Arsenal Safe From Kroenke Takeover… For Now

In matters on the pitch, Arsenal Football Club find themselves in a pretty promising position right now. Within touching distance of Chelsea and Manchester United at the top of the Premier League, a place in the Champions League knockout phase virtually secured and into the quarter finals of the Carling Cup. Yes, things are currently going rather swimmingly for the Gunners, leaving manager Arsene Wenger in optimistic enough mood to state that his team are on the brink of delivering “something special.”

But at boardroom level, “the floor above me” as Wenger puts it, the bitter power struggle for control of the football club continues to be a real concern for Arsenal and their supporters. And due to the laws of the stock market, it is a concern that does not look like reaching any discernible conclusion for a while yet.

With his most recent share purchases Arsenal’s billionaire American shareholder Stan Kroenke edges closer and closer to a full takeover of the club. Kroenke recently purchased another 627 shares at a total cost of £5.3 million (£8,500 per share), leaving him with an overall 29.9% stake in Arsenal. That is just 0.1% or 71 shares short of the 30% trigger amount that would force a mandatory takeover bid.

While Kroenke holds 29.9% of shares, Uzbek-born billionaire Alisher Usmanov is the American’s direct rival for any potential takeover with a 25% stake in Arsenal held through his investment company Red & White Holdings. Kroenke and Usmanov are the most likely candidates to launch a takeover of Arsenal. The sharks are circling their prey.

Other major shareholders are Danny Fiszman who owns 16.11% and Lady Nina Bracewell-Smith who currently holds a 15.9% share. They are likely to be highly influential figures in deciding Arsenal’s future because they can choose to sell their shares to whomever they wish.

Kroenke vs Usmanov

In what looks to be a two-horse race for ownership of the club between a very rich American and a very rich Russian-based Uzbeki, Kroenke has the upper hand on two levels:

1) he owns a 4.9% bigger stake in the club and
2) he has the backing of key players at board level.

As David Conn wrote in the Guardian back in July, “Kroenke is a director, favoured by the board [and] a close ally of Fiszman, while Usmanov, who has 25% of the club, is kept away from decision making.”

Ironic that, because board members like chairman Peter Hill-Wood only originally warmed to Stan Kroenke when they concluded that, compared to Usmanov, the American was the lesser of two evils. Hill-Wood was initially hostile to Kroenke, saying that he didn’t want “his sort” at Arsenal. But the emergence of Usmanov as a major shareholder soon saw Hill-Wood and the board change their tune. Kroenke was subsequently elected to the board as a non-executive member in September 2008.

So in the battle for supremacy at Arsenal, Stan Kroenke stands a mere 71 shares (£612,000 at the current valuation) away from having to make a mandatory bid for the club and has the added comfort of being the preferred candidate of key members of the Arsenal hierarchy.

Why not just buy the club now then?

Simply put, it all comes down to economics.

Making dollars and sense

Under stock market rules, in any takeover the buyer must offer all shareholders the highest price he/she has paid for any shares in the previous 12 month period. For Stan Kroenke that would be the £10,500 per share he paid to the Carr family for 4,839 shares (7.7% of the club) back in May 2009.

If Kroenke were to wait until May 2010 however, that price would drop to £8,500 per share, resulting in a huge personal saving. At £2,000 per share less, with Arsenal valued at around £529 million, Kroenke’s patience would save him a minimum of £88 million.

Given his recent investments it looks almost inevitable that Stan Kroenke will at some point launch a full takeover bid of Arsenal Football Club. The only other logical reason for Kroenke to increase his stake to within spitting distance of a mandatory bid would be as a shrewd investment, with the endgame being a bulk share sale to Alisher Usmanov for a huge profit.

That would be highly controversial but also very lucrative. JP McManus and John Magnier performed a similar trick at Manchester United, fooling everyone into thinking they would takeover the club before selling up to the Glazer family for an estimated £80m personal profit. Business is business after all.

Reacting to Stan Kroenke’s increasing his stake in Arsenal, the Arsenal Supporters Trust (AST) this week had this to say:

“Whilst the AST welcome Stan Kroenke’s involvement, we agree with the sentiment of Peter Hill-Wood’s statement at the most recent AGM that there is no need for any shareholder to launch a takeover of the club. The AST believes in plurality of ownership.”

“The AST’s own assessment of today’s development is that a takeover is not imminent and that today’s purchase is the consolidation of an existing position.”

Their assessment may well be correct – a takeover might not be imminent. But that would be less to do with any amicable agreement between shareholder and supporters group and more to do with cold, hard currency. If Kroenke wants to take control of Arsenal it makes business sense to wait until next May at least.

What Stan Kroenke has planned for Arsenal remains to be seen, but what’s clear is that this American billionaire has gone from being an outsider to effectively becoming the man who holds the keys to the entire financial future of the club in his hands.

It seems only a matter of time before Arsenal become the Premier League’s latest foreign-owned football club.

Arsenal, English Premier League, Football and Finance