The long-running battle between two billionaires for control of Arsenal has been won by the US investor Stan Kroenke, who will buy the 30% stake held by the Russian oligarch Alisher Usmanov, for £550m.
Kroenke’s holding company Kroenke Sports & Entertainment, which is ultimately owned in the low-tax US state of Delaware, announced in a statement to the Stock Exchange that Usmanov has given “irrevocable undertakings” to sell, after 11 years as a substantial Arsenal shareholder.
The statement said Kroenke also intends to exercise the legal right which comes with 90% ownership of a company, and force all remaining small shareholders, most of them Arsenal supporters, to sell their shares to him. That stance, and Kroenke’s intention to take the club off the Stock Exchange and reconstitute it as a private company wholly owned by him, was criticised by the Arsenal Supporters’ Trust, which described the announcement as “a dreadful day for Arsenal football club”.
The Stock Exchange statement, which highlighted Kroenke’s ownership of US teams in the NFL, NBA, National Hockey League and MLS, said Kroenke’s “commitment to Arsenal remains unwavering” and “KSE is a committed, long-term owner of the club”.
The explanation given for taking the club private and compulsorily acquiring all the shares was that “KSE believes moving to that model will bring the benefits of a single owner better able to move quickly in furtherance of the club’s strategy and ambitions”.
Although Usmanov’s decision marks defeat for his consistently stated ambition to become the majority owner of Arsenal, his profit on selling the shares will amount to around £300m, since he first bought 14.58% of the club from David Dein in August 2007.
The price paid to Dein was £75m, illustrating the £550m now being paid by Kroenke for Usmanov’s 30.05% represents more than a tripling in the valuation of Arsenal’s shares, following the burgeoning of the Premier League’s global following, multibillion pound TV deals and clubs’ commercial income. The KSE statement said Kroenke will be borrowing £557m from Deutsche Bank to finance the purchase plus costs, with Kroenke himself providing £45m. An Arsenal representative emphasised the debt will not be placed on the club.
A spokesman for Usmanov said the sale was prompted by a realisation that Kroenke, who has acquired 67% of Arsenal since 2007, mostly from other major shareholders opposed to an Usmanov takeover, was not going to cede any control or shares.
Usmanov’s spokesman added the sale was not prompted by any problems with Usmanov’s status in the UK, as the Chelsea owner, Roman Abramovich, has experienced with the non-renewal of his visa, because Usmanov has permanent residency. Usmanov is also said by his spokesman emphatically not to be selling so that he can invest in Everton alongside his long-term business advisor and partner Farhad Moshiri, who owns a 49.9% Everton stake and is now significantly financing the club.
Usmanov bought Moshiri’s 15% stake in Arsenal for around £146m when Moshiri invested in Everton, but despite owning just over 30%, he was always kept away from the Arsenal board or any involvement in running the club. He found that exclusion intensely frustrating and publicly criticised Kroenke for a lack of investment in players, proposing they put more money into the club via a rights issue, a suggestion Kroenke declined. He was also opposed to the removal of Arsène Wenger as the manager and the reorganisation of the club, including the appointment of a director of football, Raul Sanllehi, Usmanov’s spokesman said.
The AST has vociferously criticised Kroenke’s ownership in recent years for Arsenal’s relatively disappointing performances under Wenger culminating in last season’s sixth-place finish, and for payments to KSE of £3m in both 2014 and 2015, for “strategic and advisory services”.
In their statement, the AST said the compulsory acquisition of small shareholders’ stakes and taking the club private would “remove shareholder scrutiny” including at annual general meetings, which have seen pointed questions asked of Kroenke in public.
“The most dreadful part of this announcement is the news that Kroenke plans to forcibly purchase the shares held by Arsenal fans,” the statement said. “Many of these fans are AST members and hold their shares not for value but as custodians who care for the future of the club. Kroenke’s actions will neuter their voice and involvement.”
The immediate speculation that Usmanov had decided to pull his money out of Arsenal so he could invest in Everton was prompted by the long, close business relationship between Usmanov and Moshiri. For 25 years Moshiri, an accountant, has principally worked with and for Usmanov, managing his investments first in mining and other industrial assets following the privatisations in post-communist Russia, then large stakes in digital and telecommunications companies, including Facebook. Moshiri is the chairman and 10% shareholder of USM, the holding company for these assets, in which Usmanov is the dominant shareholder, owning 48%.
Last January, USM announced a sponsorship of Everton’s Finch Farm training ground, said by some sources to be worth around £6m a year, prompting the conclusion then that Usmanov was actively investing in Everton. Premier League rules prohibit the owner of a 10% stake in one club to own any shares in another. Representatives of Moshiri and Usmanov stressed Usmanov was not an investor in Everton. Moshiri, his representatives said, used his own money, albeit earned largely from his business career with Usmanov, to buy the Everton stake.
The agreement with Kroenke now values Arsenal at £1.8bn. Usmanov’s company, Red and White Holdings, confirmed he had agreed to sell his 18,695 Arsenal shares for £29,419.64 each, and issued a quote from Usmanov: “I have decided to sell my shares in Arsenal which could be the best football club in the world,” he said. “I wish all the best and great success to this wonderful club and to all those whose lives and careers are entwined in it.”