Stan Kroenke has made it plain that he doesn’t want to sell the two-thirds of Arsenal that he owns. He has repeatedly said that he’s never sold a share in any of his sports clubs in his life. When he first bought into Arsenal and joined the Board, this statement was seen as a good thing, a way of guaranteeing the stability the club is famous for, but less than a decade later it’s come to be seen in a different light: if Kroenke never sells you can never get rid of him.
Kroenke has recently turned down Alisher Usmanov’s offer, said to be £22,000 a share, which would have given him over £900m and a profit of close to £500m. A tidy sum, no doubt, but not enough to tempt him for a couple of reasons: he clearly thinks the value will continue to rise, and he doesn’t need the money. His net worth is counted in billions of dollars, and his property empire provides plenty of income. His plan to move the St Louis Rams to a new stadium in LA has been delayed by weather problems, which is reckoned could cost him a few hundred million dollars of lost income over several years, but while he’ll be annoyed about that it’s nothing to alarm his bank manager.
So I’m assuming Kroenke is staying put for the foreseeable future. But how long in this case is the foreseeable future? He’s now almost 70 years old and sooner or later there will come a time when he can’t be bothered to travel to London any more, maybe decides to hand everything over to his son Josh, or maybe just dies of old age before either of those. Maybe it’s in ten years, maybe 20, maybe even more. But the day will come. However, he appears to be in perfectly good health right now and I’m sure has expensive doctors on hand if he so much as sneezes, so I think we are stuck with him for several years at least.
Where does that leave Alisher Usmanov? It leaves him sitting on an investment worth £400m or so that gives him no income and no fun. It also means that he can’t involve himself publicly in the affairs of any other Premier League club, because PL rules forbid even part-ownership of more than one club. Meanwhile his friend and business associate Farhad Moshiri has disassociated himself from Red & White Holdings and Arsenal, gone off and bought 49.9 per cent of Everton and is having a high old time planning a stadium move and encouraging them to buy expensive new players to challenge the clubs above them. Everton are in the new ‘Big 7’ of the Premier League; the clubs who filled the top seven places this season and were well clear of the rest. Nothing in football is 100 per cent certain, but until something changes these clubs appear to be ‘too big to fail’. In other words, unlike everyone else, they should always be able to avoid relegation.
Here’s an interesting statistic*: until 2011 the same seven clubs never filled the top seven finishing positions in the English top flight twice. I don’t mean two years in a row, and I don’t mean in the same order, I mean the same seven clubs weren’t repeated in any order, ever. That was 112 seasons of football with 112 different combinations of seven clubs. Personally I find this to be an incredible fact. But the top seven in 2011 – Arsenal, Chelsea, Everton, Liverpool, Man City, Man Utd and Spurs (not necessarily in that order, sadly) – have since filled the top seven positions in 2013, 2014 and 2017. It’s the most obvious self-contained mini-league English football has ever had. It also makes Leicester’s story even more remarkable.
But although Everton are firmly in that group of seven, they’re definitely the poor relation – so far. Spurs have started exceeding expectations, while Everton have generally struggled to meet them since David Moyes left for better things. Moshiri aims to change that, and will have his sights on a declining Arsenal as one club to overtake. This appears to give Usmanov a dilemma: he’s already used one of his companies to pump a bit of money Everton’s way by sponsoring their training ground, so he’s helping them overtake his, ahem, beloved Arsenal, the team he’s probably supported since he was a small boy in Tashkent dreaming of seeing Ian Ure and Don Howe in the flesh. Love of Arsenal notwithstanding, what’s he gonna do? Sit impotently on his 30 per cent, occasionally sending open letters to the Board about how he’d do everything much better, or sell his stake and become an Everton supporter? If he wanted to I’m sure he could persuade some of the remaining Everton shareholders to sell to him, but even if he’s not bothered about whose name is on the share certificate, once he was free of Arsenal he could join Moshiri and start throwing money around like his mate Roman and buy some success. And how sweet for him if he can push Stan Kroenke’s club down the table at the same time. Kroenke has made it plain he isn’t going to sell to Usmanov, so how about if Usmanov sells to Kroenke?
We can see why Usmanov would do that, but would Kroenke be interested? He’d have to spend at least £400m-£500m, so what advantages would he get for it?
At the moment what Kroenke’s got is an asset that’s increasing in value and that, if he wanted to, he could find a buyer for – if not Usmanov then there are Middle Eastern and Chinese billionaires always interested. What he can’t do is take money out very easily – even his £3m ‘fees’ were stopped after two years due to pressure and challenge from smaller shareholders and the AST. He also has to hold an AGM and in some measure answer to other shareholders, and if he’s using Arsenal’s cash in the bank as any kind of guarantee on other deals, so far he’s having to do it very surreptitiously.
So if Kroenke buys Usmanov’s shares he gets:
- total control – he can force the remaining small shareholders to sell to him and de-list the shares
- the ability to take as many fees or dividends as he fancies with no one able to raise any legal objection
- the ability to easily leverage Arsenal’s value to assist in making other business deals
- no need for an annual public meeting where the plebs can question his activities
- full benefit (rather than two-thirds) of any further increase in the club’s value.
Will he think that is worth up to £500m?
I think he would – but this is where his Rams’ stadium issues might have a bearing: if that project was going swimmingly then his projected cash flows for the next four or five years would be higher than they are. But there are problems in LA, so does he want two drains on his assets at the same time? Only he can answer that, but my guess is he’d probably rather sit on what he’s got at Arsenal than spend an extra half a billion pounds right now.
On the other hand, British assets are currently cheap because the pound is worth less, so Kroenke might see that as an opportunity – what costs him $550m this year might be $700m next year. On the other other hand, the British government’s Brexit ineptitude might mean Kroenke can buy the whole country for $500m soon, so why not wait? But Usmanov is getting impatient and wants a conclusion either way, so he might take a lower price. So many factors to consider.
I can’t say for sure what’ll happen, but if I had to price up the options:
- Kroenke sells to Usmanov – 20/1
- Usmanov tries to sell to Kroenke – 1/5
- Usmanov succeeds in selling to Kroenke – 3/1
- If Usmanov does succeed in selling to Kroenke, he then gets heavily and publicly involved in Everton – 1/100, absolute dead cert
- If Usmanov still has Arsenal shares, he’s involved behind the scenes in Everton anyway – 1/50
So why is it worse if Kroenke owns 100 per cent rather than 67 per cent? Simply that any remaining accountability to supporters is lost. The remaining small shareholders will be forced to sell and the last traces of Arsenal Football CLUB disappear; it effectively becomes just Arsenal PLC, a business with customers and nothing more. (Some say it’s already reached this position; it hasn’t, but it’s going that way.) American sports teams are not representing clubs; Kroenke’s other football/soccer team is not Colorado Rapids FC, it’s just Colorado Rapids. Kroenke doesn’t see himself as a David Dein or Danny Fiszman, who were fans lucky enough or clever enough to get rich and buy part of their club, he’s just a businessman looking for profit. (Yes, I know what Dein and Fiszman ultimately did, but that wasn’t their dream when they bought the shares.)
So to answer the title of this piece: if there’s any change to the current situation I expect it will be that Kroenke owns all of Arsenal, lock, stock and biscuit barrel full of custard creams. If that happens then even an empty stadium and 60,000 fans voting with their feet and wallets might still not dislodge Kroenke – not before the Premier League TV bubble bursts, anyway.
Either way, expect to see Everton pushing harder for a top four place. Look out Arsenal.
*I find it interesting