by Tony Attwood
So Mr Kroenke has made an offer to buy the shares of Mr Usmanov in Arsenal, and it seems Mr Usmanov is willing to deal. Mr Kroenke will then own just over 97% of the shares. At this point, under English law all the other shareholders must be offered the same deal. They don’t have to accept but in not accepting they don’t have any power and if he really wants to, Mr Kroenke can lawfully apply to buy the shares everyone else owns, at the same price as Mr Usmanov is being paid.
As a privately owned company registered in Delaware (whose main source of income appears to be registering companies) Mr Kroenke will have total power.
Delaware is special in this regard. Over 50% of US businesses including 60% of the top 500 companies in the US are registered in Delaware even though the state has under 0.3% of the population of the United States.
What this means is that in any dispute about the business the case is heard by a judge not a jury, and second there is no corporation (ie company) tax. Delaware doesn’t tax profits on royalties, trademarks or copyrights. There might even be reason to hold one’s image rights (that old footballers’ extra revenue source) in Delaware.
Delaware businesses also have very little liability, and maximum privacy. So money could (I only say could, not would) be moved out of Arsenal as profit, to Mr Kroenke should he ever wish, with a minimum of fuss.
So who is to blame for Arsenal becoming a business owned at the whim of a very rich man?
Well, fairly obviously the major shareholders who sold their shares to Mr Kroenke in the first place. As that dear old duffer Mr Hill-Wood famously said, “We don’t want his sort here.” Sadly the shareholders decided they did. You can’t really blame Mr Kroenke for taking advantage of people who wanted to sell. He didn’t force them to bring him in.
Which raises the other question: what happened the last time Arsenal was owned by one man?
This was over 100 years ago – right back in 1910. The club was completely bust and about to go under. Henry Norris (he wasn’t a knight of the realm then, nor a Lt Col in the army) offered to take the club over and with no one else willing to do this, he took it and all its debts.
Among other things Mr Norris paid off all those debts in full (including at least one major debt to the architect involved in work on the Manor Ground, which bizarrely was not showing in the books) and promised to keep the club in Plumstead for at least a year, and offer shares in the club to the public at £1 each.
The share offer failed because although local people made a big fuss about keeping their club in Plumstead they didn’t support it enough to buy the shares. Mr Norris however was more than true to his word – he had promised to keep the club in Plumstead for one year, but kept it there for three, and kept offering people the chance to buy shares.
Mr Norris then bankrolled the Highbury development, guaranteeing the lease on the land, guaranteeing the bank overdraft and once the club had moved, constantly offering his shares in Arsenal for sale to supporters. In 1925 he went further and bought the land on which Highbury was built outright. Again he paid.
His gamble was that by moving Arsenal to near Tottenham and Clapton Orient he would generate a huge interest in football in that part of London which housed large numbers of city clerks and tradesmen living in rented property. This proved to be true, for in the first season Arsenal were at Highbury not only did their crowds go up massively, so did the crowds of Tottenham and Clapton Orient.
Tottenham objected vigorously to the move, and I have never seen them apologise for their objections, even once it became clear they were benefiting greatly. Mind you, even when Arsenal supported Tottenham’s attempt to get into the Football League after Tottenham had left the Southern League, I am not sure Tottenham were openly grateful. (Arsenal also allowed Tottenham to play at Highbury in the war when WHL was taken over for the testing of Enfield rifles.
During the war Henry Norris formed and paid for the first Footballers’ Battalion which joined into the Middlesex Regiment – he was knighted for this work in 1917. In all he evolved three battalions and many others copied his idea.
Meanwhile as Mayor of Fulham he was one of the few people in the country who was able to run the registration and recruitment processes required of councils by law. His abilities were noted and after he was refused as a volunteer in the army (because of his eyesight, his age and the fact that they realised he would be of more use elsewhere), he was recruited by the War Office and sent to clear up the recruitment mess on the south coast. Having no rank he was made a Lieutenant – the lowest rank of officer.
By the time the war ended this man who had left school at 14 and had no formal military background had not only been knighted, but was also a Lt Colonel who was put in charge of the entire decommissioning process as the troops returned to civilian life. And this despite his radical views: he wanted equal pay for women (in 1918!), no maximum wage for footballers, subsidized rail fares for workers, and lifetime pensions for all servicemen injured in the war and unable to work.
