Comment: Concerns among Manchester United fans about their team's lacklustre season to date will have been overshadowed in recent weeks by the reappearance of Malcolm Glazer.
His campaign is now in full swing. The acquisition of the stake held by John Magnier and J.P. McManus in the club means that he has 56.9 per cent of the shares and, as required by the Takeover Code, has launched a mandatory bid for the rest.
After recent skirmishing with the board of Man United, he appears to have decided to press ahead without an agreed recommendation from the board. The board has effectively been sidestepped and its dealings to date with Glazer illustrate very clearly the difficulties that can arise for target boards in these situations.
The response of the board to his previous offer was that, while it was "fair" and "may be attractive to some shareholders", it was not prepared to recommend it. The basis for withholding a recommendation appears to have been the level of debt incorporated into Glazer's financing structure.
Faced with the difficulties which the situation gave rise to, the board seems to have decided to sit carefully on the fence.
A fundamental problem for the directors may well have been deciding what they should take into account in assessing the merits of Glazer's offer. More specifically, should they make a purely financial assessment of the value of a Man United share and if, as they have said it is, Glazer's offer is fair, recommend it to shareholders or should they also take into account the broader implications for the football club?
The law in this area, as is so often the case, is not entirely clear. However, there is case law which suggests that the directors should have regard to the interests of the company, and not simply current shareholders, and are entitled to take into account the future impact of the offer on the firm.
The reality is that these issues rarely come into sharp focus in the way they have with Man United. This is because football clubs occupy a unique place in the communities in which they are based as well as in broader society.
Supporters (and presumably directors) of a club such as Man United see it as representing traditions and values which go back through generations of fans. There is also no doubt that the financial health of the club is dependent, to a significant extent, on respecting those traditions and protecting what has been established.
The dilemma for the directors has been what to make of all of this in assessing Glazer and his offer. The relevant case law, while suggesting that directors should have regard to the interests of the company, does not suggest what emphasis they should place on the broader implications of an offer. If the directors believe (as many Man United fans clearly do) that a successful bid by Glazer could be damaging for the club, despite being good for current shareholders, it may have been impossible for them to determine whether such broader implications should outweigh the financial merits of his offer. Their responses to Glazer to date suggest that the board has been unable to reconcile these difficulties.
If they thought that Glazer's previous offer was "fair", they could simply have decided to recommend it but, in doing so, they would be seen by many fans of the club (including fans who are shareholders) as reneging on their perceived role as trustees/custodians and betraying the interests of the club. More specifically, they could have been accused of not placing sufficient emphasis on the implications for the club. That would be a distinctly uncomfortable position to be in and one which they may understandably have wished to avoid.
They could have chosen to reject Glazer's offer outright. They have no doubt been advised that, in circumstances where it stacks up financially, to reject his offer in that way could have exposed them to allegations that were in breach of their fiduciary duties and were not properly performing their role under the Takeover Code (which is to assess the offer and advise shareholders).
Effectively, they appear to have decided that discretion is the better part of valour and indicated that Glazer could put the offer to shareholders but that they would not recommend it. This will not have pleased Glazer and any shareholders who liked his offer and wanted to see it succeed.
His latest action may well prove to be definitive. The board will need to communicate their views on Glazer's offer to shareholders. If they maintain their previous stance, then no recommendation will be forthcoming (but the offer will not be deemed "hostile") and they will need to explain why they are taking this position.
However, the fact that the largest shareholder has sold to Glazer, leaving him in control of the company, means that resistance may serve little purpose. The fact that any shareholders refusing to sell shares (assuming they hold sufficient shares to stop him compulsorily acquiring their shares) will be minority shareholders in a company controlled by Glazer will very likely have a bearing on the board's advice to shareholders.
Arguably, any rearguard action could even be contrary to the interests of the club, given that a protracted battle between Glazer and a minority shareholder or shareholders (assuming they hold sufficient shares to stop him compulsorily acquiring their shares) could itself be damaging. The game may well be over.
Tim Scanlon is a partner with Matheson Ormsby Prentice.
