Every year, since Stan Kroenke became owner, whenever the club is going through a difficult patch, after the finger-pointing at Arsene, Ivan and the tea-lady, the pitchforks are finally targeted at the owner. It is so repetitious it has almost become a ritual. I am convinced the practitioners have absolutely no idea why they do it, and, like all mindless behaviour, cannot conceive of its utter pointlessness.
This year’s high priest of these rites was the legendary Ian Wright. Shortly after Arsenal laboured to defeat Middlesbrough, which featured the once retro but now fashionable three at the back system, he went straight for Stan’s jugular with the following tweet:
“Arsenal joining this list of world beating teams 😡. Great investment’s though Mr kroenke. 👌” Ian Wright (@IanWright0 ) April 16, 2017
Apparently Wrighty is one of the many Arsenal fans who are heavily into wilful self-delusion. How else can one explain their blatant forgetfulness about the history of Kroenke’s rise to becoming the majority-owner of the club.
Let me reveal a long-hidden secret to Ian and his pals. It was because of the great 10-year run of Arsenal under Arsene Wenger, from 1996 onwards (collecting three EPL titles and four FA cups), when the value of the club had exploded, that the traditional English owners decided it was full-time to cash-out. Apparently they were not sanguine about an uncertain future paying for a brand new stadium. They were selling, Kroenke was buying. They disinvested, he saw a “great investment”.
Kroenke’s holdings in the club began with an initial 9.9% bought from ITV plc in April 2007. Sometime in 2008 he increased his stake in the club to 20.5% following a purchase of shares from fellow director Danny Fiszman. In May 2009, Arsenal announced Kroenke had bought a further 4,839 shares from the Carr family which made him the largest shareholder of the company with 28.3%. By November this increased to the maximum 29.9% limit.
Things really got interesting in 2009. Among the non-directors owning a large slice of shares was former vice chairman David Dein, who is today treated in some quarters as a legendary big-spending owner and director. Dein and others sold their shares to Red and White Holdings, co-owned by Russian billionaire Alisher Usmanov and London-based financier Farhad Moshiri, who made a rival bid to become majority owner of the club. As of September 2011 they owned 18,204 shares (29.25%) of the club.
Based on the bits and pieces that made it to the public domain, the future ownership of the club was decided by director Danny Fiszman who convinced Kroenke not to purchase more than 29.9% of the club until at least September 2009, while the rest of the board agreed not to consider a sale of their shares to “non-permitted persons” until at least April 2009, and had first option on each other’s shares until October 2012. When the lockdown ended, in April 2011, Kroenke extended his ownership of the club by purchasing the shareholdings of Nina Bracewell-Smith (15.9%), and Danny Fiszman (16.11%) and other directors of the Arsenal board, taking his shareholding to 66.64%. It is undeniable that Danny Fiszman’s (who, by the way, was the driving force in building the new stadium) deathbed decision to sell his remaining stake to Kroenke was critical to his majority ownership.
It is important to understand that majority ownership means Kroenke calls the shots in making the financial, managerial and strategic decisions that affect the club. This has meant, as minority shareholders, Red and White Holdings have no say in the key decisions as they have no representation on the board. In truth they have no greater privileges than that of a common shareholder, albeit one with a significant holding.
I wonder if Wrighty and those of similar ilk understand the importance of the choice made by Danny Fiszman, who bled red-and white up to his final breath. Rather than adopting former chairman Peter Hill-Wood’s bombastic declaration that “…we don’t need his money and we don’t want his sort…,” the late diamond trader, after scrutinizing Kroenke’s ownership of his many other sports franchises felt he would continue Arsenal’s tradition of being a ‘self-sufficient’ club.
Peter Hill-Wood and Fiszman were not naive and stupid:
“…Americans are buying up chunks of the Premiership football clubs and not because of their love of football but because they see an opportunity to make money…”
“…Stan Kroenke is involved in sport and we have had constructive meetings with him,”
“We have never been in better shape financially and do not want anybody to buy the club, but if Kroenke wanted to buy it he would understand it and how to maintain the standards.”
Apparently these standards are what drives Wrighty and company crazy. What makes them so mad? This is where the annual blame-game as a ritual makes absolutely no sense.
In the first place, unlike the Glazers at United, the American did not leverage his share ownership by using it as collateral to finance his buy-out of Arsenal. The Glazers went further, they then lashed the debt onto the books of United making the club responsible for making the principal and interest payments. Initially the total debt was around £660 million. This was the first time United had debt since 1931. The interest rates on the debt amounted to around £62 million a year. That by the way is the nearly one-third their annual payroll. Should United’s current revenue stream, reportedly over £500 million per year, begin to slow down, as in real-life, it is the wage-bill that will be cut to facilitate the interest payments.
