The breaking sports news on Sunday 10th April 2011 came to many as quite a surprise. Following years of vehemently fending off, and indeed signing agreements to actively lock out, any possible takeovers it was announced that Stan Kroenke was poised to make a full takeover of Arsenal Football Club PLC. The club which prided itself on keeping the pesky Americans and Russians away soon to be owned by a man from Missouri. But how, and why? A sudden fancy by a foreign billionaire? A change of heart by the Arsenal board? No, the move is neither of these, and it’s been a long time coming.
Let’s break it down and look at how the takeover came about, and what this could mean for Arsenal’s future.
Since buying his first shares in 2007 when he acquired around 10% of Arsenal’s shareholding, Kroenke has steadily acquired more and more, spending £200million in the process. At the same time Alisher Usmanov was also buying up shares in Arsenal (he currently owns 27% of the total shareholding), but the signs have been there for a while that a Kroenke takeover was in the pipeline. Whilst the Arsenal board were signing a lockout agreement to prevent the major shareholders from selling their stakes they invited Kroenke onto the board of directors, effectively alienating Usmanov whilst welcoming the American Kroenke into a big North London cuddle.
Kroenke’s shareholding before the weekend was around 30%, well below the 51% he’d need to trigger a compulsory takeover bid. Without wanting to get bogged down in the legal side of it all Kroenke was obliged to launch a full takeover once he had 51% of the issued share capital because it says so in the company’s articles, which are essentially the rules which state how a company must be run, and Arsenal FC is a company after all. In buying out Danny Fiszman’s shares (16.1%) and Lady Nina Bracewell-Smith’s (15.9%) he now has 62% and must offer to buy all of the remaining shares on equal or better terms, putting the price of each share at £11,750. When all this is added up the club is valued at a cool £730million, or £900million if you include the debt still to pay from the move to the Emirates.
So how did the board go from Chairman Peter Hill-Wood saying in 2007 that “we don’t need his money and we don’t need his sort” involved in the club to recommending that the shareholders accept Kroenke’s offer? What has changed in 4 years? A lot. The main catalysts being Fiszman’s poor health and Bracewell-Smith’s desire to sell.
Fiszman’s ill health is thought to have worsened of late, and he seemingly wants to sell his shares whilst ensuring they go to the right man. Like the rest of the arsenal board, Fiszman believes the right man is Stan.
Lady Bracewell-Smith has been looking for buyers for her shares for the past year, touting them around the world through the US financial firm Blackstones. In Kroenke she has found her buyer, albeit at a share price of £11,750 which is significantly lower than the £15,000 she wanted but significantly higher than the £8500 per share Fiszman got when he last sold a batch of shares to the American. And when reading Arsenal’s press release there’s a hugely important bit of info amongst the jargon. Both Fiszman and Bracewell-Smith have given irrevocable undertakings (basically watertight legally binding promises they can’t take back) to sell to Kroenke, as have the other board members who all hold about another 1% between them. From now there is no going back, Kroenke owns 62.89% of the shares and is the majority shareholder.
Whether he will push for absolute 100% ownership of the shares is unclear, but it’s very unlikely he wants to as he’s been a big player in the club’s shareholder scheme whereby each share is split into smaller percentages so that more fans can own a small percentage of a share. Whether or not Usmanov sells his 27% will be interesting to watch. He is said to be furious about the move.
So what does this mean for Arsenal’s future? Well, not a lot really. Not on the face of it anyway. Korenke already owns a host of sports teams in America including the MLS team Colorado Rapids (a club Arsenal have had a ‘sporting partnership’ with for the last few years, a coincidence I think not). Known as Silent Stan he prefers to stay in the background and let the management just get on and do their jobs. His mantra seems to be achieving success through stability, echoing Arsenal’s motto of ‘Victoria Concordia Crescit’; Victory Through Harmony. He is likely to leave Ivan Gazidis and Arsene Wenger to run the club, but only time will tell as to whether or not he’ll become pushy if the barren years without silverware continue.
Off the pitch he’ll be looking for better deals with the Emirates and Nike contracts ending in 2014, both of which are worth much less than Manchester United, Chelsea and Liverpool’s sponsorship deals. A pre-season tour of the States could be on the cards and could prove lucrative for the club.
All in all the takeover seems to be good for both Kroenke and Arsenal, from the board to the fans. Here we have a man who the board trust (and they’re a very untrusting board normally) and whose past performances show he’s someone who stays in the background helping things along but understanding that he’s not a manager, and that people should be left to do their jobs. This is not your average takeover where vast sums of money will be spent on overhauling the squad, and for two main reasons. To do that would go against everything Wenger and Kroenke believe in, and with the financial fair play rules starting soon it would be unwise. Kroenke likes Arsenal because they’re run prudently, and the Arsenal board like Kroenke because he shares their principles.
Through patience and calm work Kroenke has worked his way into the fold at Arsenal, gaining the respect and trust of the manager and board. He has a proven track record of success with the teams he already owns, so Arsenal are getting a proven winner. The mistake Usmanov made was to jump in and buy shares in a bullish manner. The early bird may catch the first worm, but the patient one gets the fattest. And Mr E. Stan Kroenke is currently chewing on a very large worm indeed.