Kroenke buyout: End of the Arsenal or much ado about business as usual?

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So, the day has finally come. American billionaire Stan Kroenke is to become sole owner of Arsenal.

His offer to buy out fellow shareholder Alisher Usmanov’s stake for £550 million has been accepted by the Russian, valuing the club at £1.8 billion.

With more than 90% stake, Kroenke will be able to force smaller Arsenal shareholders to sell to him, meaning the club will pass into single ownership for the first time in his 132-year history.

The Arsenal Supporters’ Trust, which represents those small shareholders, is aghast, bemoaning a “dreadful day for Arsenal Football Club”.

It says: “Stan Kroenke taking the Club private will see the end of supporters owning shares in Arsenal and their role upholding custodianship values.”

“The most dreadful part of this announcement is the news that Kroenke plans to forcibly purchase the shares held by Arsenal fans. 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. It is an action designed to remove shareholder scrutiny on how Arsenal is managed.

“The AST is wholly against this takeover. Arsenal remains too important to be owned by any one person.”

MORTGAGING THE CLUB?

The AST warns that sole ownership will allow Kroenke:

· Pay management fees and dividends without any check or balance

· No Annual General Meeting to hold the Board to account

· Remove the Independent Directors

· Place debt onto Arsenal to support his other business interests

It is also concerned that Kroenke is funding the takeover via a loan. The AST speculates that the owner will mortgage the club to fund that club, inhibiting future investment in the club and the playing squad.

OR SOMETHING WORSE?

Andrew Mangan – owner of Arseblog – teases out the worst case scenario in the Guardian.

“Once they are bought, assets can be stripped or clubs allowed to fall in to disrepair, with nothing the fans can do to stop it. It’s very much a worst-case scenario, but when it all goes wrong – as it has at Coventry, which is owned by a London-based hedge fund – the impact on a club and a community can be devastating

“It will cast a veil over Arsenal and KSE (Kroenke’s investment holding) can do what it likes with its asset. Any sense of custodianship over a local asset will be dead.”

BUT ISN’T THIS WHAT EVERYONE DOES?

Tariq Panja in the New York Times points out that most Premier League clubs are run this way, with 15 of the 20 now under foreign ownership. And suggests there are advantages to the model.

“Arsenal will adopt the private-ownership structure that is in place at most other Premier League teams, a move that will allow Kroenke to operate with greater flexibility and speed.

“Private ownership means that Kroenke’s financial decisions would be subject to less scrutiny and, in some cases, eliminate the need for board approval, a source of concern to fan groups that were already concerned about their diminishing influence over the way the 132-year-old club is run.”

On ESPN, Mattias Karen doesn’t predict any major changes in how things work at the club:

“It should have little impact on the club’s day-to-day business as Kroenke already owned 67 percent of the club and had the final say on all major pieces of business. According to club chairman Sir Chips Keswick, KSE also have no intention of changing the makeup of the board of the directors, which includes Kroenke and his son Josh.”

On Daily Cannon, Jamie Einchcomb echoes that point, suggesting the idea that Arsenal’s minority shareholders had any influence on how the club is run was already a charade.

“In effect, it wouldn’t be too different to what the situation is now. The public financial accounts are useful, as it allows anyone the power to see just how healthy the club’s finances and bust the myth that Arsenal are somehow a poor and struggling club who can’t compete. Beyond that, though, accountability has never been something Stan Kroenke values. Shareholders have the privilege of experiencing this once a year at the general meeting. Questions are asked, but answers are either unsatisfactory or not given. Then the event is closed in farce, with Sir Chips Keswick letting his disdain for Arsenal fans the most memorable part of his rare public appearances. Fan influence is at an all-time low.”

Corporate takeovers expert @giantgooner feels the outcry around this development has been overblown and any changes will be largely cosmetic.

He wrote, on Twitter:

“1) We lose the spectacle of the AGM – a bit of a pity, it was always fun
2) There might be somewhat less financial disclosure, but it shouldn’t be an enormous amount. The Delaware topco will own the shares but trading will still occur at the plc…

…and thus financials will have to be filed at Companies House, same as all the other teams in the PL, of which only MUFC is still publicly listed.

“That’s basically it. The negative control feature in English law for minority holders are minimal, Stan has run the club for years.

“You read the AGM reports every year. Do you really think the grandstanders at the meeting were “holding Kroenke to account” every year with that farce? It was amusing, but substantively meaningless.”

WILL IT MAKE ARSENAL LESS COMPETITIVE?

Here is a neat summary of Arsenal’s finances before the takeover by Tifo Football.

Stan Kroenke has not put any of his own money into the club since he became majority shareholder so he is unlikely to start once he owns it lock, stock and barrel.

However @giantgooner isn’t buying the narrative that the American will load the debt he uses to buy the club onto the club, impairing its ability to spend what’s required to compete near the top of the Premier League.

“Stan Kroenke is worth a good $6 billion, he doesn’t need to use Arsenal as a vehicle to get cash out of. If he suffers badly financially, this could change, but that’s a pretty remote risk.”

Einchcomb sees the move as a largely symbolic underlining of the chasm that already exists between the ownership structure and the fans, a growing sense that Arsenal’s support base has little influence on the club’s ambitions or plans.

“Such a move would symbolise the ever-increasing divide between the club and the fans. Arsenal would feel more corporate than it ever has, its fate completely in the hands of someone who is neither competent nor trustworthy. This process arguably began the moment Kroenke became majority shareholder; the moment the club stopped being about the custodians and more about the whims of a dwindling group of big influencers.”

Or, as Robbie Lyle, of the influential Arsenal Fan TV, put it.

“It reminds me a lot of what happened with Manchester United and the Glazers.

“What’s going to happen with transparency at the club. He’s not going to have to tell us much about what he’s doing, what his plans are?

“This really worries me as a fan. I want to know what’s happening. I buy my season ticket. I spend my money. What is the transparency going to be?”

“Is Kroenke going to spend the money to get this football club back on track? Since Kroenke came on board we haven’t challenged. Arsenal have been declining as far as challenging for major trophies.”

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