Football Business - April 2009

The takeover battle at Arsenal, the one remaining top four club in predominantly English ownership, has hotted up.   American sports tycoon Stan Kroenke has become the largest shareholder with a 28 per cent stake by acquiring the holdings of the Carr family who had more shares than was generally realised.    This means that Alisher Usmanov’s Red and White Holdings with just over 25 per cent rank second.

If Kroenke increased his holding to 30 per cent, he would have to make a formal bid for the club.   However, it is thought that he is seen by the board as a bulwark against Usmanov rather than a prospective owner.   Nothing can be ruled out, though.

Usmanov is not take matters lying down and a complaint has been made to the Takeover Panel about a ‘concert party’ at the club, i.e., parties working together to control the club.   The allegation relates to the earlier acquisition of shares by Kroenke from Swiss-based shareholder Danny Fiszman.   This saw the American’s stake rise from 12.4 per cent to 20 per cent while Fiszman’s stake dropped back to a still substantial 16 per cent.

Usmanov’s Red and White Holdings said: ‘We need to understand whether one shareholder is being given preferential treatment in buying shares.’   Arsenal insisted: ‘There is no suggestion that anyone connected with the club has behaved improperly or broken any rule.’  It said the club is co-operating with the regulators to help them understand ‘various matters relating to shareholdings in the company, and added: ‘The panel has stated that there is no suggestion of any improper action by the club or persons connected with it.’

What worries the current Arsenal board is that Usmanov may team up with Lady Nina Bracewell Smith who owns 15.9 per cent of the shares and was ousted from the board last year.   That would give Usmanov control of over 40 per cent of the shares and in those circumstances the board might think that Kroenke was the lesser evil.

Three clubs that were until recently in the Premiership have been relegated from the Championship to League 1 where they could join Leeds United if they fail to win the play offs.   Their relegation shows that parachute payments are often not enough to help clubs get back to the promised land of the Premiership, particularly if they are not spent wisely.

Norwich City could lose between £5m and £7m as a result of their relegation.  As a ‘stand alone’ club they have a loyal fan base, although the club may have to rescind an offer to give a 20 per cent rebate on season tickets in the event of relegation.   It is going to take more than a few new cookery books and programmes by Delia to fund a winning side.

Charlton had to sell off their training ground and other assets to friendly directors as part of a lease back deal to raise the funds to keep going after their bank withdrew their overdraft facility.   Rumours persist of a takeover by a consortium of wealthy businessmen led by former chief executive Peter Varney.    With a modern stadium and a big catchment area in Kent and the Thames Gateway, the club has considerable potential.

It is Southampton that has taken the biggest hit as a result of relegation.  Although a number of buyers are interested, its attractiveness has been reduced by starting its stint in League 1 with a ten point deduction as a result of going into administration.   Contingency plans have been drawn up for the club to be liquidated and a phoenix club to re-start in the Conference where they would face a derby with Salisbury City.   When the club left The Dell for its new stadium at St. Mary’s as part of a plan to sustain Premiership football, it acquired a huge debt which has proved too daunting in the Championship.  Saints fans are also far from happy with the stewardship of Rupert Lowe whom they accuse of mismanagement.    Probably Saints will go down to the wire before finding a buyer but it’s going to be a hard road back.

Not as many clubs as feared went into administration at the end of the season.  Stockport County, which is run by a fans’ trust, became insolvent.   Their main difficulty is that they do not own their ground.    The future of Darlington remains uncertain.  It looks as if Chester City, who were relegated to the Conference, will go into administration.   In Scotland, Stranraer look as if they had found a saviour and also relegated Clyde have struck a deal with the owners of the Broadwood Stadium who were owed rent.

There is considerable uncertainty about the future of No.2 Premiership broadcaster Setanta who have to make a payment to the Premiership on May 15th.    They have never been profitable and are now running out of cash and their private equity shareholders want to be reassured that the broadcaster has a future before they put in more funds.  Setanta were dealt a heavy blow when they won only one Premiership package from 2010, making their business model less sustainable.    While the recession in some ways helps the viability of home entertainment, many armchair fans have clearly decided to settle for the more attractive BSkyB package and not bother with Setanta.

One possible outcome is that Disney, who made an unsuccessful bid in the last Premiership rights auction, may acquire Setanta in a fire sale.

The summer will tell us how many season ticket holders are going to renew in the recession, but the top clubs will have no difficulty in selling their seats.  With the BSkyB revenue, and growing revenue from overseas television rights, the basic Premiership model remains in place.

Wyn Grant is a regular contributor to Albion Road and also the publisher of footballeconomy.com, a website covering the business and economy of the game of football.