Russian and U.S. billionaires wage a Cold War for the Premier League football club
The Emirates stadium, home of Arsenal football club, in London.
LONDON—The battle of the billionaires has developed into a Cold War at Arsenal Football Club. E. Stanley Kroenke, a U.S. real-estate and sports mogul, and Russian oligarch Alisher Usmanov are the two superpowers locked in a tussle for outright control of the Premier League team.
The latest flashpoint in their power struggle came Friday when Arsenal disclosed that after months of inactivity, Mr. Usmanov—through his investment vehicle Red & White Holdings—had acquired 668 shares in the North London club, increasing his stake to more than 26%.
The news comes after Mr. Kroenke has painstakingly built up his shareholding to just shy of the 30% mark that, under British takeover rules, would oblige the American to launch a full bid for the club, which is reckoned by Forbes to be the third most valuable in football at $1.2 billion.
"It looks at the moment that there are two main people fighting for ownership of the club," Arsenal manager Arsène Wenger told reporters Friday. "Who will get the ownership I don't know." Mr. Usmanov's spokesman declined to comment. Mr. Kroenke's spokesman said the holding company Kroenke Sports Enterprises doesn't comment on any matters related to its owner's interest in Arsenal.
The man nicknamed "Silent Stan" by sportswriters in his hometown of Denver, Colo., is now just 42 shares short of triggering an obligatory takeover bid.
Alex Fynn, a football consultant and co-author of "Arsenal: The Making of a Modern Superclub," says it is most likely that the quiet American will emerge as the victor.
"It looks inevitable that he is going to take over the club because he is buying shares with the acquiescence of the board," he says. "Whereas Red & White Holdings have not been given a seat by the board even though they have a shareholding of more than 25%. They have a seat in the directors' box at the Emirates Stadium and a table in the directors' dining room, but no seat at the top table, as it were." Arsenal doesn't comment on club-ownership matters.
Mr. Kroenke's newfound influence in the corridors of power at Arsenal represents a major turnaround.
Peter Hill-Wood, the current chairman whose family connections at the club span nearly a century, once famously said of the American that Arsenal didn't need "his sort"; last month, Mr. Hill-Wood pocketed £850,000 for selling him 100 shares.
"The board have realized that they could no longer proceed in the way they had done in the past," says Mr. Fynn, who has worked for a number of Premier League clubs, including Arsenal and Manchester United.
"The first warning signs were when Roman Abramovich arrived [at Chelsea] and with the arrival of the Abu Dhabi Development Corp. at Manchester City, the writing was on the wall. The board have recognized that the game has changed and finance is now a prerequisite for success."
Mr. Kroenke has amassed a small sports empire around his home in Denver. Through Kroenke Sports Enterprises he owns the Denver Nuggets in the National Basketball Association, the Colorado Avalanche in the National Hockey League and the Colorado Rapids in Major League Soccer. He also owns a chunk of the St. Louis Rams in the National Football League.
As an owner, Mr. Kroenke has invested heavily in facilities and made his teams generally more competitive. "He's been a significant force in bringing the Nuggets and Avalanche properties back to respectability and in making the Pepsi Center one of the most viable venues of any city in the U.S.," says Steve Sander, director of strategic marketing for the city of Denver.
Now he is exerting his influence at the Emirates Stadium. Arsenal has brought in more professional management and top executives now have a U.S. pedigree. Ivan Gazidis, a former executive for MLS, joined as chief executive in January, while Tom Fox, a former NBA Asia executive, was hired this fall to head up marketing and revenue efforts.
By contrast, the Uzbek-born billionaire Mr. Usmanov has been unable to secure a board seat and his idea of a rights issue to raise money for the team was turned down by the board last July.
The club's fans are watching the battle carefully, especially after the American takeovers of Liverpool and Manchester United, which with Arsenal and Chelsea make up English football's Big Four.
Both of the American-owned clubs were purchased in leveraged deals and have cut back on player recruitment since the economic downturn, while domestic and European rivals such as Manchester City and Real Madrid have spent heavily on acquiring top stars.
There are also questions about how Mr. Kroenke would fund a full takeover of Arsenal in a financing environment that has become tougher since the Manchester United and Liverpool deals.
One banker who works in the private-equity space said more cash would certainly be required in a takeover, but it is difficult to estimate exactly how much more cash since every deal has its own quirks.
In the case of Arsenal, there is a "rarity" value, since it is the last of the Big Four clubs in English hands. It also has a modern stadium, something indebted Liverpool craves.
The banker, making a "ballpark" estimate, believed a buyer of an entity such as Arsenal would need to put up about 40%-to-45% compared with 25%-to-30% two years ago.
Based on British takeover rules, Mr. Kroenke would need to bid for the company at the highest price paid per share in the past 12 months, which was £10,500 in May, or £650 million. At that price, Mr. Kroenke would need to find about £250 million in cash—a lot of money even for an individual Forbes estimates is worth more than $3 billion.
Supporters are also split between Mr. Kroenke and Mr. Usmanov because they embody two sides of a simmering row over the running of Arsenal, which has created deep divisions among fans and within the boardroom.
While Mr. Kroenke has achieved success with his stable of U.S. sports teams, he has done so without spending vast sums. Arsenal has done similar, spending smaller amounts on young, promising players and then selling them to other clubs for a profit later.
Mr. Usmanov has said he wants the team to raise more cash to fund higher-profile player acquisitions. Despite announcing record profit of £35.2 million for the past financial year, Arsenal acknowledges it still must make substantial payments to finance debts associated with its new stadium.
Increasing the sense of urgency is the situation on the field. Arsenal is currently third in the Premier League and has closed the gap on leaders Chelsea to six points with Sunday's 2-1 win at Liverpool, but there is a strong feeling—articulated recently by the team's captain Cesc Fabregas—that the club needs to strengthen when the transfer window opens next month if it is to mount a credible challenge for the Premier League title or Champions League glory.
Arsenal has lost leading scorer Robin van Persie for up to five months with an ankle injury, and even the frugal Mr. Wenger has acknowledged the need to sign a replacement forward in January. Funds are limited, however, and much of this season's transfer budget was spent on the £16.9 million signing of Andrey Arshavin from Zenit St Petersburg last January.
A takeover ahead of the January transfer window, when new players can be acquired, is considered unlikely.
Mr. Kroenke hasn't fully paid for all the shares he has pledged to acquire, according to company announcements. Under British takeover rules, he would also have to launch a full bid at the highest price he has paid for shares in the past 12 months: the £10,500 figure last May. More recently he has paid £8,500 for shares, meaning he would save a pretty penny by waiting until the season ends.
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