NEW YORK/LONDON An unusual sight greeted guests at New York's posh St. Regis hotel on Monday: dozens of investors trickled out carrying red Manchester United hats and soccer balls after a marketing event for the British soccer club's upcoming initial public offering.
Soccer, as Americans call the kind of football played in Europe and elsewhere, is not a particularly popular sport in the United States. The U.S. chapter of Manchester United's official fan club has only 5,000 paid members and even the presence of David Beckham on the Los Angeles Galaxy roster has failed to ignite widespread U.S. fan interest.
But U.S. investors may turn out to be the ones who help the club and its owners, the Glazer family, raise up to $333 million in the offering.
A source close to the deal said on Tuesday the IPO, which is expected to price on Thursday evening, is already oversubscribed and two other sources said bankers on the last leg of a two-week global marketing effort are finding Americans particularly receptive to the IPO.
The unexpected American support for the IPO adds to the intrigue and controversy surrounding the Glazers' stewardship of the club and its second attempt to go public.
The Glazers, an American family with business interests ranging from shopping centers to the Tampa Bay Buccaneers football team, have been reviled by Manchester United fans since they took the club private in 2005 in a leveraged buyout.
Fans say the Glazers saddled the club with debt, hurting its ability to buy players and win matches. The team holds a record 19 English championships, but failed to win a trophy last season for the first time since 2005.
Some investors and experts also say the club's proposed valuation - $3.3 billion at the high end of the $16-to-$20 per share range - is hard to justify, especially given the volatile nature of its business.
Without other listed sports teams with which to compare Manchester United, the club's valuation has been a source of consternation for potential investors. That was one reason why Morgan Stanley dropped out of the underwriting syndicate after plans to list the club in Singapore were abandoned.
Club officials and the banks involved in the IPO are trying to convince potential investors across the globe that Manchester United should be seen as a powerful global brand and not just a sports team with fickle fortunes that shift on the outcome of every match.
Jefferies Group Inc, the lead underwriter, is positioning the club as a high-growth consumer brand, comparing it to retailers like Michael Kors Holdings Ltd and Lululemon Athletica Inc, sources said.
JPMorgan Chase & Co and Credit Suisse Group AG are marketing it as an e-commerce company, comparing it to online giant Amazon.com Inc. Deutsche Bank AG sees it as a media company, comparing it to companies like Walt Disney Co, sources said.
"I think it is very interesting how they have been shopping this around the world, first in Asia, now the U.S. Why not list in London where people actually know something about the business?" said James Clunie, head of equities at Scottish Widows Investment Partnership, a British fund management house overseeing 142 billion pounds ($222.24 billion) in assets.
"I suspect the reason is that they think they can get a higher price from foreign investors than they can in the UK. That makes me very cautious as an investor. They are trying to get the higher price instead of a fair price," Clunie said.
Manchester United officials declined to comment.
GETTING THE RIGHT VALUE
The comparisons are crucial to a valuation analysis. Manchester United will be valued at around 26 times its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the 12 months through June 30, if valued at the high end of its pricing range.
That compares with 49 times last 12 months EBITDA for Amazon, 29 times for Michael Kors and 19 times for Lululemon. Disney trades at around 10 times, Thomson Reuters data shows.
The banks are using Manchester United's earnings projections for 2014 in their valuation analysis, but that figure could not be ascertained.
JPMorgan, Credit Suisse and Deutsche Bank officials declined to comment. Officials with Jefferies could not be reached for comment.
Still, U.S. value investors who look at such multiples are largely staying away from the IPO, a source said. Instead, potential investors include hedge funds and mid-cap-focused funds betting on the club's growth prospects, a source said.
One fund manager who attended the marketing roadshow in New York said he sees the club as a media company, but "only better," because it engenders strong brand loyalty around the world. The club's push in emerging markets where it has plenty of room to grow is also attractive, he said.
"With Disney, you're not going to go see a movie or buy merchandise because you have any sense of loyalty to the company," he said. "But with Manchester United, you have a huge global base of fans."
($1 = 0.6390 British pounds)
($1 = 0.8052 euros)
(Reporting By Olivia Oran and Sinead Cruise; Editing by Paritosh Bansal and Matt Driskill)