Hedge funds that hold a minority stake in Manchester United are preparing for a potential legal battle if the Glazer family excludes them from ongoing takeover proceedings.
Two prominent figures, Sheikh Jassim and Sir Jim Ratcliffe, are interested in acquiring a significant stake in the club. While Sheikh Jassim aims to purchase 100% of the club, Sir Jim intends to acquire at least 51% to gain control, with the possibility of buying out the remaining Glazer siblings’ minority stake in the future.
However, concerns have emerged among some of United’s investors regarding Ratcliffe’s proposal.
What is the main Issue?
The share structure of the club is a key issue, with around two-thirds of the total equity comprising Class B shares owned by the Glazers, which carry 10 votes each.
The remaining equity consists of publicly listed Class A shares, carrying one vote each, primarily held by investors including the hedge funds now contemplating litigation.
Amidst speculation that Sir Jim may attempt to acquire sufficient Class B shares to secure control without offering financial compensation to other investors, there is legitimate cause for concern among the minority stakeholders.
Concerns over Ratcliffe’s proposal
Breakingviews, a financial analysis outlet, reports that the United saga could escalate into a full-blown legal dispute that may need to be resolved in court.
The hedge funds holding a substantial stake in the club are preparing legal measures in case Ratcliffe’s offer focuses solely on acquiring the Glazers’ super-voting Class B shares, effectively sidelining minority investors from the takeover process.
These hedge funds are already studying past legal cases under Cayman Islands law, where Manchester United is incorporated, to understand their potential recourse against any maneuvers by the Glazers or Ratcliffe.
Breakingviews also suggests that the Glazers might attempt to amend the club’s articles of association to ensure that Ratcliffe’s acquired shares maintain their super-voting rights.
The hedge funds have legitimate grounds for pushing back as Manchester United’s initial public offering filing in 2012 explicitly states that shareholders have the right, according to Cayman Islands law, to challenge deals and receive “fair value” for their shares as determined by a judge.
Furthermore, Breakingviews raises concerns about Sir Jim Ratcliffe’s financial capacity to undertake a substantial rebuild of Old Trafford, which is currently in a dilapidated state.
There is a risk that the minority investors in Manchester United may be left with devalued shares of significantly lower worth than their current value.
The unique nature of Manchester United’s situation, combined with potential legal battles, further heightens the uncertainty surrounding the club’s future and the interests of its various stakeholders.
