Everybody’s talking about it.
Readers have been emailing from USA and everywhere else.
When Stan Kroenke suddenly owned 29.9% of Arsenal it became a big deal on Radio 5 Live, in the business pages, and in US newspapers too. He got to 29.9% by buying 100 shares from Chairman Peter Hill-Wood, so he is in pole position. He is one phone call away from triggering a takeover bid.
Since Silent Stan is again a talking point, it’s time for ANR to address some of the issues and options.
Such as : Why now ? What’s in it for Stan? As one of USA’s top 20 retail developers, is he more interested in Arsenal’s property side? Is the timing anything to do with Platini? Will it be a leveraged buy-out?
Uefa president Michel Platini is working towards legislation which will make it impossible for new owners to take over football clubs and put the debt on the club’s balance sheet. That is illegal in USA and most of Europe, but still allowed in the deregulated Wild West of UKplc.
Why now? Maybe because interest rates are very low now. The cost of debt would be low. Although, after three years of inflation, interest rates will go up.
The last five years have shown us that sensible British billionaires are allergic to football clubs, so Americans already own Manchester United, Liverpool, Aston Villa and Sunderland.
Clearly, Arsenal fans don’t want to see a Yank borrow £700 million to buy their club and put the debt on the club’s balance sheet. That is by far the most important issue for them. Whatever else Stan does, Gooners don’t want him to do that. He hasn’t said he will do it. And he hasn’t said he won’t do it. But there are whispers that he has said privately that he won’t finance it that way. So how will he finance it?
Well, Stan Kroenke is known for his consistency and respectability. He seeks concensus, negotiates from strength, never signals his intentions, and puts his money to work over a period of years and decades. He plays a long game. Peter Hill-Wood says he’s exactly the right kind of guy to join the board : experienced, committed to sports, very knowledgeable on property, doesn’t want to take the club over. Stan seems to like what they’re doing and fits in with it.
Forbes, the business magazine, listed his net worth at $3 billion, but Stan cannot pay cash for the 70% of Arsenal that he does not own.
At £8,500 per share this would cost £370 million . He still owes Danny Fiszman and Richard Carr £55m for purchases earlier this year. The stadium debt is still £250m, the Highbury Square debt is £47m. That is a total of £722m, plus huge fees for his investment bank and lawyers (£30m plus)
Of course, the fact that Danny and Richard have not yet been paid might have more to do with their tax situations than with Stan’s liquidity. But I’m fairly sure that they have agreed to wait for their cash until a full takeover happens. Arsenal’s lawyers told Hill-Wood to keep his mouth shut about that at the AGM.
Stan owns seven sports franchises in the USA, including a stake in the St Louis Rams. The other owner was a remarkable woman, Georgia Frontiere, who died in 2008. In 1995, Stan had purchased 40% of the LA Rams and helped them relocate to St.Louis, her hometown, and the Rams won the Super Bowl in 1999. Her 60% stake is now owned by her son and daughter, Chip Rosenbloom and Lucia Rodriguez. Stan has an option to match bids for their stake and can insist that anyone who buys their 60% buys his 40% as well.
The St Louis Rams are about to be sold and there are four different bids of about $750m. The owners believe the franchise is worth $800-900m. A deal may be concluded in January.
If Stan has never sold a share in a sports club in his life, why would he sell the Rams to buy Arsenal? Because of regulations and because basketball his first love. If he owned 100% of the St Louis Rams, he would have to sell his Denver franchises because the Denver Broncos play in the NFL and cross-ownership regulations prevent him from owning the Nuggets, his NBA team, and the Colorado Avalanche, his ice hockey team, in that city.
Peter Hill-Wood was remarkably laidback at the AGM on October 22, and when a chairman is that relaxed, it’s usually a sign he is on his way out.
If Stan owns Arsenal and lives 4,000 miles away in Columbia, Missouri, and employs Ivan Gazidis as his CEO, he can talk to Ivan every week. Or every day if he wants. But he would need a chairman to keep an eye on Gazidis. And if Arsenal announced the departure of Hill-Wood, they would name a new chairman. Who would it be? Well, most of the Highbury hierarchy have now been replaced and it’s unlikely that Fiszman wants to be chairman.
So the next six months will be interesting off the pitch as well as on it. Even though Stan Kroenke is a very focused entrepreneur who takes finely calculated risks, this is a big venture for him, so he will take as long as he needs to get the deal right. And he will ask himself a crucial question: Do I want to risk a third of my personal wealth on a soccer club in London, even if my billionairess wife Ann Walton agrees underwrite the purchase, as she kindly did with my Denver sports acquisitions?
Stan would have a huge chunk of capital tied up in a very risky strategy : the globalisation of the Arsenal brand in a relatively short time, dependent on Arsene Wenger’s youth policy winning the Premier League and the Champions League in the next four years, not losing Arsenal’s key players, and Wenger staying on. Any manager following Wenger would probably demand £100m to spend on stars to compete with Chelsea, Man United, Real Madrid and Barcelona, so that post-Wenger scenario would involve more cost, more risk, and still no return on his investment from dividends on the shares. Capital growth would be dependent on developing Arsenal into a significant global franchise on the scale of Manchester United or Real Madrid. To do that Stan needs trophies, superstars to drive shirt sales, and tours in the USA and Asia.
Until recently, it looked as if Stan didn’t have to make a decision until the summer of 2010. And maybe not even then. He has a sizeable chunk of capital tied up in a business which delivers him no income. We don’t know what his ideas are but my guess is that Stan’s ideas don’t include keeping Usmanov hanging around with 25% and a veto.
He sees Arsenal as a unique opportunity. The third most successful English football club and based in Europe’s biggest, richest city. Foootball does something gridiron cannot do : it communicates beyond language, crosses every boundary, joins every continent. Stan already owns the Altitude Sports Network in Colorado, and 50% of Arsenal Broadband Ltd, and he probably envisages massive growth in online football watching in China and Africa.
If he does make a takeover bid, the business is in play, and someone else, like the Arabs, can make a bid too, and offer a higher price for Lady Nina’s 15.9% and Usmanov’s 25%. On Tuesday 32 shares were traded in one block for £9,200 each .Usmanov’s Red &White Holdings have spent £1.3m on shares this week.
Is it conceivable that Usmanov could be playing a longer game? Would he be willing to wait and see whether Kroenke can make Arsenal work? If he can’t, Usmanov might be able to buy the club from him later. Or does Usmanov now want to sell up and invest elsewhere? Excluded by the incestuous share dealings between the Arsenal directors, he might fold his cards and walk.
In a rolling news world, amid the misinformed chatter of the interactive and hyperactive internet, the silence of Stan is intriguing because it makes the signals harder to read. For me, the loudest signal is that Danny and Richard have not been paid yet. That suggests that those two will be paid later when Stan buys the whole club. He wants Usmanov’s shares but at the right price. He is in no rush to conclude the biggest deal of his life. His friends on the board are happy with the status quo. He doesn’t need more than 29% now because he is already in control. The board are so scared of Usmanov, and so keen to exclude former vice-chairman David Dein, that they will do whatever Stan Kroenke wants them to do. “Strategic Stan” might be a more appropriate nickname for this sports tycoon.