Last Tuesday was my birthday. I got a new radio from my husband and a jacket from my parents. Well, when I say “from”, I really mean I bought them, then told my wife and parents what they got me. It’s just that simple.
It was Sir Jim Ratcliffe’s birthday last week, and it looks like he bought his own presents too. Why risk it when you know exactly what you want?
Doing it this way must put a lot of pressure on his family and friends. So what do you get a billionaire for his birthday?
a bicycle? Come on, he owns the best cycling team in the world.
a car? No, one of his companies produces a line of 4x4s, he is the third owner of the Mercedes F1 team and has the great Michael Schumacher’s first Ferrari in his garage.
a boat? Been there, done that. He owns a $150 million (£123m) superyacht and is captained by four-time Olympic gold medalist Sir Ben Ainslie.
OK, you got it. Ratcliffe is wealthy enough to have INEOS bid to buy a quarter of Manchester United for 1.3 billion pounds ($1.6 billion).
But how rich? How much money does INEOS have? And, crucially, what could all this mean for United’s record-breaking but unbeaten club in 2022-23?
Why did Sheikh Jassim leave United – and what can Qatar do next?
For 35 years, the UK’s Sunday Times newspaper has been trying to answer questions like the Rich List, an annual ranking of the nation’s plutocrats. The latest effort was published in May and had Ratcliffe’s fortune at just a smidgen below £30 billion ($36.4 billion), good enough for second place in the rankings.
This is the year It represents an impressive return to form for the chap who was on that list in 2018, when the newspaper put his fortune at more than £21bn, but has seen his wealth fall for four consecutive years. In the year In the 2022 rich list, Ratcliffe’s personal fortune was over £6 billion ($7.3 billion) and he dropped to 27th place.
So, how did Ratcliffe lose so much between 2018 and 2022, with war in Europe and the effects of the pandemic on the global economy going back?
All are explained in a richly detailed manner. The newspaper admits it doesn’t know how many people have in their bank accounts or how many small stocks they may have in their personal portfolios. Instead, it focuses on land, property, horses, art or significant stakes in listed companies, which it calls “distinguished wealth”.
And if, like Ratcliffe, 60 percent of your wealth is based on owning a private company, well, the Sunday Times reckons.
“We value private companies based on their sector, track record and the strength of their balance sheets,” the paper explains. “Our starting point is to take an average of 10-12 times the latest dividend but we also take into account the sector, track record and debt.”
Ratcliffe’s company INEOS is an unusual beast though. It is 36 different businesses with 194 sites in 29 countries. For accounting, most are divided into three main companies, of which only two publish annual accounts. These businesses are in some of the most cyclical sectors of the global economy – chemicals, energy and plastics – so profits can fluctuate wildly from year to year.
More recently, INEOS has been branching out into sectors that could be described as more fun – automotive, fashion and sports – but also more expensive.
So if we go back to The Sunday Times methodology and apply it to INEOS, we can see the two chemicals and plastics companies doing well in 2022, with combined revenues of £35billion and profits of £3.5bn. Only investors can see the numbers for the third major business group, INEOS’s growing network of oil and gas businesses, but it is widely believed to have made a similar contribution to the group’s annual efforts.
Including its joint venture stake, INEOS’s total revenue is $65 billion and industry experts think its profit margin is at least 10 percent. Let’s say £5bn to keep things simple. Use the newspaper’s 10x multiple and you’re back to £50bn. Ratcliffe owns three-fifths of the business, with co-founders – both Rich Listers in their own right – Andy Currie and John Reese each holding a fifth. Three-fifths of £50bn is £30bn.
OK, that’s a rough and ready calculation, but there’s always a big guesswork involved in trying to figure out one’s wealth when that wealth is so closely tied to a privately held global portfolio of petrochemicals. As INEOS put it in its annual accounts, “Historically, margins in the petrochemical industry have been volatile for a number of reasons, many of which are beyond our control”.
A month before The Sunday Times published its latest British fortune, US business publication Forbes released its 2023 list of the world’s billionaires. “James” estimates Ratcliffe’s fortune to be $22.9 billion, good enough for 67th worldwide. That’s $6.6 billion more than Forbes thought he was worth a year ago.
But Forbes loves this particular guessing game. It also has an annual ranking, a real-time billionaires list that it updates daily. As of last Thursday, Ratcliffe’s fortune had fallen to $18.6bn (£15.3bn) and he fell to 89th in the table.
