporters, backed with finance provided by Nomura International, the investment bank. Here is some clarification and further explanation of the plan.

Background

SU has attracted United supporters all over the world (27,000 members in 85 countries) to join the ‘independence’ campaign and to buy shares through the SU Share Scheme. SU members feel strongly about their club, strongly enough to want to get together and do something about it, even if that means buying just a single share. While SU does not have control of enough shares to itself to block Glazer or any other bidder, it is one of the supporters groups (along with IMUSA and the fanzines) which represents the feelings of the vast majority of fans who say loud and clear that their club is “Not For Sale”.

“Up to now, we have focused on getting the fans to act and to come together in opposing Glazer and other predators, and we have been very successful” said SU Chair Nick Towle. “But we have not so far come up with a vehicle to attract enough of the wealthier supporters, those who can afford a few thousand or even a few million, to invest in a collective stake big enough to protect the club from takeover, but who obviously would not want to see that investment lost or put at clear risk. We think that, with the proposed investment trust funded with leverage provided by Nomura, we have found that vehicle”.

How it works

The constitution and precise workings of the LIT have not been finalised, but SU is confident that with the backing of Nomura and other specialist advisers yet to be appointed, this trust will meet the expectations of the fans, the investors and those who provide it with funding. This is a new and relatively untested area for financings, a leveraged investment trust for supporter-shareholders of a football club, but Nomura undoubtedly has all of experience and expertise necessary for such cutting edge financing.



Step-by-step – the timetable

These steps are an outline of the process which SU considers needs to be undertaken to make the LIT effective – they have not been discussed in any detail yet with Nomura.

1. This week, SU is sending a letter to c.7,000 of the larger individual MU shareholders with >1,000 MU shares (Note: comprising somewhere between 10-12% of the total MU equity – as at 31.07.04) asking them to let us know whether they would be interested in participating in the LIT – recipients will be invited to respond by post or online at the Su website. The remaining 25,000 or so individual MU shareholders will be written to at a later stage.

2. SU will be canvassing its list of “red knights”, those wealthy United supporters (including some celebrity names in the business and showbiz worlds) who may be interested in taking part – we hope to be able to announce some names over the next few weeks. The net will be cast as wide as possible, even using some “business angel” databases we have access to.

3. Once we have gauged, together with Nomura and our advisers, that there is enough interest from shareholders and potential new investors in the LIT, the trust will be formally established and an offer document will be sent out inviting participants to commit.

4. The LIT will be a normal investment trust, except that it will be a single asset trust (i.e. the shares of MU which it acquires) – it will hold no other equity investments. For this reason, for regulatory purposes, the LIT will probably have to based offshore in a reputable banking & financial centre such as the Channel Islands. The LIT will have the power (i) to issue ‘units’ (or shares) in its own capital to those investors who pay for them in either cash or assets in the form of MU shares, and (ii) to borrow against those assets.

5. Participants who are existing MU shareholders (probably starting with a minimum number of shares, maybe 500 or 1,000), will exchange their MU shares for ‘units’ in the capital of LIT of equal value.

6. Cash investors (including red knights) will also receive ‘units’ in exchange for the cash they pay to the LIT. This cash will go to buy MU shares on the market for the LIT. [SU has looked into schemes to provide fans with personal loans to buy shares and already has one offer from a reputable finance house to fund up to £100 million in unsecured loans of up to £10,000 each for fans to buy shares, subject to status.]

7. The MU shares acquired by the LIT from these two sources will be ‘locked in’ to the extent necessary to protect the club from unwanted takeover, but in line with normal investment trust operating criteria.

8. Instead of being shareholders in MU, investors will be shareholders in the LIT which in turn owns the MU shares on trust.

9. The units issued by the LIT to investors will be traded on a secondary market, run by a market maker. Investors can therefore buy and sell their units at any time in the future – guaranteeing an ‘exit’, but without affecting the MU shares which will remain under ‘lock & key’ in the LIT.

10. The units in the LIT will also have a return on the investment, yet to be finalised. The dividend payable by MU to the LIT on the MU shares is available to pay this return, but there is also the requirement to repay the leverage provided to buy further shares (see below). We hope to be able to talk to the club about providing alternative special benefits to LIT investors in the form of rights to match tickets or seats in the Directors’ box and other similar investor perks.

11. The most important aspect of this LIT is the next part – for every £1 worth of MU shares acquired by the LIT, Nomura will lend a further £1 to the LIT which can be used to buy more MU shares in the market. “Double your money” or “twice the bang for your buck” – this is what is known as leverage, using existing assets to raise more funds. But this is a friendly leverage, as opposed to Glazer’s type of aggressive borrowing against the assets and revenues of the club. The terms of the leverage have yet to be decided, e,g, interest rate and repayment terms, and supporters will be keen to know how far the assets of the LIT (the MU shares) will be at risk if there is a default in repayment of the Nomura loans by the LIT. Again, we are relying on Nomura to come up with a satisfactory solution to these issues which are clearly sensitive ones for supporters, recognising that there has to be security for the loans and a return on the financing cost.

We hope that there will be enough interest in this plan to enable us to get to the desired 25% as quickly as possible, as this is the number at which Glazer’s takeover plan becomes impossible. With the leverage element, we would only need commitments from individual MU shareholders and cash investors of around 8 or 9% of the MU capital, which with the 2x leverage would give us 20% of the club (if you add in SU and SU members’ holdings).

SU Chair Nick Towle commented: “This is a very achievable and credible strategy and we urge all United fans, especially those with big money, to get behind it and get their hands in their pockets. The question all fans have to ask is: would you rather find the money to save your club and keep it independent, or hand it over to Glazer in increased prices for tickets, merchandise and facilities at Old Trafford?”.

SU Board


*Notes to editors:
SU is a not-for-profit organisation of United fans holding shares in United for emotional rather than financial reasons and who oppose attempts by Glazer or any other individual or company who wants to acquire Manchester United for profit. SU believes United should be independently owned, with supporters having a significant stake and a real voice in the running of the club. SU membership has risen to over 27,000 members since starting up 5 years ago.

SU is currently a company limited by guarantee, but is about to put a proposal to members to convert into an Industrial & Provident Society registered with and overseen by the Financial Services Authority.