Glazer proposal suffers setback

Malcolm Glazer's attempted takeover of Manchester United received a significant setback yesterday when the British football club's board ended discussions with the US sports tycoon about a 300 pence sterling a share offer.

Mr David Gill, chief executive, said the board had made the decision because Mr Glazer's proposal was "overly leveraged" and would leave the club with too much debt. "Manchester United has been around for 126 years and too much debt could jeopardise its future viability," he said.

The Glazer family declined to comment. However, people close to the Glazer camp said the board had abdicated its fiduciary duties by rejecting the proposal.

The offer was equivalent to 68 times consensus forward estimates, they added, whereas the FTSE 250 average is about 17 times. The Glazers are believed to feel aggrieved that the board has refused to meet them since first presenting their proposal at the end of September.

Under the Glazer family's proposals, most of the money loaned by JP Morgan, which is funding the bid, would be repaid by taking on debt. It is likely this debt would be paid off via a securitisation of future ticket sales.

Mr Glazer and his family have yet to make a formal bid for United but, in the past 10 days, they have increased their holding from 19 per cent to more than 28 per cent. Most of these shares were acquired at 285p.

A person close to the Glazers said there had been a "wall of demand" from shareholders willing to sell at that price.

However, Mr Gill said the proposed structure of the Glazers' offer would be detrimental to the future of the company. The board, he said, had to look at the company "in the round" considering the effects on "all stakeholders" of any increased debt burden, including supporters and creditors.

"Yes, shareholders own the business but, at the same time, there are other elements," Mr Gill said. Manchester United fans have demonstrated against Mr Glazer's plans to takeover the club, in which the Irish racing magnates JP McManus and John Magnier hold a 29 per cent stake.