Will he be disturbed? Probably not. The Billionaires Index, run by Bloomberg, ranked 103rd last week with $16.8bn (£13.8bn) to his name.
So, we have four different estimates of Ratcliffe’s wealth, from three different outlets, six months apart: £18.9billion, £29.7bn, £15.3bn and £13.8bn. And those last two real estate estimates were on the same day last week.
The obvious conclusion is that no one knows exactly how much they are worth. And why should they? Ratcliffe has spent most of his life out of the limelight, and his wealth is large but volatile. But the two American titles, Ratcliffe, Currie and Rees, have only secured assets related to INEOS, as opposed to the new, more dynamic and less transparent parts of the business they can’t?
It may be a coincidence, but a book published this summer to celebrate the company’s 25th anniversary, Grit, Rigor & Humour, was written by Times Radio business presenter Dominic O’Connell, formerly business editor of The Sunday Times. It rates INEOS in underlying profits before interest, tax and other negatives of around £5billion-£7bn a year. It all adds up.
There is another variable to consider when evaluating wealth: taxes.
News of Ratcliffe’s apparent investment in Manchester United broke in London at the weekend ahead of the Premier League. One of the world’s largest sports business conferences brings together leading managers, bankers, consultants, investors, lawyers and anyone who likes to gossip about the industry.
“It depends on whether he’s trying to raise money or pay his taxes,” said a seasoned banker asked by The Athletic how much Ratcliffe is worth.
The exchange was apparently tongue-in-cheek, but Ratcliffe moved the company’s headquarters to Switzerland in 2010 when he turned down a UK government request to transfer tax payments – a move that returned to the well-heeled Knightsbridge district of west London in 2016. – and saved himself £4 billion in income tax by moving to Monaco in 2018.
Ratcliffe has since described that decision as an attempt to make himself “Corbyn-proof”, a reference to former Labor leader Jeremy Corbyn, who briefly looked like he might one day become UK prime minister. Ratcliffe believes the likes of him, Currie and Risi would be “shut out” by the Corbyn government, but says he prefers Monaco’s Mediterranean climate. INEOS also likes to point out that it pays corporation tax (25 per cent) in the UK and still employs thousands of well-paid workers in its home country.
Let’s face it, Ratcliffe’s finances only matter now because some United fans feel like losers in the 1980s British game Bullseye. For those of you who missed this story of light entertainment, host Jim Bowen tells the upset contestants, “Look what you’ve won,” when a screen comes up in the studio to reveal a car or a powerboat.
For many United fans on social media, the “could have won” came in a year when the state’s wealth in Qatar, one of the world’s richest countries per capita and home to Ratcliffe’s only real rival. Race – if that’s the right word – to buy a Premier League side, Sheikh Jassim.
Little is known about his personal wealth, but his father, former Qatari Prime Minister Hamad bin Jassim bin Jaber Al Thani, is worth $1.1 billion, according to Forbes. HBJ, as the father is better known, did not make the Bloomberg list, but most Gulf experts believe he has enough swag from his time as the second most powerful man in Qatar to be considered a billionaire.
But there has never really been much debate about how rich Sheikh Jassim or his father are. After all, Sheikh Jassim’s bid is for all of United’s shares, not just the 69 percent owned by the club’s current owners, the Glazer family. in cash.
Old Trafford is desperate for redevelopment – but a sales saga has put plans on hold.
The INEOS bid – and it should be remembered that it was not the only bid from the Ratcliffe company – was always a more targeted approach. Initially, INEOS was only interested in the shares owned by the Glazers, or enough to give away most of them, because this was the cheapest and fastest way to take control of the club, even if it meant leaving the Glazers, who were still very unpopular. With a seat at the table.
But at least two of Glazer’s six siblings — their father, Malcolm, died in 2011. The INEOS plan has changed to a lower initial cost.
In general, the bid for some of the Glazers’ shares would have given the club a higher value than Sheikh Jassim’s bid for all of the shares, which is why INEOS appears to have won. But anyone who knows anything about the company’s modus operandi knows Ratcliffe and the company have no plans to remain a minority partner forever, and this investment will be the first step on the road to full control and possibly privatizing the club. Ownership.
In Grit, Rigor and Humour, Ratcliffe explains his feelings on the benefits of public ownership.
“You waste a lot of time with (analysts and investors) and they all have their own agenda,” he said. It wasn’t an area I particularly liked.
Unlike most modern multinationals, INEOS was built, piecemeal, using borrowed money, not shareholders’ money. In the beginning, it was an expensive debt secured against their property without anyone knowing who they were. Ratcliffe In 1992, he restored his home to buy his first chemical business. But as the company’s balance sheet and profits grew, its debt kept shrinking.
