Usmanov and Kronke: what the deal will make for each of them « Untold Arsenal: Arsenal News. Supporting the Lord Wenger; coach of the decade

By Tony Attwood

There is, among the big share-holders at Arsenal FC, a lock down agreement.  This means that those who have signed the agreement (including Mr Kronke) have agreed not to sell their shares before October 2012.

But what happens after that?  It is worth asking now, because if there is a move to be made in October 2012 it will be prepared for now.

One thing to note is that the recent problems with the Plus Markets stock exchange that Anne wrote about this week, don’t make things easier.  Any moves made in that area might give us a clue as to what is going on. But meanwhile…

Several options are possible.

1.  A new lock down agreement

2.  No agreement and maybe a little bit of minor trading but nothing more

3.  Mr Usmanov takes his holding to 30%  (he currently holds 29.6% – 18,467 or thereabouts with 199 more or so needed to take him over the limit (source: angry of islington, website)

Points 1 and 2 would of course cause little comment and nothing will change.  But what would happen if option 3 took place?

Mr Usmanov is currently paying £14,000 a share – which is rather a lot more than the £11,750 a share that Stan Kroenke paid.  (The Rangers holding in Arsenal that Mr Usmanov bought was I believe bought at a different rate because of the unusual circumstances.  There is an article on the Arsenal History blog about this transfer).

Anyway, if Mr Usmanov gets 30% then what…

Well, he has to bid for the rest at the current going rate – which is £14,000 a share.  Of course there is no doubt that Mr Usmanov has the money.  It would be 44287 x £10,000 or £332,870,000.  But that of course is only if everyone took up the offer.  Some might, some might not.  The question is what would Mr Kronke do?

If Mr Kronke sold he would make £2250 per share, or something approaching £90m.  £90m for coming in, buying, doing a rather amusing speech at the AGM (and that is not sarcasm, I thought the long, long, long pause at the start was one of the funniest things I have ever heard at an AGM in my life – I wish I had done something like that in one of the 30 or so AGMs I have chaired), and attending some meetings.

That figure would then give Mr Usmanov control, and by my calculations, over 90% of the company, in which case he would buy up the rest of the company, and everyone including AST members and Fanshare members would have to sell.  So those of us in either organisation would get a lot of dosh too.  (To be clear, at this level one has to sell – as I understand the FSA rules – and if you have never seen them, they are complex and then some).

Mr Usmanov would be down about £400m by the end.  Can he afford it? Yes because his net worth is £12,3 billion – so even the $100m yacht he just bought doesn’t actually make a dent.  He would have some money for transfers too.

But now, supposing it goes the other way.  Mr Kronke said at the AGM that we should get used to seeing him around because he is in for the long haul.   So he doesn’t sell.  Mr Usmanov still gets his 30% and still has to make the offer at £10k a share.  A lot of people are going to get a fair old profit if they want to sell, (including AST if they want to deal) but Mr Usmanov ends up without having control of the company.

30% is one of the many magical thresholds that apply in plcs – but exactly how it applies and what the exceptions are bemuse me.  I know there are people who say “at 30% holding one is entitled to a seat on the board” etc etc, but the FSA rules are so convoluted that I am not sure.  If you know, and can quote the actual FSA rule number and tell me where the hell to find it, please do.  Otherwise I am going to have to ask my firm’s accountants, and that is going to cost.

Anyway, it is possible that at 30% Mr Usmanov will have  a seat on the board.  But so what?  Yes he will then have access to all the restricted-access financial documents, but …  He can make proposals, he can vote as he wishes, but Mr Kronke’s votes will always hold sway.  And I am sure it is possible to get rid of a 30%+ shareholder even if they don’t want to go, because I have seen it done.  A director who breaks confidentiality rules, or who directly contravenes a vote by the board (as I believe Mr Dein did when he left the board at Arsenal – although of course I wans not there so can’t be sure) can be removed.

So the 30% in terms of a seat on the board, even if it is what the FSA rules say, is not that valuable, apart from making waves.

Which means Mr Usmanov is only likely to go beyond 30% if he wants to buy the rest of the shares and thinks he can convince Mr Kronke to sell.  Otherwise he might sit tight.

Either way, I think it makes Fanshare rather a neat investment.