Arsenal's $14 Billion Player Gets Tired of the Bench

(Bloomberg Opinion) -- It seems an obvious question: Why, after a decade fighting for control of Arsenal Football Club, would Russian oligarch Alisher Usmanov surrender suddenly to American sports investor Stan Kroenke?

It’s certainly one that Arsenal fans will be asking, given their existential despair about the low-spending Kroenke and his seemingly endless commitment to former coach Arsene Wenger – who only quit last season after 14 years of failing to deliver the English Premier League title.

Usmanov is one of the world’s 100 richest people, according to Bloomberg, with a personal fortune of $14.4 billion – outstripping even that other great Russian benefactor of English football, Roman Abramovich. When this kind of money walks out of the door, success-starved fans tend to weep.

Yet you can see why Usmanov has given up. After failing to get majority shareholder Kroenke to sell out to him, it didn’t make much sense to hang around.

The Russian was adamant that he’d never sell his 30 percent stake to the American, who also owns the NFL’s Los Angeles Rams and U.S. soccer team the Colorado Rapids. But it’s hard to imagine who else would want to buy it at a decent price. On Tuesday, Kroenke said Usmanov had agreed to sell him the shares for about 550 million pounds ($712 million), valuing the club at 1.8 billion pounds.

That Kroenke is financing the purchase via a Deutsche Bank bridging facility has also alarmed Arsenal fans, who fret that he will leverage up the club. The bridge loan has been made to Kroenke rather than the club, but there’s little to stop him borrowing against the club’s assets or cash flows once he adds Usmanov’s stake to his own 67 percent holding. Supporters who own shares in the club say they will be squeezed out by the deal and no longer able to ask awkward questions of Kroenke.

Usmanov’s parting comment that “Arsenal could be the best club in the world,” with the emphasis on the word “could,” shows what he thinks of Kroenke’s stewardship. But with no board seat, he had no influence over the club’s operations and no working relationship with the main stakeholder. Usmanov seldom visits London now, preferring to split his time between Sardinia, Bavaria and Moscow.

There’s also the political landscape to consider. U.K.-Russia relations have chilled since the poisoning of the former Russian spy Sergei Skripal and his daughter in the English city of Salisbury in March. That frostiness extends to wealthy Russians with a London presence. Abramovich, the owner of Chelsea F.C., has had difficulty renewing his visa and has responded by halting a huge investment in a new stadium in west London. There are reports that Britain’s richest man Jim Ratcliffe would like to buy the club from him. 

There’s no suggestion as yet that Usmanov has faced any pushback from the U.K. government, but MegaFon PJSC, the mobile phone company that he controls, has announced plans to buy back shares and delist from the London Stock Exchange. Cutting potential sanction risks was a possible motivation.

Arsenal was never about the money for Usmanov, as is often the case in the strange world of football finance, but he sold at a discount to the most recently traded shares. He still probably secured a profit on his investment. The 1.8 billion-pound value ascribed to Arsenal gives it an enterprise value that’s roughly 16 times expected earnings, according to Bloomberg data. That’s pretty much in line with Manchester United, whose U.S.-listed shares value its equity at 2.7 billion pounds. 

There may be another explanation too for the sudden change of heart. Iranian businessman Farhad Moshiri, a former co-investor in Arsenal with Usmanov, has bought control of rival English team Everton Football Club. The Russian already supports Everton financially through a sponsorship deal and might want to resume his relationship with Moshiri. Failing that, perhaps a continental European team might prove attractive.

Either way, retaining the Arsenal interest was of little benefit. Football is a romantic business, even for the most hard-headed oligarch. But being a minority shareholder with zero power can cool any ardor. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

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