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Glazer's soccer bid gets boosts

Manchester United gets a disappointing profit report, and a stock split could give him more money to make a deal.

By LOUIS HAU
Published March 23, 2005

Malcolm Glazer's bid for British soccer team Manchester United received two boosts on Tuesday.

First, Manchester said its interim net profit plunged 52 percent in the six-month period ended Jan. 31 from a year earlier, possibly enhancing the appeal of a takeover bid by the Tampa Bay Buccaneers owner.

Later Tuesday, Rochester, N.Y., holding company Zapata Corp., which is majority-owned by Glazer, said it is planning an 8-for-1 stock split. It wasn't immediately clear if the split was part of an effort to help expand the resources available to Glazer for his Manchester bid. But news of the split propelled Zapata's little-traded stock to an intraday high Tuesday of $81.75, before closing at $72.95 a share, up 7 percent on heavy trading.

Richard Hunter, an analyst with the British brokerage firm Hargreaves Lansdown, said Manchester's disappointing financial results would strengthen Glazer's claim that he could get more out of the team's brand.

"He's going to be looking for any kind of opportunity to show people why a Glazer bid would be to the benefit of the club," Hunter said. "These results, because they are relatively weak for a club like United, will put the club in a weaker bargaining position."

The Manchester board said last month it was unlikely to support Glazer's roughly $1.5-billion bid because of concerns it would greatly increase the borrowings of the virtually debt-free team.

But that was before Tuesday's release of Manchester's interim financial results, which revealed that the team's net profit nosedived to 9-million pounds ($17-million) in the six months ended Jan. 31, from 18.7-million pounds ($35.2-million) during the same period a year earlier.

Manchester said a fall in TV revenues, in part because of the team's third-place finish in the English Football Association's Premier League last season, contributed to a sharp decline in operating profit.

Still, in a statement released Tuesday, Manchester chairman Sir Roy Gardner appeared to stand by the board's previous skepticism about Glazer's latest takeover bid.

"The process of dealing with our third (takeover) offer . . . in the last 12 months has been disruptive to the smooth running of the business, creating considerable uncertainty for all our stakeholders," Gardner acknowledged, adding "the board believes that its strategy and business plan for the company are strong and that over time significant value can continue to be delivered to shareholders."

Stock splits are typically carried out to increase trading in a stock by making each share more affordable, with the hope that greater investor interest could boost the stock price. In a statement released Tuesday, Glazer's son Avram, who is president and chief executive of Zapata, said in a statement that the company believes the split "will increase investor liquidity and encourage greater interest by the financial community and the investing public in our Company."

Zapata could certainly use the added attention. Before Tuesday, average daily trading volume in the company's stock was a microscopic 727 shares.

In addition, no Wall Street analysts cover the company and only one analyst covers Zapata subsidiary Omega Protein Corp., a maker of fish meal and fish-oil products.

Zapata said the 8-for-1 split will be effective at the close of business April 6, when additional shares will be distributed to shareholders of record as of March 30.

In an e-mail, Zapata chief financial officer Leonard DiSalvo said the company hasn't split its stock since December 1980, although he noted it completed two reverse stock splits in 1994 and 2001.

DiSalvo declined to comment on whether the split was related to Glazer's bid for Manchester United. Either way, it wouldn't be the first time other parties have tried to link Zapata's fortunes with those of Glazer's sports investments.

Business Week reported last year that the Securities and Exchange Commission was looking into run-ups in the stock prices of Zapata and Omega, which the magazine said appeared to coincide with rises in the Glazers' stake in Manchester United. Glazer holds about 28.8 percent of the team. SEC spokesman John Nester said Tuesday it was the commission's policy to neither confirm nor deny ongoing investigations.

Zapata has previously been the target of shareholder lawsuits accusing the company of making questionable investments in other Glazer-controlled companies. At least two of the suits accused Glazer of improperly using Zapata to finance his 1995 purchase of the Buccaneers. However, all but one of the suits was dropped.

Times staff writer Scott Barancik contributed to this report, which includes information from the Associated Press and Times files. Louis Hau can be reached at hau@sptimes.com or 813 226-3404.

[Last modified March 23, 2005, 00:55:18]