Alisher Usmanov and his 30% Arsenal shareholding

This post has been superseded by an updated version. I have left this here for completeness, but please refer to the ‘Take 2’ version posted on February 20.

 

Alisher Usmanov is very close to owning 30% of Arsenal Holdings shares. By the time you read this he may even have got there. Does it matter? Here’s a bullet point summary.

How many shares has Alisher Usmanov got now?

  • It is impossible to give an exact figure because there is no obligation for a purchaser of shares to announce every time he buys one. Announcements have to be made at certain thresholds; the last one for Usmanov was when he reached 29% in June 2011.
  • Tracking his purchases as far as possible since then gives him a figure of just over 29.9% now, leaving him perhaps 50 shares short of 30%.

Why does Alisher Usmanov want 30% of Arsenal shares?

  • There is a Premier League rule that when a shareholder in a club reaches a stake of 30% he is allowed full access to the club’s books. That means he gets all the details of who is paid what, where all the income comes from and where the expenditure goes.
  • This knowledge will allow any shareholder to judge whether the business is being run well much better than they can by reading the published accounts that are available to anyone. There is a wealth of detail that can be hidden in ‘overall wages’ and ‘miscellaneous expenses’.
  • But the Premier League didn’t put this rule in place to help minor shareholders like Mr Usmanov, they put it in place so that if ownership of a club was split between several parties, those with relatively big holdings could not duck out of the responsibilities of ownership, they would be forced to take an interest.
  • What the PL didn’t envisage was the situation at Arsenal, where there is a majority shareholder (over 50%) plus another shareholder at 30% who is not welcome on the Board.
  • So Usmanov wants to get to 30% to allow him full access to the accounts.
  • Stan Kroenke may or may not care whether Usmanov reaches 30%; he doesn’t care enough to buy up remaining small shareholdings in order to stop Usmanov getting them.
  • However, Kroenke still may resist opening the books on the basis that the rule was implemented to stop people avoiding liability, and Mr Kroenke is very happy to take full liability at Arsenal, thank you very much.

What else does a 30% shareholding mean?

  • Short answer: nothing – anymore. Not at Arsenal, anyway. When there are a bunch of small shareholders and no single person has majority control, 30% is the magic figure at which a shareholder has to make a bid for all other shares in a company.
  • Again this is designed to stop shareholders avoiding responsibility. It stops them building a big stake in a company without taking on any of the duties of ownership.
  • You will recall that Kroenke bought enough shares to take him to just below the 30% threshold, then stuck on that level until it suited him and the rest of the Board to make his move. At that point he agreed a price with Danny Fiszman and the other Board members, and was obliged to make an offer for all the other shares.
  • But now that that there is a majority shareholder, there is no rule that says Usmanov getting to 30% obliges him to do anything. He does not have to make an offer to Kroenke if and when he reaches 30%, and this is not his reason for wanting to get there.
  • Some people mistakenly think that 30% entitles Usmanov to a seat on the Board. It doesn’t. The Board is voted for by the shareholders and votes require a majority, 50% plus one share. As Kroenke has about 67% his vote wins. Usmanov is not joining the Board.

So 30% confers no other privileges. What percentage shareholdings are important?