The Glazers it seems have no limits to putting the burden of their ownership on United. In 2016 it was revealed the club must pay £15 million in dividends annually to the six Glazer siblings for the privilege of their buying out the club with borrowed money. It was further revealed that the said same siblings had borrowed a total of £10m from the club and been paid £10m in “management and administration fees”.
Compare and contrast with “Silent” Stan. He bought Arsenal with externally generated funds placing no additional debt burden on the club. How easily Ian and his friends forget that until 2014, Arsenal was struggling with repaying the obligations incurred to finance the new stadium. The club had locked itself into long-term naming and sponsorship deals which guaranteed a steady cash flow acceptable to the lenders who loaned them the money. But it didn’t leave a lot available for making transfers and paying wages comparable to Arsenal’s big-3 rivals (United, Chelsea and City). Not only did Kroenke not do a leverage buy-out, he has taken no dividends from the club, which is his inherent right as a shareholder. In fact the only direct payments that have been made by the club to a Kroenke entity is £3 million to Kroenke Sports and Entertainment LLC, in 2013-14 and 2014-15 (not taken since) for services rendered to the club. This is a piddling amount compared to the payments United must make to the Glazer children.
It is well known that what really aggravates Wrighty and others is the refusal by the billionaire majority owner of the club, to reach into his personal checkbook and spunk up the mega bucks necessary to help buy the best players available worldwide who could presumably guarantee the club to win every major trophy available. Wrighty’s tweet reeks with sarcasm and snark when he tweets “Arsenal joining this list of world beating teams.” Not.
Apparently these critics of Kroenke believe that making these “investments” will guarantee Arsenal league titles. Haven’t we learnt anything from the last ten years? Unlike a one-horse league enjoyed by Bayern and PSG or the Real Madrid-Barcelona duopoly in Spain, there is no evidence that spending massively on transfers and wages will guarantee first place in the Premier league. Examples abound. In the last four-years of the post Ferguson era United has spent about £400 million on transfers and have failed to make the top-4 in two of those years much less win a title. Roman Abramovich has spent about £1 billion on transfers and wages and last season finished 10th. City has spent an equivalent amount yet only has 2 titles in 10-years to show for their investment.
On a longer time horizon, relying on a sugar-daddy owner is economically and commercially unsustainable. Look no further than the recent example of A. C. Milan. For over 30 years they had the ultimate beneficent owner in Silvia Berlusconi. Under him they became one of Europe’s pre-eminent clubs, winning eight league titles, one Italian Cup, seven Super Cups as well as five Champions League trophies and five UEFA Super Cups. But due to Milan’s growing debt and Berlusconi’s falling financial fortunes, the club were forced to sell some of its best players year after year without significant reinvestment, leaving them floundering. In a span of just two years, Milan lost world class players like Andrea Pirlo, Clarence Seedorf, Alessandro Nesta, Pippo Inzaghi, Gennaro Gattuso, Mark Van Bommel and Gianluca Zambrotta, who were then followed by Zlatan Ibrahimovic and Thiago Silva.
Due to their cascading financial failure, both AC and Inter have fallen into the hands of Chinese owners. Nothing is wrong with the Chinese per se. Like any businessman they are in it to make money. But to the chagrin of some Italians, they are running both clubs as extensions of their businesses on the mainland. They recently forced both clubs to play their derby game at 12:00 noon on a Saturday, a tv-friendly time for their Chinese audience. To add insult to injury, in the case of AC there is little chance the new owners can afford to spend big on new players required to return them to former glory. They incurred significant “debt” (remember that word Wrighty) to finance its £628m takeover and their lenders reportedly have little appetite to extend new money to buy expensive players who also come with very large wages.
Meanwhile, the Rossoneri have now gone three years without European football, their longest abstinence from the continental stage in the past three decades — currently lead Inter by two points but are still two points behind fifth-placed Atalanta and an assured place in the Europa League.
Remember Milan was the biggest club in the world during Wrighty’s era as a footballer. One wonders if their experience will give pause to him and others who are so quick to blame Stan Kroenke for leaving Arsenal to do what it needs to do; generate its own resources and pay its own way.
Sadly, I think not. Most football fans have the memory of a goldfish. They have been seduced by the corrupt mainstream media into believing the false narrative that success can be bought and not achieved by hard work over time. They want titles and they want it now. Like Wighty and his twitter followers, the experience of AC Milan is quickly cast down a memory hole and big spenders like United, Chelsea and City held up as the gold standard.
Who thinks I am being too pessimistic?