Since 1998, INEOS has borrowed money on 47 different occasions. Covered bonds, term loans, project finance facilities, INEOS has signed various IOUs ranging from £100m to nearly £8bn, and has used them to finance dozens and dozens of acquisitions.
In the past six weeks, INEOS has bought an acetic acid plant in the US state of Texas for $500m, a Norwegian titanium and steel business for $245m, and has agreed to partner with a Chinese company to develop a new form of high-grade plastics. Factory in Tianjin city. Did Ratcliffe, Currie and Reese dip into their personal fortunes to pay for these investments? No, INEOS borrowed the money and will repay it in the same way it has been paying off its loans for a quarter of a century.
INEOS has gone to the bond market 15 times in the past five years, borrowing £13billion. Its net debt is estimated to be around £14bn. Apologies for getting a bit technical here, but this gives INEOS around 25% of debt, which means that when banks lend money to this company, they know they’re getting it back with interest.
Another measure lenders want to look at is the debt-to-earnings ratio, and with INEOS’s ratio of just 2:1, it’s no surprise that the company has had little trouble raising the £3 billion it wants to build a new ethylene plant. Plant in Belgium – the largest investment in European chemicals for a generation.
But INEOS has had a lot of trouble building that facility. At the beginning of this year, the construction was stopped because the state government withdrew its support due to environmental protection. As Ratcliffe said in the annual book, it is becoming a business risk for INEOS in Europe, but the company is confident that the plant designed to be the greenest ethylene production site on the continent will go forward.
The point for United fans is that INEOS regularly borrows more money than the club owes and has experience with more complex construction projects than football stadiums.
But for comparison, United’s net debt, including future transfer fees, is less than £1 billion, while the club’s revenue is £640m. Roughly, this gives the club a debt-to-equity ratio of over 150 percent. Yep, you guessed it, that’s going the wrong way.
As every United fan knows, Malcolm Glazer has been on the books for more than half of his debt since he was loaned out to complete his contract in 2005. As interest rates increased, so did the weight. Sheikh Jassim’s promise to clean up was more than good PR – it also made business sense.
It remains to be seen how Ratcliffe and his partners intend to solve the problem and how quickly they will do it, but United fans need to rest assured that INEOS has a good credit history and that banks want to call the company and lend them money, not the other way around. . And any money INEOS borrows to finance the United deal will be kept on the books, not the club.
Another of Sheikh Jassim’s promises to fans was to drag Old Trafford into the 21st century.
United’s stadium has plenty of seats (around 75,000) but that’s about as far as the scraps go. And there are holes in the roof that are not suitable for an outdoor space in northwest England, where it often rains.
Ratcliffe grew up less than 10 miles away in Failsworth, and knows the weather there. United know they can easily sell 15,000 tickets for each home game. So, it’s no surprise that expanding Old Trafford is also high on their list of priorities. Again, this will be funded in the same way as INEOS expanded.
Manchester United takeover: How countryman Sir Jim Ratcliffe built a business empire
If that sounds a little… dangerous, well, it is. And buying only 25 percent of a sports team in need of renewal, like United, is risky, especially when you effectively shoulder 100 percent of the responsibility of managing the hardest part of running a sports team: what happens during their season.
But INEOS has an interesting relationship with risk.
In the foreword to that recent book, Ratcliffe tells a story about visiting the Kimberley region in northwestern Australia. Beautiful but difficult to access, the unspoiled wilderness is a bucket list destination for intrepid hikers.
Ratcliffe and two friends chartered a helicopter to get there. But it’s a long way from almost anywhere, so their chopper had to be parked at a hot and dusty gas station. It was run by her own lady who prepared the tea and cake. While enjoying her hospitality, Ratcliffe notices a sign on the wall that reads, “DON’TDO DUMB S–T.”
For a guy who runs a chemical business, this really resonates. But also – until now – led the investments.
Perhaps this opinion on United is different from the usual caution and perhaps it is better to think that the 71-year-old billionaire buys himself or his children – gifts.
But United fans shouldn’t feel forced to watch the Bullseye contenders “could have won” the prize.
INEOS money, Qatar money, it’s all just money at the end of the day.
The trick will be that INEOS can outspend the Glazers more than they can outspend United.
Why is Manchester United, the most successful team in English football, so deeply troubled by futility?
(Top photo: Valery Hache/AFP via Getty Images)