  • The most important is 50%, because most votes in limited companies in the UK require a simple majority. As stated, Kroenke owns about 67%, so no one can outvote him on anything to do with the day to day running of the club. He can appoint the Board, sack people and interfere in Arsène’s team talks if he likes.
  • When the other shares are split into smaller blocks and you have a few mates on the Board with you, it is possible to maintain day to day control of a company with a stake of around 30% – as Danny Fiszman was doing – but you need 50% to be absolutely sure you don’t need to answer to the riff raff.
  • 75% is also important, as you need support from holders of 75% of shares to make some changes to the company constitution.
  • This is why Usmanov’s initial push was to get to 25% before Kroenke launched his full bid. Although Usmanov knew he could not easily get a majority (with Kroenke already cosied up to Danny Fiszman), with 25% he could block anyone restructuring the company and trying to keep him out for good.
  • The last important number is 90%. If a single shareholder reaches 90% then he can, if he desires, force the remaining shareholders to sell up and then take the company private. Kroenke had no chance of reaching 90% as long as Usmanov opposed his takeover, so the remaining small shareholders can be grateful to Usmanov for that.
  • We may never know whether Kroenke would have taken Arsenal private, but as supporter feelings do not appear to be high on his list of priorities it’s a possibility. It appears that he views supporters as a necessary evil and small shareholders as an unnecessary irritant. I would love to be proved wrong.
  • If Kroenke does decide to sell to Usmanov at some point, Usmanov will immediately have over 90%. We’ll then find out his real attitude to supporters and small shareholders very quickly.

Does it matter if the club is taken private?

  • Depends on your outlook. If you have no interest in how your football club is run and think that is for other people to deal with (even though it affects every aspect of what happens on the pitch), then no, it doesn’t matter.
  • But public companies have to publish accounts and have a certain level of openness, which I prefer to believe is important when the company is a football club that people invest in emotionally as well as financially.
  • Ask yourself this: Do you prefer to have a club where supporters can scrutinise to a large extent how it is run, or do you prefer everything behind closed doors and the Board not answerable to anyone but themselves?

When can Usmanov make an offer?

  • Anytime he wants to. Tomorrow, next year, never.

So why doesn’t he make Kroenke an offer now?

  • Probably because there is no indication that Kroenke wants to sell.
  • When he made a counter offer right after Kroenke had made his, Usmanov specifically said he would buy anyone’s shares except Kroenke’s; that was to stop Kroenke immediately making a quick few million by buying shares from others at one price and then selling straight on to Usmanov.
  • Usmanov now gives the impression that he would quite happily buy all Kroenke’s shares, but probably not for the same amount he is paying for the few odd shares he is still picking up from small shareholders.
  • The scarcity of shares in the market and Usmanov’s determination to reach 30% means that the price he’s paying has pushed up from under £14k to £16k a share. If you took this as a true reflection of value and extrapolated it to apply to all Arsenal shares, then the club is suddenly worth over £1bn, compared to the £760m that Kroenke’s offer valued it at. Clearly this is a hypothetical figure, at a time when the on-field performance is flagging.
  • An unfortunate consequence of Usmanov’s push for 30% is the shortage of shares for the Arsenal Fanshare scheme, in which supporters club together to buy shares and maintain an independent stake in the club for the benefit of all.

What we don’t know is what either Kroenke or Usmanov intend doing in the long term, or which would ultimately be better for Arsenal. Many supporters are disappointed that Kroenke has failed to engage and are concerned about his intentions; Usmanov is a totally unknown quantity as an owner, and if he gained control he may not stick to any promises made beforehand. Meanwhile the apparent stagnation in the boardroom does not appear to be helping the manager or the team.

The Arsenal Supporters’ Trust will shortly be issuing an expert analysis of Arsenal’s current financial position.

Follow me on twitter: @AngryOfN5

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26 thoughts on “Alisher Usmanov and his 30% Arsenal shareholding

    • why does everyone love Dein? See bond issue, Wembley, taking millions out of club etc. He was no saint. All these people who say we want our club back are kidding themselves. You never had it. At least nowadays with AST etc. there is some transparency.

  1. No one should expect any owner to keep investing money from their own pockets. For god’s sake It’s their own private money. They are well within their rights to do whatever they want with it. We have to perform well with our existing players.

  2. The lack of long term idea from either of them is frustrating. As fans we want what’s best for our club both in terms of success and financial stability to we can continue to buy. The current inaction, with the lame duck board who can be reappointed in I think April, isn’t getting us a champions league spot. I’ll be interested to see what the summer looks like.

