Why Usmanov must speculate to accumulate.

The speculation presented in the Sun today is quite old news as Arsenalinsider informed you all of any likely impending Boardroom struggle back in July, when Lady Nina Bracewell-Smith was rumoured to have finally found a buyer for her shares. The 15.9% stake was always going to be the crucial holding in the final ownership direction, and there were only two players who were going to fight it out. Stanley Kroenke and Alisher Usmanov. Until the removal of Lady Nina Bracewell-Smith from the Board, Arsenal were relatively safe from an Usmanov takeover. The problem was that Lady Nina may want a slice of the action that Danny Fiszman had in realising the assets from paper to hard cash. In the event of any Usmanov takeover victory the future annals of the club would point to Lady Nina as some kind of Mata Hari figure, an analysis which she may find troubling considering that she carries the famous Bracewell-Smith name. As for the timing of any takeover bid, following the public spats between Usmanov and the Arsenal Board over referral to the takeover panel and the refusal of a rights issue, there appeared to have have been a non agression pact put in place pending the outcome of the teams prospect in the Champions League. Now that lucrative financial position has been assured, the battle can begin in ernest.
The regular trading of shares by Stanley Kroenke has helped to maintain their value, and his long term strategy seemed to be as I suggested on the 11th of July.

“If I were a major shareholder at Arsenal Football Club, then I would be faced with two options, sell and get out whilst the going is good, or find a means of providing more funds to keep Arsene Wenger at the club for another three years. Danny Fiszman is already established in the former category in my opinion, with Kroenke in the latter. Which makes the buying strategy of Stanley Kroenke all the more logical. I would expect him to takeover the club to protect his already considerable investments. His only goal is to drive down the share price, so that the inflated ten thousand per share paid by Usmanov for the majority of his shares is reduced to the eight thousand or so that Kroenke’s regular trading has established. This is the strategy of a real businessman, as compared with the short sighted cash grab of Usmanov.”

Danny Fiszman has made great gains and at the same time has managed to maintain his tax exile status whilst sitting at the top table. His example and role in dispatching several key directors from the Board has been the real destabilising influence at Arsenal Football Club, for whilst maintaining the policies agreed by the Board and enforcing any censures upon Directors who appeared to have acted or seemed to act against the Board’s agreed policies, in the final takeover scenario, Danny Fiszman will finally have converted all of his holdings into hard cash, and could never be seen again as he beats a retreat to watch a sunset from the shores of Lake Geneva, without any accusation that he was responsible for the removal of Arsenal Football Club’s independence.
Is there a way to avoid the threat of a takeover?  Well it is quite simple if you are a real Arsenal fan. All Fiszman has to do is arrange for himself and the rest of the Board to buy the shares owned by Lady Nina, for it seems that this all that she wants, an opportunity to convert her own holdings into cash and enjoy some of the benefits that David Dein and Danny Fiszman have acquired. The attempt by Usmanov to seize control by any hostile takeover has been always on the cards, but his losses in the mineral industry and the credit crunch has hit him hard. He now lies at 450th in the 2009 Forbes rich list with a reduced estimated worth of only 1.6 Billions, now in fact below the increased 3 Billions of 205th ranked position Stanley Kroenke, whose worth has risen to 3 Billions and Kroenke has of course at his disposal the untapped reserves of his wife Ann with 2.6 Billions inherited from the Wal Mart fortunes.
Usmanov’s position at the club has been undermined by Kroenke’s rise and also his recent position on the Board. Usmanov has paid for many shares above the going rate and therefore stands to make even greater losses if the takeover price falls to below 7,000 pounds a share, it is in his sole business interests to push up the share price. If he could realise 9,000 a share, who knows, Usmanov would probably cut and run. Kroneke will not be able to afford a buy out at that level based upon the observations of his instalment payments for his recent share acquisitions from Fiszman and Carr. In fact even at the projected future share price of 6,500 per share next summer, the likely timing for any Kroenke takeover, it is still likely that he will need the financial muscle of a co-investor to make the deal happen.
Why do I say this? Well for Kroenke to buy Arsenal outright, he would need to sell his 40% stake (estimated 350 millions) in the NFL franchise the St Louis Rams at a time when owning an NFL franchise is an indicator of one’s financial prestige in the USA. Kroenke’s love of sport in general and basketball in particular is a potent driving force, and of the two Billionaires about to lock horns, the Arsenal Board have clearly opted to support him rather than Usmanov. I am not sure that Kroenke’s long term US sporting interests will be served by selling his NFL stake. Much more likely is that he will call upon the financial aid from a co-investor.
Added to this rather bizarrely, The St Louis Rams are looking for someone to buy them and back in June, an american blog was suggesting our Stan Kroenke was most likely to be the one even though the NFL rules on cross franchise ownership would mean that Kroenke would have to dispose of his interests in the NBA Denver Nuggets, his first love, and then there is the NHL franchise Colorado Avalanche. So complicating the likely timing of Kroenke’s takeover of Arsenal is Usmanov’s best weapon. I have referred to Usmanov’s likely motivations. They appear to be somewhat obvious. To recoup his financial losses of past Arsenal share purchases. A simple cash grab followed by disposing of the club to another buyer (?Arab) in due course.
So this year’s AGM could be the springboard for any hostile takeover. The sequence of events being the purchase of Lady Nina’s shares just before the scheduled AGM followed by the calling of an EGM at the end of the AGM, and then effectively plunging the Board into paralysis and leaving them with an option of inviting Usmanov onto the Board or being faced with fighting the takeover attempt. The question is would Kroenke have the stomach for a fight at this time? This is the calculation that may be fuelling Usmanov’s last ditch moves. If Usmanov declines the market’s obligation to make a formal takeover following his acquisition of Lady Nina’s shares as he allowed to do, then he would be barred from any future takeover bid for 12 months, which would play into Kroenke’s hands. So no one really knows how this impending clash will end, and despite my musings on this blog, I am no more informed than any of the media jounalists who will write upon these issues in the coming days. We can all speculate, but only one of the two Billioniares will accumulate in the final analysis.

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