Earlier this afternoon (Wed 17/12/08) an email was sent out to Arsenal Holdings shareholders (of which I’m one) giving news of potentially worrying changes in the Arsenal boardroom.
A formal announcement was also made to the PLUS (formerly Ofex) market, the junior stock exchange on which Arsenal Holdings shares are publicly traded. After a week of no activity at all two blocks of eighteen Arsenal shares were traded today. The current trading is price is steady at £7,750 a share. Here’s a link to the announcement on the PLUS website:
The most significant is that Lady Nina Bracewell-Smith is leaving the board with immediate effect. What could this mean for our beloved club?
Difficult to say at the moment, but rumours reach my ears of boardroom bust-ups. Lady Nina owns 9,893 Arsenal shares which equates to 15.9% of the total 62,217 authorised and issued voting equity. The holding has a paper value of £76,670,750 at today’s “mid” price (half way between the quoted buy and sell prices, known as the “spread”). The shares were transferred to her ownership from her husband Charles. He inherited them from his father Sir George Bracewell-Smith who was an Arsenal director from 1953 to 1976. In turn Sir George was the son of former Arsenal chairman 1948-1962 Sir Bracewell Smith. Lady Nina represented the third generation of Bracewell-Smiths on the Arsenal board, albeit by marriage, until her sudden departure today.
In an interview in the official Arsenal magazine after her appointment as a director in April 2005 she said that she was enjoying her work on the board “immensely” and liked watching Arsenal “very much”. She went on, “Although I wasn’t a big football fan before my association with the club. I have to say that I am now totally hooked. I love the way we play football. I think Arsčne Wenger creates fabulous teams.”
Lady Nina is a signatory to the famous “lock-down” agreement which commits each of its signatories not to sell their Arsenal Holdings shares. Speaking at the 2007 Arsenal Holdings annual general meeting club chairman Peter Hill-Wood said, “The Board are (sic) committed long-term shareholders and, to strengthen the current position, they have entered into a new agreement which replaces the existing lock-down agreement which expires next April. Under the new agreement, the Board members have agreed not to dispose of any of their interests in the Club before 18 April 2009, other than to certain permitted persons such as close family. After that date, for the remainder of the term of the agreement, they can only sell their shares to another person if the other parties to the agreement do not wish to buy them. The agreement is for 5 years (until 18 October 2012), although it can be terminated early by the parties on its 3rd anniversary (18 October 2010).”
The extended agreement prolonged an original no-sale legal pledge. Full details and the exact wording of the lockdown pact have never been made public. It is however likely to be a bit of a “paper tiger” claim some legal observers. Legally, it can only be enforced in the courts by the other parties to it. Assuming there are no punitive clauses in it for simple breach (which, to hold up legally, would have to be fair, reasonable and proportionate if tested in the courts), any signatory would have to prove that he or she had suffered material financial loss due to the breach by other signatories. Essentially it has always been more of a self-denying ordinance than an effective legal measure.
In any event, the agreement allows signatories (which include Lady Nina) to sell “outside the family” to third parties if they first offer their shares for sale to the other signatories from 19 April next year. It is, I suppose, just about conceivable that the agreement could contain a clause requiring such shares to be offered to the other parties at a below market price. Even if this were the case – highly unlikely – even at half today’s share price this would amount to well over £38 million. I can’t see any of the other signatories wanting to copper up this amount. In fact only one signatory would have the cash (Danny Fiszman) and it would put a VERY large hole in his personal fortune. Can’t see that happening.
So who might be the other buyers? Two spring to mind. Our new director Stan Kroenke and Russian/Uzbek oligarch Alisher Usmanov via his Jersey registered Arsenal vehicle Red & White Holdings Ltd. Usmanov, a man who sends shivers down my spine, is already the biggest single shareholder in the club at very nearly 25%. He might even be at 25% already, although he is obliged to notify the markets if his holding goes up or down by more than one percent. The last announcement of an increase in his holding to the PLUS market was on 15 February this year when he notified an increase in his holding to 14,948 (24%). Most of the buying which has gone on since then is assumed to have been by him.
If he were to buy Lady Nina’s 15.9% that would put him at around 40.9% of the club, way over the thirty percent threshold that would trigger a compulsory offer for the remaining shares under City takeover rules. This would have to be pitched at the level of the highest price he had paid for any of the shares bought to get him over the thirty percent threshold.  This would be around £10,250, the price he paid Lansdowne, a hedge fund for its 3% stake in Arsenal in September 2007.
That would value Arsenal at around £638 million and leave Red & White having to find around £377 million to fund the purchase offer for the remainder of the shares, plus whatever Lady Nina might be prepared to sell for, plus what he’s already lashed out to get to 25%. He paid David Dein £75 million for his 9,072 shares (14.58%). He’s paid around £8,800 for most of the additional ten percent holding he’s built up and up to £10,250.
