SBD/April 11, 2011/Franchises

Kroenke Agrees To Terms For Takeover Of Arsenal Following Purchase Of Two Stakes

Arsenal would become 10th EPL club that is currently foreign owned
EPL club Arsenal today announced that it has "agreed to be taken over" by investor Stan Kroenke after he "bought out two of his fellow club directors," according to Naughton & Hughes of the LONDON TIMES. Kroenke already owned 29.9% of the club, and it was announced this morning that he had agreed to a deal to "acquire the 16 per cent stakes held by both Danny Fiszman and Lady Nina Bracewell-Smith, triggering a formal takeover." The takeover values the club at around $1.2B (all figures U.S.), and if it goes ahead it will "make Arsenal the tenth club in the Barclays Premier League to come under foreign ownership." But Kroenke's "biggest obstacle" in regard to a takeover is "likely to be obtaining the shares" of investor Alisher Usmanov, who owns a 27% stake. Usmanov "has paid inflated prices for shares in the past and will want to drive a hard bargain." Naughton & Hughes note "crucially for the club's long-term financial health, and their ability to compete in the transfer market," Kroenke has "promised that the deal will not be funded by debt secured against the club's assets and future earnings -- unlike Malcolm Glazer's 2005 takeover of Manchester United" (THETIMES.co.uk, 4/11). BLOOMBERG NEWS' Tariq Panja notes Arsenal currently has a net debt of $180.5M, and Kroenke's offer "made clear that the shares would be bought with cash and no debt will be added on to the team." By "securing the holdings of the third- and fourth-largest shareholders in the club, Kroenke will raise his stake to a total" of 62.89%. Fiszman, who is "fighting cancer, has agreed that Kroenke can buy his shares within 20 days of his death." Fiszman "moved his Arsenal investment into a trust earlier this year." Panja notes a takeover by Kroenke is "unlikely to bring big changes in the way the club operates." Deloitte indicated that Arsenal is the "second-richest English team in terms of revenue, behind Manchester United, and fifth in Europe" (BLOOMBERG NEWS, 4/11).

FANS WANT STAKE: Arsenal Supporters' Trust BOD member Tim Payton said that the fan group, whose members own about 3% of the club, "would oppose a full 100 percent ownership by Kroenke and would want fans to remain shareholders." The AP noted the group has "close links with Arsenal's investors and executives, who have endorsed its low-cost scheme that enables fans to buy small stakes in the club." Fans "can make small contributions to the 'Fanshares' initiative before gaining an actual portion of Arsenal and be given a chance to attend key club meetings" (AP, 4/10).
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