Back with the football comes the story you probably know about him – Arsenal’s election to the First Division upon its expansion in 1919. The story is that Sir Henry rigged the election. However before the election the leading sports press talked up the idea of the election of Arsenal, recognising their role in taking the League into the south when others (like Tottenham) opted to join the Southern League.
The minutes of the AGM of the League has no record of Sir Henry making a speech, the local and national press on the day after contain no suggestion of any speech by Sir Henry or anything amiss. Indeed the story of Sir Henry fixing the election only turned up over 20 years later.
What screwed up Sir Henry’s reputation in fact was the manager he employed from 1919 to 1925 – Leslie Knighton, who 20 years after he left Arsenal, and after Sir Henry’s death, wrote a self-serving autobiography which sought to excuse Arsenal’s failure under his tenure and blame it all on Sir Henry.
You can read more about the man without whom there would be no Arsenal, and who wanted Arsenal to be owned by the fans, in the Arsenal History Society series Henry Norris at the Arsenal. It is by far the most comprehensive and detailed review of the man’s work at Arsenal that has ever been published. Really, you shouldn’t judge the rumours and stories you have heard until you have looked at this.
After Sir Henry left the club, it continued to flourish under the dynasty he established (Chapman, Shaw, Allison and Whittaker, the four managers who between them delivered seven Division 1 titles and three FA Cups) continued to flourish, but slowly ownership began to drift into the hands of individuals. From Sir Henry’s grand idea of a club owned by everyone, it started to become a club owned by smaller numbers, until we have reached the situation whereby quite soon one man will own it.
This in itself is a sad day, but so is the fact that people still endlessly write of Sir Henry as the villain of the piece, rather than the man without whom there would be no Arsenal, and who had the glorious vision of everyone owning a part of their local club.
The Arsenal History Society website
Great piece of research Tony that helps put things in perspective. I wonder if it is now more or less likely that the Arsenal board will finally recognise Norris as the savour he was?
Being an Evertonian I knew nothing of Sir Henry Norris and his association with Arsenal F.C. but on reading this article I will surely make it my business to read more. You paint a picture of a laudable and most honourable man who deserves to be held in memorium. Alas I fear Mr Krokes vision for Arsenal does not reflect that of Henry Norris.
thanks, tony
your site is a true goldmine for a disinformed frenchman like me
when they’re not busy vilifying AFC, the guardian columnists sometimes come up with readable pieces, like the one below, in which you’ll find one inetresting thing or two about delaware:
https://www.theguardian.com/us-news/2016/apr/06/panama-papers-us-tax-havens-delaware
as for people like kroenke, and their unquenchable thirst for wealth and power/control, the part they play in the current heatwave/harbinger of ecological disaster is well documented in naomi klein’s following article (it’s summer, lads, … reading time):
https://theintercept.com/2018/08/03/climate-change-new-york-times-magazine/
looking forward to watching the lads on sunday, even though i was quite impressed by kompany-less, debruyne-less, dsilva-less, … city last sunday
let’s hope unai will come up with something special …
As a private co, Kroenke can do whatever he wants (e.g. taking money out) even if it was registered in the UK, or elsewhere. That after all is the nature of a private company, and all the more so if one owns 100% of it. So the Delaware registration is a moot point, especially for supporters (the large majority of us). Kroenke will use GBP 45mn of his own cash, and take a 557mn bank loan to pay off Usmanov and the other shareholders. After which he’ll own an entity currently valued at GBP 1.8bn.
So the question one has to ask is why would a businessman buy up 100%, take it private, and then screw up the future value of his business by doing anything silly, like taking money out to pay himself. As of 30 Nov 2017, the club had cash on hand of GBP 161mn; so very little available to “loot” the club after he takes it private, if that is his intention. If Kroenke is a long term investor, as he claims, and I have no reason to doubt that, then the the value of his business/club is really the cash flow generated by the club in future, and one has to believe that he’ll want to maximise this through managing the club/business properly. Future cash flow generated will also determine the value of the business, should he decide to sell it to someone at a later stage, or take it public. One can find many examples of well known listed companies that were taken private, strengthened and then taken public again with a higher value (e.g. Seagate, a US disk drive company). A relisting of Dell (the US PC company) is also in the works, after it was taken private some years ago.
One could argue that Kroenke was not investing “enough” (as some say) in the club the past few years because of Usmanov. Why invest in the club if any benefit also accrues to Usmanov? With Usmanov out of the picture, any benefit from investments Kroenke might now make would only accrue to him. I think Kroenke will loosen the purse strings now; whether this will lead to more trophies for the club is a different matter. I may be naive, but as a supporter, I think this is positive.
