Football Business - September 2009

It looks as if Arsenal may soon lose its status of being the only top four club controlled by an English board, while Liverpool continues its search for a purchaser. At Arsenal, American sports entrepreneur Stan Kroneke is close to winning the battle with Moscow-based billionaire Alisher Usmanov to control Arsenal. He increased his holding in Arsenal to 28.7 per cent yesterday, 1.2 per cent short of the mark that triggers a mandatory takeover bid. The American spent £680,000 on 80 shares, paying about £1,000 above the market price for each one. In a little more than a year, Kroenke has committed nearly £100m to increasing his holding from 12.8 per cent. Once he reaches the 29.9 per cent mark he would be obliged to make a formal offer to other shareholders under Stock Exchange rules.

If it came to a struggle for control Kroenke could probably count on the backing of Danny Fiszman, a director who was the club's biggest shareholder. Usmanov might try to team up with Lady Nina Bracewell-Smith, no longer a member of the board and the third biggest shareholder with 16.8 per cent. However, he would be unlikely to obtain enough support from smaller shareholders to win control. Any takeover bid could well leave the club with more debt.

The overall financial picture at the Emirates is encouraging. Arsenal increased revenue and profits in the year to 31st May. Gate and match day revenue rose from £95m to £100m but failed to meet a total wage bill of £122m, including a £23m loss on transfer activities. But total turnover rose from £225m to £316m, aided by broadcast income of £73m and improved retailing and commercial revenue. The biggest contribution to the jump in turnover was £88m booked on property development, centred on the transformation of the old Highbury stadium into 655 residential apartments. Overall net debt fell from £318m to £298m with a net finance cost of £16.6m covered by profits which rose from £37m to £46m.

Chairman Peter Hill-Wood yet again ruled out a rights issue to help fund player signings and pay down debt, insisting that the club's finances were on an even keel. 'In the final analysis I believe it boils down to a decision about whether it is appropriate to raise money from shareholders to purchase registrations and pay the wages of footballers,' he said. 'This is not something that Arsenal has ever done previously in its history and it would be at odds with our ethos of running the club as a business which is self-sustaining and pays its own way in the world.' He added that transfer activity was limited on the recommendation of manager Arsene Wenger, not out of 'any necessity or financial constraint'. Since the end of its financial year, the club has made net gains on player transfers following the sales of Emmamuel Adebayor and Kolo Toure to Manchester City.

At Liverpool, a Saudi prince is the latest person to express an interest in buying a stake in the club and claimed that he had started the process of due diligence. However, Liverpool played down the story, saying that it was talking to other interested third parties. The club badly needs an influx of funds to pay down its £250m debt and find funds for its new stadium at Stanley Park. Liverpool has, however, received a boost from a new shirt sponsorship deal with insurance giant Standard Chartered worth £80m over four years which matches that recently secured by Manchester United.

At least neither club is in the position of pointless Portsmouth where cash from the new owner did not arrive quickly enough to allow players to be paid on time. How much money he has to invest in the stadium and the team remains to be seen.

Some of Europe's leading football clubs, especially those in the Premiership, are preparing to oppose plans by Uefa which I discussed last month to curtail the ability of club owners to buy their way to success. Michael Platini's campaign, which some think is aimed at Premiership clubs, has been approved by Uefa's executive committee and will come into force over the next three years. The concept has the approval of the European Club Association, which represents about 150 clubs. Uefa claims that 50 per cent of clubs in Europe are losing money but it acknowledges that applying new rules across the continent's different financial systems will be complicated. The Premiership, which is introducing its own measures to improve financial scrutiny, argues that the only beneficiaries of the concept would be the richer clubs who already generate revenues of more than £200m a year, and that the idea was in any event unenforceable. Richard Scudamore, the Premier League's chief executive, said, 'Ultimately, if you are going to regulate costs, you end up regulating every income stream, and we just don't know how you can do that.

The Football League still has questions it would like answered about the new owners of Sven Goran Eriksson’s Notts County. The identity of the new owners of the oldest professional club in the world remains unclear. The supporters' trust at the club agreed to donate its shares to Munto Finance. Munto, registered in the British Virgin Islands, is a subsidiary of Qadbak Investments. Qadbak last week emerged as the new owner of the Formula One BMW Sauber team. Qadbaak was described by BMW as 'a Swiss-based foundation which represents the interests of certain Middle East and European-based families.' One of Munto's directors, Peter Williams, has links to a Dubai investment group. The Government is considering giving football authorities powers to access offshore bank accounts so they can track the money trail of new club owners. However, even if given these powers, the Football League does not have the resources to track back along quite complicated financial trails.

Also in League 2, Accrington Stanley are fighting for their existence as they try to raise the money to pay off a tax debt while Conference side Salisbury City went into administration. What is evident, however, is that there is still plenty of money around chasing top Premiership clubs.

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.