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An American Takes Over Arsenal

By Owain Bennallack - Updated Apr 6, 2017 at 10:27PM

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Stan Kroenke looks set to win control of the Gunners.

This article has been adapted from Fool U.K., our sister site across the pond.

Football is derided by most Americans as an interminable back and forth build-up for just the occasional burst of action.

At least by that measure, American businessman Stan Kroenke has an affinity for our national game.

Kroenke is on-course to become the proud owner of Arsenal Football Club, as he successfully concludes a four-year long campaign that began with the purchase of a 9.9% shareholding in Plus-listed Arsenal Holdings in 2007.

That initial foray prompted Arsenal chairman Peter Hill-Wood to declare: "We don't need his money, and we don't want his sort."

Yet on Monday, Mr Hill-Wood was among the Arsenal directors who'd unanimously agreed to sell their shareholdings to the U.S. tycoon and to back his bid, saying in a statement:

"The Board of Directors and I consider it a key responsibility to protect the ethos and spirit of the Club. Mr Kroenke, although relatively new to Arsenal, has shown himself to be a man who values and respects the history and traditions of this very special Club that we cherish. We are confident that he will be a safe custodian of its future."

Support from the mid-field
Peter Hill-Wood holds 400 Arsenal shares, which comprises much less than 1% of the shares of Arsenal Holdings. All but one of the other directors own even less.

Rather, Kroenke's secured his shot on goal by acquiring the interests of two of the three remaining major shareholders -- director Daniel Fiszman, who controlled 16.11% of the shares, and Lady Nina Bracewell-Smith, who married into her 15.9% shareholding.

Add those to his business vehicle Kroenke Sports Enterprises' (KSE) existing 29.9% holding and the nominal shareholdings of the other directors he's secured, and Kroenke now controls 62.89% of Arsenal Holdings -- enough to trigger a formal offer to acquire all of the shares.

Tackling the opposition
KSE is offering 11,750 pounds for each outstanding Arsenal share, which values the club at 731 million pounds.

The shareholder with the biggest decision to make is Kroenke's former rival in the race to acquire the club, the Russian Alisher Usmanov, who has a 27% stake.

Usmanov isn't obligated to sell his shares to Kroenke. But like any minority partner in a business without representation on the board, he will be powerless to do much to affect the value of his investment. He might therefore decide to make a clean break of it and cash out for 197.4 million pounds while he can.

On the other hand, the metals magnate turned Internet start-up backer was ranked 34th in the recent Forbes Billionaire List. With a personal fortune of $17.7 billion, perhaps he'll stay invested for the sheer fun of it.

Fan's favourite
If your maths is up to it on a Monday morning, you'll have realized that Kroenke's holding plus that of Usmanov still only come to a little over 89% of the shares of Arsenal Holdings.

The remainder are in the hands of numerous minority shareholders, ranging from former Arsenal striker Ian Wright to the Arsenal Supporters' Trust, a fan-based body that owns three shares. The latter's holding has traditionally been used to give a voice to Arsenal's supporters in the boardroom, rather than as an investment. Having previously come out in favor of Kroenke's overtures, I imagine the Trust will retain its shareholding, although its strategic influence will be negligible given KSE's now dominant position.

Fans in general will be torn between fears that the U.S. businessman will load Arsenal up with debt as has happened at other U.K. football clubs, versus the hope that he might inject some more money to acquire superstar players.

In the short term at least, both paths look unlikely. KSE isn't using debt to acquire its Arsenal shares, and the club says it has been told that the intention is for Arsenal to continue to be run along "self-sustaining" lines.

He shoots, he scores
Arsenal is one of the few clubs where that's even possible, being a profitable business with a lot of property assets, easily sufficient to back its relatively modest 136 million pounds of net debt.

No wonder Kroenke, who owns a string of sports interests in the U.S., saw an attraction in the business.

But with Arsenal not having won a major trophy in recent years, he'll also no doubt want to see manager Arsene Wenger and his players return to their winning ways. And having finally concluded a four-year long midfield scrap to ultimately win the day, Kroenke might just have some advice for them on that front after all.

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