The Future Ownership Of Arsenal

In a light week for Arsenal on-field news I thought I’d pause today and have a look at the future prospects for ownership at Arsenal.
Yesterday saw a bloc of 32 Arsenal Holdings shares traded off-market. I think it’s reasonable to assume that Alisher Usmanov’s Red & White Holdings Ltd was the buyer. Stan Kroenke’s SKE (UK) Inc is at 29.9% and won’t want to trigger a mandatory bid at the moment. Red & White Hol
dings, as it doesn’t have a seat on the board only has to publicly declare movements in its holdings in the club up or down by one percent. Red & White declared going over the 25% threshold back in February and it’s known they’ve been active in the market since. Expect an announcement that they’ve gone over 26% soon. Interesting the quoted share price on the PLUS market has slackened a little by £400 a share to £8,850 from £9,250. The market price is however a notoriously bad guide in the case of Arsenal Holdings shares as there are only 62,217 of them in issue and 88% of those are in four hands (Danny Fiszman, Alisher Usmanov, Lady Nina Bracewell-Smith and Stan Kroenke). The trading is so thin that tiny movements can cause huge swings in the quoted share price.
Whilst Stan Kroenke with his new best friend Danny Fiszman (and now Peter Hill-Wood) have played a blinder so far and have completely outplayed Alisher Usmanov, the battle for control of Arsenal, whilst heavily favouring Kroenke isn’t over yet, by a long chalk. Alisher Usmanov has more than enough shares to hang around like a bad smell for a good while yet.
His chances of at least walking away with the money he’s put in are however not looking good at the moment. Even if he could persuade Lady Nina Bracewell-Smith to sell her 15.9% stake to him he’d have to get just about every small shareholder left to sell to him as well to get the 50% of shares he needs to take control of the club.
What we’ve got here are two unattractive choices in my view. Kroenke is a value investor with absolutely no emotional or cultural interest in Arsenal. It’s all about the dollars, let’s be clear about that. Usmanov wants Arsenal for his only personal train-set. He may lavish a lot of money on it for a while but temperamentally he’s inclined to spit the dummy as all Russian oligarchs do if they don’t get their own way. All staff at his company head office are required to address him as “Mr Senior Shareholder”, not that he’s up himself or anything.
Under Usmanov we would be in danger of becoming the same sort of revolving door of managers and players we’ve seen at clubs such as Internazionale, Spurs and Real Madrid. One thing we’ve always understood at Arsenal is that success doesn’t come from changing the manager and players more frequently than your underwear. Look at Chelsea under Abramovich. They get the best manager they’ve ever had in Mourinnho and, er, sack him. I do NOT want Arsenal to be a rich-man’s favourite train-set. I also have grave doubts about the personal integrity and business practices of Usmanov. He certainly comes from a country where the rich and corrupt can have investigative journalists gunned down in the streets with impunity and where good business practice equates to staying on the good side of the powers that be in the Kremlin. Russia has gone from autocratic state Communism under the Soviet Union to increasing autocracy and intolerance of dissent in less than twenty years. Depressing.
The big danger with Kroenke is that he’ll finance his purchase with debt one way or the other. Loading the debt onto the club is going to be difficult as the club’s assets are already mortgaged up to the hilt to pay for the new ground. The debt repayments are comfortable at the moment and have given us a new ground that generates much more cash than the cost of the repayments (as long as we keep on selling out or nearly and the executive boxes and Club seats stay reasonably full, at least). Adding more debt would be VERY bad. Whether a new owner could in fact get the current lenders to share their security is in fact doubtful. Why would a lender voluntarily surrender security on a loan in the current climate? They’ve got enough bad debts on their hands as it is.
The other way to get himself paid would be to declare a dividend of course. The Football Association’s supine surrender of its rules designed to stop speculation in football clubs in the 1980s has seen all restraints blown away. Arsenal hasn’t paid a dividend since the early 1970s. The dividend paid then was capped at 5p in the pound by FA rules. No longer. A dividend doesn’t have to come out of profits. It can be paid in years when a company makes a loss, as long as the directors don’t propose a dividend that would make the company insolvent. Another way to extract money from the club would be to pay the directors huge fees, something that’s never been done at Arsenal in its history. Paying directors was barred by FA rules for most of the games history in this country. No longer. Any dividend or director’s fee comes out of money that could be re-invested in the club. No thanks to ANY debt taken on merely to allow somebody buy and profit out of Arsenal.
Just look north to Liverpool and Manchester United. Liverpool had high but manageable debts when Hicks & Gillette took over. No longer. All the promises they made to fans of a bright new future have proved to be empty. Manchester United fans are paying through the nose for the Glazer takeover with massive ticket price rises. A club which had no long-term debt whatsoever is now groaning under £700 million plus of debt. The debt is growing and this at a time when the club has been just about as successful as it’s possible to be on the field, winning the Champions League, Premier League and World Club Championship, with all the extra cash that brings in.
We don’t need or want any of that at Arsenal. If Danny Fiszman and Lady Nina Bracewell-Smith are serious about their role as custodians of the club they won’t let it happen. Likewise all the small shareholders. The recent Arsenal Independent Supporters’ Association fan opinion survey is interesting. It shows over eight in ten Gooners want the current situation to continue with no one person in overall control. Only 6.4% want Usmanov to take over. Just 11.2% want Kroenke in overall control. The on-line survey was open to all Arsenal supporters, not just AISA members.
The message is simple, no hostile takeovers and no debt. To all current small shareholders and Lady Nina Bracewell-Smith – DON’T SELL, AT ANY PRICE.
Finally, a small plug for Eduardo and is original home community in Brazil. Some of you may have wondered what the “paz na villa Kennedy R-J” on his t-shirt was all about. It means “Peace for Villa Kennedy Rio de Janeiro” in English and refers to the slum suburb of Rio where he was bought up before leaving for Croatia as a promising young footballer. Arsenal Supporters’ Trust member Jon Blair, who works as a documentary maker had a film on More4 last night called True Stories: Dancing with the Devil. It shows the horrifying reality of day to day life in the Rio flavelas, far from the stunning beaches of Copacabana, Ipanema and Leblon. Catch it if you can on repeat. It’s definitely worth a watch.
Keep the faith!

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