(WFI) Arsene Wenger would have “no fear” about American businessman Stan Kroenke eventually owning Arsenal, after the sports and construction tycoon upped his stake in the club to 29.6 per cent.
Under UK company law, any shareholding in excess of 29.99 per cent would oblige Kroenke to launch a formal takeover of the club.
If that ultimately proved successful it would mean a majority of English Premier League clubs are in foreign ownership, with a quarter of the 20 clubs owned by Americans.
But speaking ahead of Arsenal’s Champions League game against AZ Alkmaar, Wenger expressed confidence that any takeover would not threaten his autonomy over the club’s football strategy, and said that there remains “a strong core of tradition” leading the club.
Kroenke’s growing hold over the club is seen as a boardroom strategy to stave off a possible takeover by its second biggest shareholder Alisher Usmanov.
Usmanov, an Uzbek mining billionaire who currently holds around 26 per cent of Arsenal’s shares, served six years imprisonment for fraud and embezzlement in the Soviet era, before becoming one of Russia’s richest men. Although he claims to have amassed his $1.6 billion fortune through legitimate means, the whiff of impropriety still lingers.
Craig Murray, Britain’s controversial former ambassador to Uzbekistan, has accused Usmanov of links to organized crime.
Usmanov, for his part, has repeatedly described himself “fed up” of “prejudiced people who are determined to turn me into a stereotype, a central Asian thief.”
But his image problem has seemingly seen the Arsenal board adopt every measure possible to stave off the prospect of his gaining a controlling stake in the club. Kroenke, at present, appears to be their best bet.
Kroenke’s English bargain
U.S. billionaire Stan Kroenke presents a contrasting image to his Uzbek rival.
While Usmanov was serving a jail term in the USSR, Kroenke was marrying into one of America’s richest families, the Waltons – owners of Wal-Mart supermarkets – before himself going into the business of building shopping malls. Today his company THF Realty is one of America’s top 20 retail developers.
His U.S. sporting interests are extensive. After failing to create a new NFL franchise for St Louis in the early-1990s, his company Kroenke Sports Enterprises instead went on an acquisitions spree.
In 1995 it bought the Los Angeles Rams and relocated them 2000 miles west to Missouri. This was followed by its 2000 purchase of NBA’s Denver Nuggets and NHL’s Colorado Avalanche.
Since then Kroenke has continued acquiring stakes in a variety of sports enterprises that include lacrosse and Major League Soccer, as well as sporting venues and the Altitude Sports and Entertainment cable channel.
Over the past 30 months Kroenke has turned his attention to Arsenal, expanding on the initial 9.9% holding he bought from Granada Ventures in April 2007 to the point where he may take over the club altogether.
Shares in Arsenal currently trade between £8,500-10,000 ($14,000-17,000). A bid in the upper part of this range would see the club valued at £600 million ($992m).
This is a hefty sum, even by U.S. standards. According to Forbes magazine, if Kroenke was to complete his set of U.S. sports franchises and buy a baseball team, only the New York Yankees – valued at $1.5billion – would cost more. The NFL’s 32 franchises have an average value of $1billion, which is comparable to Arsenal’s.
Indeed, in English football terms £600million has only been outdone by the Glazer family’s £800 million ($1.3bn) purchase of Manchester United.
It is more than twice what Tom Hicks and George Gillette paid for Liverpool in 2007, and nearly ten times what Randy Lerner paid for Aston Villa in 2006.
But in many respects it still represents a real bargain.
Arsenal might not have the global brand recognition of their northern rivals, but it is in many ways a perfectly run club and – almost uniquely in English football – one that runs at vast profit year on year.
The Emirates is a world-class stadium that generates staggering amounts of match day revenue — £100 million ($165m) last year, or around £3.4 million ($5.6m) per game. Arsene Wenger is one of the greats of English football, and the former economics student represents any prospective owner’s dream
manager, somehow combining parsimony in the transfer market and success on the field with unstinting loyalty to the club.
