Board Rejects Usmanov Proposal; Kroenke Increases Stake In Club

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News surrounding Arsenal approaching the weekend centers on dealings related to the club’s board and its chief executive officer Ivan Gazidis (pictured above), who yesterday outlined the reasons for rejecting a rights issue proposal to raise capital offered by Russian billionaire Alisher Usmanov.

Usmanov had been the largest stakeholder in Arsenal until recently, when the American sports entrepreneur Stan Kroenke overtook the Russian with a purchase of shares this Spring. And media reports today indicate that Kroenke, who owns a number of professional sports teams in the U.S., has again increased his stake in the club by paying £1.5million for 1,600 shares this week.

The recent transactions mean that Kroenke now owns 28.58 percent of the club (compared to Usmanov’s 25 percent). And while the American businessman’s shareholding is approaching the 30 percent threshold that would force him to make an automatic offer for the remaining shares, he has previously stated that he is not interested in pursuing a full buyout.

With both Kroenke and Usmanov building stakes in Arsenal over the past year or two, takeover speculation surrounding the club has increased as the two gain more of an ownership interest. Last week Usmanov even offered to invest 60 million pounds for the club through a new rights issue to make capital available to Arsenal in the transfer market, but his plan has been rejected by the club’s board, according to CEO Gazidis.

“The Board, with its financial advisors Rothschild, considered thoroughly the proposal to use permanent equity capital to either pay down debt or to add to the club’s spending in the transfer market,” Gazidis said (in an interview featured on Arsenal’s official web site). “With regard to debt, the conclusion reached is that the club has a very efficient capital structure with long-term debt on attractive interest rates.”

He added that “we can comfortably afford to meet the annual costs of this debt while at the same time generating surplus funds to invest in the club. Using permanent capital to pay down debt would not, therefore, radically transform the annual cash flow of the club.”

Gazidis said that he believes that “Simply spending money in the transfer market does not make a team or guarantee success. We have followed a slightly different route to most and have built, not bought, a team that has players who are highly sought after and valued by the biggest and best clubs in the world.

“The club, supported by the talents of Arsene Wenger, has embarked on a longer-term strategy of building its team rather than buying it. There’s a football graveyard of clubs that have not adhered to these principles and have unfortunately suffered the consequences,” added Gazidis. “Our responsibility is to build the club so that it can be successful, not just this season and next season, but also ten and even twenty years from now.”

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