Kevin Whitcher
Firstly, let’s try and understand what the reasoning would have been in Stan Kroenke making an offer to buy Alisher Usmanov’s 30% shareholding in Arsenal, media reports of which led to Usmanov releasing a statement yesterday afternoon. It would have been to take 100% control of the club and compulsorily buy out the remaining small shareholders. But with what intention? Why bother? Because currently, Usmanov’s blocking stake prevents Kroenke doing whatever he would like to do with Arsenal.
We know Kroenke is not particularly interested in Arsenal as a sporting concern, in terms of the club’s ambitions. As a consequence if you were to think about backing Arsenal to win the Premier League using, for example, the sportsbetting mobile app, you’d get pretty long odds. For the majority owner, it’s a good business investment. However, he has previously expressed his admiration for what the Glazers achieved at Manchester United, and saw no harm in their leveraging of the club to pay for their purchase of it. Effectively, United profits over succeeding years helped to pay for it to be bought out by the Americans by being used to repay the interest on the loans required.
Kroenke said of Malcolm Glazer: “He took money out of the club. So what? Jerry Buss [the owner of the Los Angeles Lakers] takes money out of the club. A lot of owners in the US do. No-one ever says anything about it.” Kroenke may have indicated back in 2011 that he would not leverage Arsenal (although there is no direct quote on that), however times and circumstances can change intentions. And once in complete control, Silent Stan can pretty much do what he likes without having to answer to anyone. When he made his offer to buy the shares that bought him to his position as majority owner of Arsenal, he stated a commitment to ongoing dialogue with supporters groups. He has never met one since, in spite of being challenged on this at one subsequent AGM. So who knows what his word is worth?
The reality is that his moving of the St Louis Rams to Los Angeles will cost an estimated $2 billion. And the struggle to sell seats in their temporary home at the Los Angeles Memorial Coliseum (main venue for the 1984 Olympics) - the stadium was half empty for their opening game this season – does not augur well. The new stadium is not scheduled to be completed until 2020 and Kroenke will have to raise the funds to pay for it. Given he has rebutted offers of £2 billion for his Arsenal shareholding, it would be convenient if he did buy Usmanov out and thus use the club as collateral for a loan to complete the building of the Rams’ new home.
And what would that mean for Arsenal? At United, the club did not suffer as much as feared, because their income was so huge they could cover the interest payments. But the Glazers only secured loans of between £265 million and £275 million against Manchester United's assets. Kroenke would in all likelihood put Arsenal in hock far deeper than that. Additionally, because they had such a significant annual income, United could still buy talent. When they won the Premier League in 2009, they could call upon attacking options that included Ronaldo, Rooney, Tevez and Berbatov. The latter two were bought after the Glazers had put the club in debt and neither came cheap. And of course, they were managed by a serial winner, willing to adapt his methods, change his coaching staff and move underperforming players on quickly when things were not working.
The prognosis for Arsenal would be a return to the earlier years of the Emirates era, in terms of the manager balancing the books in the transfer market. Perhaps it was significant that the club ended the last window with close to £30 million profit in their dealings, with the last minute attempt to secure Thomas Lemar almost certainly doomed to failure, given the player was on international duty preparing to play on the evening the window closed. And for the scenario of constricted financial budgeting, Arsene Wenger is the perfect manager. He can keep the team in the Premier League (with its guaranteed gravy train of broadcast income) whilst developing enough players to sell on at healthy prices to ensure net profit in the transfer windows. Wenger is not so obsessed with winning that he would demand funds to buy players, as his great love is developing footballers playing in an entertaining style. And the style of play is a more important principle to him than winning whatever it takes.
Certainly matchday income would continue to decline, and the gap in sponsorship revenue between Arsenal and the more successful clubs would grow, but as a viable business – which is Kroenke’s main concern – as long as the club remain in the Premier League, they would remain in rude health.
For those that doubt this scenario, you simply have to wonder why Kroenke would be willing to stump up over £500 million to buy Usmanov out at a time when he needs to raise funding? I am struggling to work out any other reason than using Arsenal to raise cash for the Los Angeles stadium build, but I am open to suggestions. Perhaps the move is a final gambit, an attempt to exhaust his options before being forced to sell up himself due to his commitments elsewhere.
Usmanov has stated he is not looking to sell, although he would consider a change of heart if he could sell to someone with the same philosophy for the club as his and the majority of fans – the pursuit of sporting glory. That opens the way for someone with different priorities to Stan Kroenke to take complete control of the club, assuming Kroenke would sell. There have been other bidders apart from Usmanov for Kroenke’s stake, so if the American is in need of funds, maybe, he might sell up. And if it is a party that is not interested in making profit from the club, they would not necessarily even need to buy Usmanov out.
One things looks certain. The enmity between Kroenke and Usmanov runs so deep that the latter can afford not to sell Arsenal to the LA Rams’ owner lock, stock and barrel. And that can only be a good thing.
A final thought. Remember that banner that read ‘Love Arsenal, Hate Usmanov / Sod off Jabba’ in October 2007? A decade on and now we’re seeing ‘Love Usmanov’ tweets. Who’d have thought it?
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