Fear and Loathing at Manchester United: Corporate Raider Malcolm Glazer is the Man Brits Love to Hate
US billionaire Malcolm Glazer will invest in anything he thinks will turn a profit. He recently acquired Britain's Manchester United soccer team, once home to David Beckham, for a cool 1.2 billion, mostly on credit. In doing so, he's turned one of Europe's wealthiest soccer teams into one of its most leveraged and he's become the scorn of England.
Malcolm Glazer: Britons feel betrayed over the takeover of Manchester United by an American with one things in mind -- profits.
The caller who left a message at the offices of the Tampa Bay Buccaneers in the US state of Florida in late June spoke with a recognizable British accent. The anonymous caller may have sounded laid-back on the Buccaneers' answering machine, but his message was dead serious: He announced that he planned to murder the American football team's owner.
The death threat from England is only one of many received last week at the team's headquarters at Tampa's Buccaneer Place, a nondescript red-and-white building with a flat roof. The message was intended for 76-year-old billionaire Malcolm Glazer, who amassed a fortune by investing in shopping malls, nursing homes, TV stations, fish processing plants and his American football team. In May, Glazer abruptly entered the world of soccer and, after a bitter round of negotiations over the takeover stock price, bought his way into Manchester United, one of Britain's most traditional soccer teams.
The fact that an American and, to make matters worse, an American who sees every minute spent in a soccer stadium as a wasted minute, is now the new boss at legendary Old Trafford Stadium, has been met with collective outrage within the large Manchester United community. It's being called the sell-out of a national institution, and it has caused about as much uproar as BMW's buyout of traditional British carmaker Rover 11 years ago. At demonstrations to protest the "aggressor" and in Internet chat rooms, United's loyal fans have been outdoing each other with their fantasies over how the team can disengage itself from Glazer's clutches.
The best and currently only form of consolation for fans, who call themselves "disenfranchised" and complain that they have been "deprived of their civil rights," is a look back into the past. Commentators are reminding British soccer fans that they managed to find their greatest moments, moments of unity, during times of national catastrophe: in 1941, when Hitler's bombs devastated Britain's stadiums, and in 1958, when eight British soccer players were killed in a plane crash at a Munich airport.
Another group hopes to find its own spiritual salvation in the Division Two league. A fortnight ago, the newly formed FC United of Manchester, or FCUM for short, played its first match, attended by 2,552 fans. Adam Brown, one of the new team's board members, feels as if he had been "banished into exile." A senior research fellow in sociology at Manchester Metropolitan University, Brown feels that Glazer "occupied" the flourishing team, which is currently on tour in Asia, "like a colonial master."
For corporate raider Glazer, his hostile takeover of Manchester United PLC, which has since been taken off the stock market, and its subsequent merger into Glazer's privately held company, Red Football, was truly an outrageous coup. To come up with the more than 1.2 billion price tag for all shares in the company, the US tycoon borrowed about 800 million from banks and hedge funds.
By buying the company more or less on credit, the businessman from Palm Beach, Florida, promptly turned the world's richest soccer team, whose directors were always the first to point out that their team had managed quite well without falling into debt, into the world's most highly leveraged soccer team. Its annual interest burden alone will amount to just under 68 million.
Servicing this amount of debt from current operations won't be easy. Manchester United, considered a highly profitable team on the international stage, achieved a profit of just under 30 million in its last fiscal year, which ended in July 2004.
For years, Manchester United's fans ignored concerns that the company's decision to go public in 1991 could end up costing the team its independence. ManU, as people in Britain call it, became too successful, and its brand name too superbly positioned, eventually turning its stock into a juicy target for corporate raiders. An investment in Manchester United's stock 14 years ago would have earned a whopping 1,300 percent profit by the time of Glazer's takeover bid.
Now the fate of ManU lies in the hands of a short man, roundish in stature, who prefers wearing his trousers hiked up to above his belly button, and whose detractors derisively call him "the leprechaun." Of course, his reddish beard does little to contradict his nickname. Soon after the takeover, the team's new boss made it clear that control over ManU is his top priority, and promptly inserted three of his five sons -- Avram, 44, Bryan, 40, and Joel, 38 -- into the board of directors, essentially as minders.
Glazer's plan for ManU
How to lose friends and alienate people: Glazer plans to increase profits at Manchester United by 52 percent by 2010 by raising ticket prices.
According to the plan, operating costs will increase by only 11 percent within the same time period. This means that coach Sir Alex Ferguson's annual budget for recruiting new players will be limited to just 37 million.
ManU's new owner apparently sees great potential for increasing revenues by marketing the 67,800 tickets for Old Trafford Stadium, which Glazer plans to enlarge by 8,000 seats. To achieve his goal, a ticket for a league game, for which a fan would until recently have paid an average of 44, will cost about 68 in five years.
Glazer seems to have taken a close look at the competition. Manchester's ticket prices are currently somewhere in the middle range when compared with those of other top league teams. English champion team FC Chelsea, owned by Russian businessman Roman Abramovitch, already charges more than 68 on average for a ticket to one of its games. But Glazer seems to have ignored one fact in making his calculations: audience composition. While the average FC Chelsea fan makes about 70,000 a year, the average annual income of Manchester fan is only about 50,000.