Kroenke hasn’t been a particularly good owner so far, but neither has Usmanov.
Similarly neither of them have been particularly bad either, although the friction between them caused by Usmanov MAY be the cause for Kroenke not investing in the team when money was short.
If Usmanov does sell to Kroenke then in a couple of years time we will finally be able to judge whether he’s a good, OK or bad owner…
Until either Usmanov, Kroenke or both of them step back, I don’t think we can know this for sure.
PS I prefer Kroenke to Usmanov, but that doesn’t mean he’ll be any better!
If Kroenke’s buying up of the 30% Usmanov’s shares in Arsenal is concluded before the Premier League transfer deadline day. Would he sanctions the transfer of Ousmane Dembele from Barcelona to Arsenal with cash backing to guarantee the transfer is successful now that he’ll own 97% of the Arsenal shares today being Tuesday according to media reports before he buys up the remaining 3% shares from the owners?
If this scenario plays out as I’ve said above, this will tell us the Arsenal fans if Mr Kroenke is ever ready to seriously pumped cash into the Arsenal he now owned for top quality players signing by the club to truly challenged for the PL Title next season that starts on Friday this week and from then onwards. More so now that Usmanov is out of his way if that’s the reason he has not open his financial hands to Arsenal glamorously to be signing top quality players that should have given the club the better chance of a shot at the PL Title and hit the target sometimes since 2004, like Roman Abremovich has been doing at Chelsea since he bought the club to own it 100% that has made his Chelsea to hit the target of all the targets that are hitable domestically and in Europe.
I would think it would be a foolish waste of money to make an excessive purchase at the deadline, just to send a “message” to a bunch of fickle fans who will be calling for blood at the first stumble regardless of whether he was to make the purchase or not.
I am a Arsenal for life fan and I’ll remain so even if Stan Kroenke buys up the club’s shares 100 % will not change me from being Arsenal for life fan since I have Arsenal DNA in my nerves. Under Kroenke’s 100% ownership of the club, I’ll continue to give my 100% support to the club as long as Arsenal FC continue to exist. Even if Kroenke doesn’t pump money to the club on a large scale for top quality player signings when necessary in a window to challenge and keeps challenging for honours domestically and externally, I’ll be hoping he’ll have a change of heart to start doing more and better positives for Arsenal on all fronts. And if he doesn’t have a change of heart to remain static. I’ll hope and keep hoping his strangle hold on Arsenal will come to an end one day for the better for the club.
I am not a fan of Chelsea FC but I just wonder if Real Madrid are the ones that should tell Chelsea what they should take or can have in Kovacic from them to allow Courtoise their keeper to transfer to Real Madrid. Is it not Chelsea who should be the ones telling Real Madrid what they should bring maybe in downright cash payment or if they want, a Real Madrid player plus cash before they can sign Coutoise from them?
1. Apply past history of ownership
2. Apply “I like the Glaziers forula”
3. Apply underinvestment
4. Apply Usmanov asking to add more value, by inreasin the float, very sesnsile business, from a man who is actually welathy, not pretending to be wealthy.
5. Why would you need a non taxing state, if you won’t pay dividends?
6. Why support a chairman who doesn’t pay dividends if you don’t get money unless selling your shares (Chips)?
7. Gaining control of a company through methods suggested by the key shareholder who sold her husbands shares unwittingly, is a srious offence.
8. Oh do you know what, f it, if Arsenal is ARSENAL in name and nothing more, I ain’t supporting s**t. I may as well support the new Woolwhich, or FUlham.
The only use for owning Arsenal is out of passion for the sport and club, unless…….
I’m amazed with the comparison of Stan & Alisher. Neither of them like football (soccer) but both have the greed for money. Personally I hope Stan’s wife takes the club because she will have a lot more genuine affection for the club & its history.
It is time for the UK to start nationalism similar to Trumps US first. All our sporting clubs should be owned by UK resident members & leased to the greedy. That way control will always be retained locally. It may take a while to set up but the heart will beat for real reasons rather than the pound of flesh.
I don’t believe a share purchase could be completed that quickly.
It’s not quite the same as buying candy.
I know he’s spent a lot of money on the LA Rams (as much as they’re allowed to in the tightly regulated NFL) but we don’t need a new stadium and throwing mega-money around to get expensive players isn’t the AFC way.