Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of! Football Finance

The Great Arsenal Mystery

Posted by John Beech on December 23, 2009

No, I’m not referring to the near-eponymous classic 1939 black & white film The Great Arsenal Stadium Mystery, which incidentally is now available as a digitally remastered DVD.

I’m on about the internecine guerilla war which is currently taking place between Stan Kroenke and Alisher Usmanov.

Each has been buying up small tranches of Arsenal shares and edging towards the 30% level of share-holding which would require a formal offer for the remainder of the shares at the highest price paid for stock during the calendar year.  Given that they may well have been paying over the odds for the small tranches, there is every chance that either or both of them will burst through the 30% shortly after 1 January making an offer for the club at a lower share price.

The delicate balance of power in the Arsenal boardroom has been tipping first one way and then another for a decade now.  Back in January 2000 Danny Fiszman bought shares from the then Vice Chairman David Dein to bring his share holding up to 33% (in those days one did not have to make an offer for the rest of the shares) (1).

It was only in September 2006 though that the current jockeying for control really began.  The club was beginning to feel the financial pressure of the move to the Emirates (2), and ‘mystery investors’ acquired £3.5m of the club’s shares (3). Talks began with one Stan Kroenke, a property magnate whose portfolio included the NFL’s St.Louis Rams, the NBA’s Denver Nuggets, the NHL’s Colorado Avalanche and the Rapids, over a possible partnership (4), and in April 2007 he acquired a 10% share of the club from ITV (5).

A possible takeover by Kroenke was not the kind of partnership that Chairman Hills-Wood had envisaged, as he promptly made clear, saying “The shareholders would prefer to stay in control than sell out to some stranger. We would be horrified to see ownership of the club go across the Atlantic” (6). However, Vice Chairman David Dein was very much ‘for’ getting into bed with Kroenke, and left the board (7).  This left the share-holding distributed thus (8):

  • Board members (44.95%):
    Danny Fiszman 24%
    Lady Bracewell-Smith 15.8%
    Richard Carr 4.35%
    Peter Hill-Wood 0.8%
  • Others (43.79%):
    David Dein 14.5%
    Stan Kroenke 11.26%
    Small investors 18.03%

[It’s not clear what the BBC had done with the other 11.26%! It probably consisted of shares in nominee accounts. JB]

A couple of days later Hill-Wood made his position even clearer: “Call me old-fashioned but we don’t need Kroenke’s money and we don’t want his sort. Our objective is to keep Arsenal English, albeit with a lot of foreign players. I don’t know for certain if Kroenke will mount a hostile takeover for our club but we shall resist it with all our might“(9), words he may yet rue.

However, so long as the board remained united, they were in a relatively strong position – they only had to gain the support of, for example, roughly a third of the small shareholders to be able to resist a takeover.  To this end they agreed a ‘lockdown agreement’ – meaning that they pledged not to sell their shares, for a period of at least one year.

Dein was of course not a party to the ‘lockdown agreement’ and might have been expected to consider selling his shares to Kroenke. Instead, in August 2007 he sold his 14.5% share-holding to a company called Red and White, co-owned by Alisher Usmanov, a Russian minerals billionaire, and Farhad Moshiri (10) with Dein as its Chairman. The following month Usmanov bought further shares, making him the club’s second biggest shareholder (11) with 21%.

Hill-Wood’s reaction was very reminiscent of his reaction to the appearance of Kroenke; he said of Usmanov, “Business is murky in Uzbekistan, and that in itself is an argument against him being involved in Arsenal. I wouldn’t want him to be the owner of the club” (12). His attitude to Kroenke was however softening: “Stan Kroenke is involved in sport and we have had constructive meetings with him” (13).

Usmanov’s position became clearer very shortly: “If other major shareholders agreed to sell, he would buy their shares if the price was right” (14).  The response of the board was to extend the period of the ‘lock-down agreement’, with fellow directors being given first refusal, until October 2012, on any sale of shares (15).

Since then two things have happened.  Firstly both Usmanov and more especially Kroenke have incrementally increased their percentage holding, edging towards the triggering 30% level. secondly there have been changes in the membership of the board – Kroenke was appointed in September 2008 (16), Usmanov hasn’t been, and, in December 2008 Lady Nina Bracewell-Smith was ousted from the board (17), leaving her free to sell her shares (although she has not done so).  Her departure could not be described as ‘by mutual consent’ (18).

So, the mystery is what will happen when share trading starts again after the festive break. The incremental purchase of shares by Kroenke and Usmanov would suggest that either or, more probably both, notwithstanding their protestations at various times, will push through the 30% barrier, providing they can buy the necessary shares at a low enough price to form the basis of a takeover bid.  From the current board’s perspective, Kroenke would be the lesser of two evils. The role of Fiszman, and his response to a takeover bid, will prove critical – he is unlikely to sit back and just watch Usmanov in particular try and take over.

For those of you whose list of New Year’s resolutions includes ‘try to be more anoracky’, dealing in Arsenal shares can be followed here.

The only certainty for the New Year is that we will be spared more headlines telling us that Stan Kroenke has bought another handful of shares.

As a final thought, if Arsenal does fall to either Kroenke or Usmanov, it will mean that all of the Big Four clubs will be in foreign ownership, as will, for the first time, a majority of Premier League clubs.  Is this what was envisaged by the Chairmen who led the breakaway from the Football League less than twenty years ago?

One Response to “The Great Arsenal Mystery”

  1. John Beech said


    So far this year neither Stan Kroenke, who is a director and is very close to the 30% limit in his shareholding, nor Alisher Usmanov, who is not a director but owns approximately 26% of the club’s shares, has made a move to acquire any more shares.

    Chief Executive Ivan Gazidis has said to BBC Sport: “I’ve had no indication from any shareholders that they are about to launch a takeover.” (1). The mystery remains however, as neither is going to announce publicly that he will be making a move.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: