STAN KROENKE DECIDES TO BUY REST OF ST LOUIS RAMS – THE PLOT THICKENS

In s story via the Associated Press wire in the early hours of this morning (Tuesday 13 April 2010) British Summer Time the surprise announcement came that Stan Kroenke will not be selling his forty percent majority stake in the St Louis Rams of the National Football League (NFL), the USA’s premier professional gridiron football organisation.
The terms of Kroenke’s partnership agreement with the Frontiere family, owners of the sixty percent majority stake, allow him to match any offer for their holding in the club in the event of a sale. It appears that he’s exercising that option, which will cost him around US$450 million (about £310 million).   The Rams moved from Los Angeles to St Louis in 1994 (the franchise started life as the Cleveland Rams in 1936 before de-camping to Los Angeles in 1945) to replace the St Louis Cardinals which in turn had moved from St Louis to Phoenix to become the Arizona Cardinals in 1987, having moved to St Louis in 1960 from Chicago  where it had been a founder member of the NFL in 1920. Such is the geographical game of “team in motion” that occasionally inflicts professional sports franchises in the USA. Alien to us in Europe but fairly regular if infrequent occurence over there.
Given that NFL regulations won’t allow him to secure anything like that amount of debt on the Rams, never mind load the debt onto the team’s balance sheet, he’s got himself access to a VERY large sum of cash from somewhere. Yet he’s been paying for the Arsenal shares he’s bought from Danny Fiszman, Richard and Clive Carr and Lady Sarah Phipps-Bagge (nee Carr) on the drip. Given that he’s paid out somewhere in the region of £200 million buying his 29.9% stake in Arsenal and his fifty percent stake in the joint venture subsidiary Arsenal Broadband Ltd (which controls the club’s media and broadband rights that aren’t tied up in collective deals via the Premier League, FA, Football League and UEFA), he’s putting a severe strain on whatever source of capital he’s employing.
It’s very unusual for any rich entrepreneur to keep huge amounts of ready cash on hand. He’s most likely either selling or borrowing against other assets to raise these sums. His ability to borrow against his US sporting and entertainment interests is impaired by the strict rules on debt ratios and service maintained by the NFL, National Basketball Association and National Hockey League. He could be borrowing against or selling some of his commercial retail property assets (his other main business via his companies THF Realty and the Kroenke Group, besides his sports teams, owned via Kroenke Sports Enterprises) or from his wife Ann who is part of the Walton family and this an heiress to the Wal-Mart pile ‘em high, sell ‘em cheap supermarket empire. All that is speculation however. What isn’t in doubt is that he’s in a position where he needs to raise over £300 million in cash to buy the majority of the Rams, and raise that sum quickly if he’s to complete on his intention to buy the sixty percent majority stake in the Rams as he’s announced.
The purchase of the majority of the Rams will also mean that he’ll have to dispose of the Colorado Avalanche and the Denver Nuggets, his ice hockey and basketball teams. League rules bar a majority NFL team owner from owning franchises in other sports in cities other than that in which their NFL team is based. He’ll either have to sell both the Avalanche and the Nuggets or get some sort of exemption from this rule from the NFL. He could however keep ownership of the Pepsi Centre, the indoor arena in Denver, Colorado in which both teams play.
He also owns the Colorado Rapids of Major League Soccer for whom he has built a brand new ground and training complex called Dick’s Sporting Goods Park (after the major American sportswear chain which bought the naming rights). Arsenal has a formal partnership agreement with the Rapids who have undergone pre-season training at our Shenley training ground. Dick’s Sporting Goods Park became the first American ground to have a purpose-built standing area this season, after fans of the club said they wanted the choice to sit or stand.
Selling both the Avalanche and the Nuggets (it is unclear whether he’d have to sell the Rapids and his lacrosse team the Colorado Mammoth under NFL rules) and possibly the Pepsi Centre would be an obvious way of raising cash to fund his purchase of the Rams. Kroenke’s real sporting love is however known to be basketball. He was born, raised, educated and still lives in the state of Missouri and is a big financial supporter with his wife Anne of the University of Missouri where he read for his bachelor’s and master’s degrees.
Where all this leaves his stake in Arsenal is unclear. We also had the news yesterday that Lady Nina Bracewell-Smith has appointed American private bank Blackstone to sell her 15.9% stake, which was transferred to her control from her husband Charles who received them in his grandfather and former Arsenal chairman Sir Bracewell Smith’s will. Charles is known to have serious medical problems.
The chances of a third new investor aside from Stan Kroenke and Alisher Usmanov buying her stake without some assurance that they’d be welcome, at least by Stan Kroenke and Danny Fiszman is remote. They’d be paying £80-90 million for a stake that would give them little or no influence. Usmanov owns over 26% of the club (and is well on his way to owning 27% with a constant drip of small purchases paying around £10,000 a share). He is kept very much at arm’s length by the current board.
So there we are. The ownership issue is up in the air again. What I can tell you is that there is something very exciting for Arsenal supporters brewing at the moment on the ownership front. I’m sorry to tease but I can’t say more than that presently. Watch this space for further news.
Meanwhile, let’s focus on making it a REALLY miserable week for the forces of darkness at the wrong end of Seven Sisters Road.
Keep the faith!

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