A high-risk gambit
The big question is whether the Glazer clan's business plan will lift the team to new heights or drive it into a blazing demise. "They know nothing about soccer," says one insider who worked with the family for years, "but they see an opportunity for a good business."
Working in Glazer's favor is the fact that he has already been spectacularly successful with his only previous major investment in the sports world. In 1995, the tycoon was ridiculed for pumping $192 million into the Tampa Bay Buccaneers, a team then considered one of the worst in the National Football League. The "Bucs" won the Super Bowl eight years later, and the team is now valued at an estimated $780 million.
Glazer's sons Joel and Bryan handle the Buccaneers' day-to-day operations in Tampa. Glazer himself is a regular at the team's home games in Raymond James Stadium, a futuristic-looking concrete behemoth built on the outskirts of Tampa in the late 1990s -- with taxpayers' money -- thanks in part to the Glazers' political influence in the city.
During every game, precisely at half-time, a neatly dressed young woman delivers a summary of the day's revenue statistics to Malcolm Glazer in his lounge, where he and his sons like to nibble on seafood. The columns of numbers are routinely a hit with the Glazer family. That's because by half-time, the day's take -- from ticket sales and sales of souvenirs, snacks and beverages -- usually amounts to a respectable $1.7 million.
Business magazine Forbes reverently described Glazer as a man with an "eye for value," ranking the gruff old man 278th on its list of the richest Americans. At 15, Glazer, a son of Lithuanian immigrants who settled in Rochester, New York, took over the family watch business after his father died. He earned his first million selling lots for mobile homes and trailers.
But this self-made man only managed to make it into the top echelons of US business by acquiring a stake in Zapata, an oil-drilling business George Bush senior founded in the 1950s before entering politics. Glazer successfully restructured the company, and Zapata now earns its revenues producing fish oil and manufacturing air bags.
But the crowning jewel of Glazer's empire is First Allied, a holding company he owns jointly with his children. The Glazer clan invests in anything that promises to turn a profit, be it motorcycle maker Harley Davidson or toy manufacturer Tonka.
"Malcolm is like a machine"
But Glazer's sister, Jeanette Goldstein, takes a different view of her brother's success: "Money, money, money," she says; "Malcolm is like a machine." And she knows what she's talking about. Years ago, Glazer and a few of his siblings were embroiled in a bizarre and lengthy legal battle over their mother's estate.
"No customers, no profit:" Hundreds of Manchester United fans have turned out to protest against corporate raider Glazer.
The local press characterizes the businessman as a notorious hermit who, aside from visits to his synagogue, shuns the Tampa social circuit. He prefers to barricade himself into his $12 million estate, surrounded by palm trees and high walls. One of his neighbors is aging rock star Rod Stewart. When he began receiving death threats from England, Glazer hired a security company to guard his imposing, sand-colored villa and its private beach 24 hours a day.
The added security costs him $60 an hour, a sum Glazer presumably would rather not pay. He recently said the following to a reporter for New York's Village Voice, whom he met, together with his son Bryan, in a miniscule hotel room in Manhattan: "Take a look at Bryan's pants. They're Hugo Boss and they cost him $200. I got my pants at J.C. Penney, on sale for $19.95. I like mine better. Do you know why? Because I remember the days when I didn't even have $20 to buy myself a pair of pants."
It was one of those rare moments when the self-made billionaire divulged something on the order of an aphorism. Otherwise, the clan has remained tight-lipped. A director at Zapata says that Glazer's motto has always been to "act and don't talk about it, because if you talk about your strategy, you're giving it away."
A charm offensive
But this stonewalling tactic backfired when it came to Manchester United. The team's fans were too incensed when they heard about the deal, and the rumors were too out of control. That's why Daddy Glazer recently sent three of his sons, Avram, Bryan and Joel, to old Europe on a charm offensive.
When they arrived, they met with top officials of the British Soccer League and the Premier League, with British Minister for Sport and Tourism Richard Caborn and with 550 of their new employees. But when they stepped onto the playing field at Old Trafford for the first time, it seemed as if they had bought the moon and had just landed on its surface.
Joel made an appearance on MUTV, the team's television channel, which is broadcast to 68 countries. He spent half an hour campaigning for his family's cause. No, he insisted, Old Trafford will not be sold. Yes, he emphasized, Sir Alex Ferguson will receive the Glazers' full support, and of course the coach will be allowed to invest more than 37 million a year in new stars, if that's what he wants to do. No, he insisted, there are absolutely no plans to change Manchester United's coat of arms. In fact, he said, the Glazers merely see themselves as the "managers of the club."
When the three brothers left the stadium, they had to be escorted to a waiting car with bullet-proof windows by a dozen police officers, presumably to protect them against about 300 angry protesters who were standing behind a ring of barriers.
This week ManU fans may already be able to see for themselves whether Joel Glazer plans to deliver on his promises. Coach Ferguson wants to sign FC Bavaria star player Michael Ballack, but his signing fee will probably be a cool 18 million. The first round of talks are already slated for faraway Tokyo.
Translated from the German by Christopher Sultan
© DER SPIEGEL 30/2005
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