The Gloves Are Off At Arsenal - 03/09/2007

The gloves are off in the battle for control of Arsenal. A hostile takeover is a real possibility after David Dein sold his shares to a new investment company, of which he has been made chairman, and declared his intention of playing an active role in shaping the club's future. The former Arsenal vice-chairman received £75m for his 14.85 per cent stake from Red and White Holdings Ltd., owned by the businessmen Alisher Usmanov and Farhad Moshini. A metals magnate ranked as the eighth richest man in Russia with a fortune estimated at more than £2.8bn, Mr Usmanov has a reputation as a hard businessman even among Russia's no-nonsense oligarchs. He has cultivated close ties to President Vladimir Putin's Kremlin and in particular to Dimitri Medvedev, the chairman of gas group Gazprom, who is seen as a potential 2008 presidential candidate. His lawyers have made it clear that he no longer has a criminal record, having been fully pardoned for offences under the Soviet regime which he did not commit. Nevertheless, the Financial Times felt able to comment that he has had 'a chequered career.' His business partner Farhard Moshiri is a London-based fund manager who recently purchased a 9.9 per cent stake in investment bank Panmure Gordon.

Mr Usmanov has pledged to imitate the success of Roman Abramovich at Chelsea. He said, 'One of my compatriots has shown that he can create a superclub and I will follow. I believe that the business of Arsenal has a large upside capacity.' David Dein is insistent that Arsenal will never be able to compete with their foreign-owned rivals unless the current board, which controls 45 per cent of the shares, gives way to the new breed of wealthy owners. Dein believes that Arsenal are no longer the force they were when they won the Premier League in 2004 and that heavy investment is essential. Dein has won some support from the Arsenal Supporters' Trust which represents 2 to 3 per cent of small shareholders, but many supporters are sceptical. Arseblog commented, 'If this group takes over Arsenal Football Club, then we lose so much of what we are. Tradition, values, integrity, history - all these go by the wayside if we become another Chelsea.' Andrew Hill, writing in the Lombard column in the Financial Times commented, 'The governance of Arsenal football club looks like some sort of bizarre Cold War stand-off, Russians on one side, Americans on the other, and in the middle the directors - each group commanding a significant chunk of shares.'

Advisers to Mr Dein have stated that there has been no attempt to broker a deal between Stan Kroenke, who owns 12.2 per cent of the shares, and Red and White Holdings. Nevertheless, it is believed that Dein is in contact with Kroenke and may be planning to work with him towards the 29.9 per cent holding needed to trigger a mandatory takeover bid. The situation is highly complex and will not be resolved soon, given that the existing board has pledged not to sell its shares during a twelve month period. Takeover rules also put a six months freeze on hostilities. The modern Arsenal stadium mystery is sure to have many twists and turns before it is resolved, but it looks increasingly likely that the club will eventually have foreign owners with the main British alternative, Bernie Ecclestone, having invested in QPR.