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The Intentions of Stan Kroenke

By mac14 on November 10, 2009

Last week, Stan Kroenke increased his stake in the club 29.9% and I’d like to speculate, along with others, on what that will likely mean for the future of the club we all love. Mostly, I’d like to respond to an article by David Tully that was posted on Football FanCast this past week. Sadly, fear-mongering has been a great feature of this struggle for controlling interest in the club initiated by David Dein in the wake of his exit from the club. Arsenal Station has already covered the dynamics of the original squabble and subsequent developments, but with Kroenke only 0.1% away from launching a required takeover bid, the plot has thickened even further.

In Tully’s article, he writes:

Only a few Arsenal fans, if any, would argue that a takeover by Stan Kroenke would be beneficial to the club, that he would spend a greater deal more on players than the current board and bring the trophies back to the Emirates.

My issue here is that a takeover or new owner does not need to spend more money on players to be “beneficial to the club.” Even if Kroenke made more money available, it is clear that Arsene would not all of a sudden change his philosophy and go on a Middle Eastern-style spending spree. What could be beneficial is that stability in the board room would return and, most importantly, the prospect of an Usmanov takeover will be over. There is no doubt in my mind that an Usmanov takeover is the worst thing that could happen to the club.

Tully also wrote:

Both Kroenke and Usmanov have been used as pawns in a bitter power struggle within the Emirates, but one of them, Kroenke, to the surprise of both Fiszmann and Hill-Wood, will soon be in the position to buy the entire club under their noses. Up until this point it has been assumed that Kroenke did not have the finances to buy Arsenal at the £375m it has been valued at, but with the sale of the NFL franchise St Louis Rams which it holds a majority stake in, he will be able to buy the club out. As with both the Glazer family and the Gillet-Hicks partnership, the large assets that Kroenke owns, such as the Denver Nuggets, will allow him to borrow the required amount to buy and put the debt on the club.

You can hardly say that David Dein, in his struggle with the Board, has used Usmanov as a pawn. In fact, it would be the other way around considering that Dein was relieved of his duties at Red & White once he had sold his shares to Usmanov and it became clear that his relationship with the Board was holding Usmanov back. So, while there may have been a power struggle between Dein and the Board two years ago, once his relationship with Usmanov soured, the whole dynamic of the affair changed.

Second, Tully seems to think that Fiszman and Hill-Wood are now “surprised” that Kroenke is almost in a position to launch a takeover bid. That makes no sense. Hill-Wood just sold Kroenke shares to help him get to 29.9%. Once the club decided that Kroenke was the lesser of two evils, I believe they became resigned to helping him secure the necessary 30% before Usmanov. Kroenke has been, in effect, an insurance policy against an Usmanov takeover. For a more in-depth analysis of this statement, see my pieces on Dein and Usmanov from last year.

Rob Shepherd, in a News of the World piece entitled, “Arsene Wenger In Arsenal Quit Threat Over Takeover,” writes:

I understand Wenger has made it plain to the Gunners board he will not work under Usmanov and would move to Real Madrid instead.

And that is one of the reasons behind Stan Kroenke’s stealthy takeover at the Emirates. The American billionaire has taken his stake in the club to just less than the 30 per cent needed to spark a takeover bid, leaving Usmanov puzzled at his motives.

However, senior Arsenal sources believe Kroenke’s attempt to push Usmanov out of the picture is to help protect Wenger’s position.

While I highly doubt Wenger has given the Board an ultimatum about going to Madrid (he could simply not spend the money that Usmanov would supposedly make available), it at least seems that Shepherd has the dynamic right. A takeover became inevitable and the Board asserted themselves the best they could in that situation by choosing which suitor seemed the least threat and then enabling him in a bid to stonewall the bigger threat.

Tully ends his article with this:

Kroenke cannot win for the sake of Arsenal’s future. He would saddle the club with an enormous debt which has burdened both Liverpool and Manchester United and squeeze the club for greater profit to reduce the debt’s size. A message to the Arsenal board: learn from the mistakes of other clubs, don’t allow your petty rivalries to allow an outsider in through the back door, think of the club first.

This is fear-mongering in the extreme. There is absolutely no reason to believe that Kroenke would do what the Glazers and Gillett and Hicks have done at United and Liverpool in saddling those clubs with the debt they incurred to buy the club. Firstly, Kroenke doesn’t need to buy the entire club outright to assume control, he only needs a majority interest. Second, unlike Usmanov, Kroenke has never called for Arsenal to begin paying dividends to its shareholders. Dein is out of the picture and what is going on is not a rivalry between him and the Board. It is a rivalry between the Board, with Kroenke, and Usmanov.

Kroenke’s quietude at the AGM has aroused suspicion, however. The laws do not allow potential buyers of a club to make ambiguous public statements, otherwise they could be barred from buying the club for six months. This is obviously why Kroenke was careful not to say anything regarding his share buying or his intentions. If he did and was sanctioned, it would give Usmanov a six-month window to engineer his own takeover.

Rather than try to scare Arsenal supporters about a Kroenke takeover, we should be welcoming any development which neutralizes the Usmanov threat. That is what must be done “for the sake of Arsenal’s future.” To rail against a takeover at this point is useless, a takeover, while not imminent, is inevitable. It will happen. But let’s also keep in mind that even if Kroenke reaches 30%, he is required to launch a takeover bid by law, it doesn’t mean that he wants it to be successful. It also doesn’t mean that the other shareholders MUST sell him their shares. He is only required to make an offer for them. So even the magic number of 30% is not an absolute. The other shareholders could stay on and Kroenke could have more than 30% without having bought the club.

I believe that a Kroenke takeover will not mean radical changes to the club, on or off the pitch. Kroenke is, above all, a smart businessman and he knows not to mess with something that is working. Arsenal are in great shape both on the pitch and off and a smart businessman doesn’t try to fix what ain’t broke.