The weak state of sterling is also inherently favourable to Kroenke. Arsenal, assuming a £600 million valuation, are $300 million cheaper than they would have cost an American buyer two years ago.
No new American affection
In having American owners, Arsenal would follow Manchester United, Liverpool, Sunderland and Aston Villa.
Yet this doesn’t necessarily signify any great cultural shift or suggest that American tycoons are suddenly falling in love with football. Sterling’s low value, overstuffed portfolios of U.S. franchises, EPL’s great global appeal and the riches promised by foreign TV rights all make acquiring an English team a great business proposition for a U.S. sport mogul.
There are nevertheless causes for concern, particularly for supporters.
While Randy Lerner has so far done a fine job of overseeing a revival in Aston Villa’s fortunes, it would be difficult to argue the same for Liverpool or Manchester United’s owners. Indeed the perils of foreign ownership are all too apparent, as Portsmouth supporters will attest after Sulamain al-Fahim’s ruinous running of the club.
Too little is known about Stan Kroenke’s intentions to cast him in the same boat as either his compatriots or even al-Fahim. Earlier this year Arsenal chief executive Ivan Gazidis, who in his previous role as Major League Soccer deputy commissioner has known Kroenke since 2003 [Kroenke’s portfolio includes MLS franchise Colorado Rapids], describes Kroenke as a “model owner”.
Whether Gazidis was paying lip service to a possible future boss or building him up as a least-worse alternative to Usmanov remains to be seen. Arsenal supporters have given him a cautious welcome, but Kroenke’s refusal to speak about his plans will do little to assuage growing concerns.
At Arsenal’s annual general meeting a fortnight ago, Kroenke joined Gazidis, Wenger and Arsenal chairman Peter Hill-Wood, but lived up to his nickname “Silent Stan”.
When Hill-Wood was asked by a shareholder about Kroenke’s intentions, he would not be drawn, saying “I can be indiscreet. Lawyers have told me to keep my mouth shut.” When the shareholder responded that Kroenke might like to respond himself, he declined to do so.
Tearing up the history books
If Kroenke’s takeover goes ahead, it will fundamentally alter Arsenal’s ownership structure, which has served the club so well since the 1920s.
Then, Hill-Wood’s grandfather, Sir Samuel Hill-Wood, a former mill owner, bought an unpromising venture – nearly bankrupt, recently relocated from south east London, and with no real pedigree or tradition of success – and invited a succession of aristocrats and establishment figures on to the club’s board.
“Lucky Arsenal” immediately flourished, in the 1930s becoming one of English football’s great institutions. During this time they won five league titles, Highbury’s famous art deco East Stand with its marble halls was constructed and the local tube station was renamed after the stadium.
A popular movie, “The Arsenal Stadium Mystery”, was even made in 1939 about this now venerable institution and Queen Elizabeth counted herself among their fans.
Since then, and in contrast to any other English club, the club has been almost continually successful, the mediocre 1960s being the exception. The club has never been dominated by one all-powerful shareholder, and the conservative but essentially democratic boardroom has been seen as the harbinger of Arsenal’s stability and success.
Arsenal Supporters’ Trust, the body that promotes wider supporter involvement in the club and the interests of its small shareholders, has previously welcomed Kroenke’s involvement in the club. But it expresses grave concerns about a takeover, fearing that it will upset Arsenal’s historic executive structure.
In a statement issued Tuesday it stated that there is “no need for any shareholder to launch a takeover of the club” and reaffirmed its belief in the “plurality of ownership.” Chief amongst its concerns are any plans that require the club to incur debt to pay for a takeover as has happened at Manchester United and Liverpool.
“Two red lines that cannot be crossed are the use of debt secured on the club’s assets to fund a takeover and an ownership structure which excludes small shareholders,” the statement said.
“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.”
Written by James Corbett
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