  3. korenke is just giving us headache he does have the money so he is feeling jealously of the Russian milt-billionaire ranked 30 in world and 3rd in Russia far better than abromovic, this is very sad to have such people with bad attitude to our club just waiting for profits to use them and buy BASEBALL clubs instead of buying players for ARSENAL fc. GOD HELP US AND TAKE THIS MAN(KORENKE) OUT OF OUR CLUB BEFORE WE KNOCK THE ICE BAG.

  4. Bollox mate, total bollox

    By the law, KSE has no right to block Alisher’s access to the accounts

    By the law, the offer must be done unless the the company decides otherwise, albeit I agree there is no point of doing so as KSE isn’t interested in selling, at the moment at least ….

    • No Ltd company can block access to accounts, they’re published. That’s not the point. It’s the detail behind the accounts Usmanov wants.
      When you say ‘By the law, the offer must be done . . .’ – what offer? If you mean AU must make an offer to all other shareholders when he reaches 30%, sorry, you’re wrong. This doesn’t apply if there is a majority shareholder, and if it did AU would have been far more careful about how much he’d been buying shares for for the last 12 months, because he’d have to offer the highest price he’d paid in that time.

  5. Phil
    The point is, as there is a majority shareholder, he can relinquish that step. I agree it’s not practical
    I’ve been given warm recommendations from a fella I totally appreciate his view, so think we’ll have the chance to chat more in the future
    Keep the good work 😉

    • And by the way why do you reckon KSE can block AU from getting full access to accounts after passing the 30% threshold? Can you refer to the section or the law?

      • The access to the books is a Premier League rule, not a law. As I said in the blog, it’s designed to stop shareholders building a controlling stake (not necessarily a majority stake) without taking responsibility. That doesn’t apply in this case, so Kroenke may resist on the basis that it wasn’t what the rule was designed for and there is no benefit (in his opinion) to the club. The PL may or may not agree, no one has tested it yet as the situation has not arisen before.

  6. The present board is not to be trusted. It treats supporters like fools. My feeling is that they will wait until the new sponsorship deals are in place in 2014 and then sell at a vast profit a model club as a ‘fantastic opportunity’ for a willing investor to operate under the fair play rules..

  7. Fair shout Phil, but it’s your own view/interpretation
    KSE can try and resist of course, but the dry words says it can’t, but it remains to be seen
    Anyway I reckon in a few months time we’ll be smarter, as I guess Alisher is targeting the 30% threshold

    Pardon my English, it ain’t perfect and will never be

  8. Good read fella..

    The current board have proven that they can not be trusted & the fans patience is finally running low..

    There needs to be big changes upstairs! I’m not saying usmanov is or is not the right man to take ovee but there defenetly needs to be a change for the good of the club.

  9. By my reckoning, as of 10 February he needs 301 more shares to hit 30%.

    Perhaps Ricky would like to make Silent Stan an offer for his shares so that he can run the company.

  10. In a complicated situation, the answer is simple. We, the fans, are the true ‘Arsenal’ – not those solely driven by how much money they can take out of Arsenal. So, we need people in charge of Arsenal who are fans – and would want, for instance, to attend all matches we are involved in. Ideally, a multiplicity of ownership is best…but, realistically, we’re likely to have one or two billionaires in charge. The answer is to find such people who truly support Arsenal. David Dein tried this approach, but the result was this ‘stand-off’ between Kroenke and Usmanov. As Shankly once said, (loosely quoted), “Football clubs exist solely to win silverware”. True fans will understand this – those in it just for the money won’t.

  11. Arsenal stopped being a football club in May 1893 when it was formed into a limited company.

    It is a business that uses the game of football to generate its income.

    • Yeah. Perhaps Wimbledon F.C. supporters did the right thing…when the money guys turned their club into Milton Keynes Dons. They started again by forming AFC Wimbledon. True supporters.

  12. Kroenke is an american and americans dont invest in football.they are concerned with baseball and basketball. while kroenke is here he will always try to invest the profit in baseball. arsenal needs some one who’ll invest for the club. and the answer is usmanov

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