That takes his total outlay so far to well over £120 million, probably more like £130 million, on top of which he’d need to find another £478 million or so to fund a compulsory hostile takeover bid. This assumes that Lady Nina wouldn’t sell out to Red & White for less than the level of the compulsory bid price.
Crucially it also assumes that the takeover would be hostile. Is it safe to assume that it would be hostile? That’s a VERY interesting question. Since Red & White sacked David Dein (and I think it’s safe to assume it was a sacking) as chairman Usmanov and his British partner Farhad Moshiri (a Manchester United supporter) have enjoyed much better relations with the current board. Usmanov has even been spotted in the directors’ box at the Grove.
So what about Stan Kroenke? He joined the board a couple of months ago just before the club AGM. If he bought Lady Nina’s shares he would be comfortably below the thirty percent threshold for a compulsory bid at around 28.3% and would become the single biggest shareholder at the club without breaching his pledge not to take his holding above thirty percent for a year unless there was a hostile takeover bid. He could probably find the £77-80 million or so he’d need to buy her out at the current market price. That is however a LOT of cash. If we assume that no bank is going to lend that sort of amount in the current market conditions to fund a purchase of football club shares without VERY serious collateral, he’d have to dip into his personal wealth. That’s said by Forbes, which chronicles the world’s wealthy, to be a net US$2.1 billion, or around £1.36 billion. Not much of that is likely to be in cash so he’d p robably have to sell off some assets to raise the money, or pay her in some other form, such as shares in one of his businesses. In the current climate she’s likely to insist on cash.
If Lady Nina does sell out, which she can do from 19 April next year, it will be, I’d guess, to Stan Kroenke rather than Alisher Usmanov. On a personal note, it will stick in my craw if she trousers a penny from her Arsenal shares, never mind tens of millions. She inherited the shares via marriage. The Bracewell-Smith family has been associated with Arsenal for generations. By an accident of marriage she would become immensely wealthy. She hardly needs the cash. The sale of her shares would do absolutely nothing to benefit Arsenal football club.
Stan Kroenke, who was over for a board meeting last week, attended the Arsenal Supporters’ Trust annual Christmas drinks party held in the Diamond Club at the ground. Belying his nickname of “Silent Stan” he chatted amiably with many of those in attendance I understand. He would have to be preferable to Alisher Usmanov. Truthfully, I’d rather Arsenal shares hadn’t gone “outside the family” in the first place however.
Our new chief executive Ivan Gazidis will be joining the Arsenal board in January. Long-standing director Richard Carr, who owns 2,722 Arsenal shares (4.6%) is standing down from the holding company board but will remain a director of Arsenal FC plc, a wholly owned subsidiary of Arsenal Holdings plc. He is the childless grandson of Sir Bracewell-Smith and half-sister of Lady Sarah Phipps-Bagge (I know, it starts to sound like a 1930s English drawing room farce, doesn’t it?) who owns a further two percent of Arsenal’s shares.
When I think about Gazidis forthcoming arrival I’m reminded of that old Chinese curse, “May you live in interesting times.” In April 2007 chairman Peter Hill-Wood said that Lady Nina (nor the Carr family or Danny Fiszman) had “No intention of selling”. He also said, “These people love Arsenal, they are independently wealthy and do not need the money. Having a few extra million pounds in the bank is of no interest to them. We’re here for Arsenal football club, not to make a few bob. The club has been run for the benefit of supporters, staff and players.”
We’re about to find out if that’s true. All we need with the wheels constantly threatening to come off on the park and the economic crisis. Another example of why fan ownership is so important.
On that note let me end this blog with a please. If you care about Arsenal and its future you need to join the Arsenal Supporters’ Trust TODAY. You can join using a credit or debit card now at:
It only costs £2 a month (you choose which day of the month to pay) if you pay your subscriptions by standing order from a UK bank account. It really helps the Trust if you pay this way as they can spend less time on administration and more time doing the great work they do. You can download an application form to pay by standing order or cheque from the AST website.  If you pay by cheque or debit/credit card its £30 a year or £250 for life membership.
Aside from supporting AST in its crucial work and having a say its affairs, you also get to own your own thin slice of Heaven via AST’s mutually owned Arsenal Holdings shares.
Memo to Lady Nina.
Become a shining star in Arsenal pantheon. Gift your shares to the Arsenal Supporters’ Trust.
I know, all but certainly a vain hope but if you don’t buy a ticket you can’t win a prize.
Keep the faith in these uncertain times my fellow Gooners.

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