Usmanov may test board loyalty

Oct 3, 2007 - 5:10 PM By Jim van Wijk Special to PA SportsTicker

LONDON (Ticker) -- Alisher Usmanov's bid to take control at Arsenal looks to ultimately hinge on whether he can overcome the determination of the board to remain faithful to their traditions.

The Russian, via his investment company Red and White Holdings, has already spent some $240 million buying up 23 percent of the club's stock.

Usmanov gave his first major interviews in Moscow this week, in which he spelled out his long-term ambition to obtain a controlling interest in the Gunners.

There are, though, several major hurdles for the Uzbek-born metals magnate - with an estimated fortune of some $5.4 billion - to overcome before that ambition is realized. Much has been made Usmanov edging ever closer to a 'blocking stake' of 25 percent, which actually would have no impact on the day-to-day running of the club.

Rather, it enables the veto of special resolutions such as changing the name of the company, its structure or calling an Emergency General Meeting, which could be resolved by the current board given their share holding at any rate.

"There are some instances where companies have in their memorandums and articles of association that you need a 75% majority for certain proposals so, in that instance, whenever there is something of that nature being voted on, he would have a blocking stake," football analyst at stockbrokers Wise Speke Vinay Bedi said

"It will, though, only have limited use in normal circumstances. It is unlikely that any of the day-to-day decisions are going to be influenced too much."

Nevertheless, that benchmark is likely to be achieved sooner rather than later given the Russian's current buying levels.

It could possibly happen before the scheduled Annual General Meeting on October 18, with shares in Arsenal's parent company now trading at over $20,000, a more than tempting carrot for the estimated 1,200 minor shareholders outside the boardroom.

However, a large amount of those are in the hands of fans as well as Arsenal employees, both permanent and on match days, whose loyalty to their club runs much deeper than just money.

It is here where Usmanov - who claims to be in love with the Gunners footballing ethos under manager Arsene Wenger - will encounter greatest resistance.

But it is also a test for his fellow shareholders and their determination to hold out against what could eventually prove to be an offer that is too good to refuse.

Director Daniel Fiszman - who with 24.11 percent is the club's largest individual shareholder - is a lifelong fan and self-made millionaire and jets into games from his Switzerland home. Lady Nina Bracewell-Smith, with 15.9 percent, is from a family which has a long affiliation with the Gunners.

With the remainder of the board - who all entered into a 12-month agreement not to dispose of any of their holding until April next year - they control some 45.45 percent.

They can also count on support from close allies, which now appear to include American investor Stan Kroenke - himself with a 12.19 percent stake.

When RAWH was formed in August following the initial sale of former vice-chairman David Dein's 14.5 percent stock for $150 million, a public statement was made insisting they had no intention of launching an immediate takeover bid.

Under strict corporate rules, that prohibits a possible move for power by Usmanov's group until early next year - but even then there is no guarantee of a straightforward path to boardroom control.

Once any individual or company reaches the 30 percent threshold, they would be required to attempt an official takeover.

However, that does not mean the current board would recommend the sale to the remaining shareholders.

"The board will recommend to the other shareholders what they think they should do. In this case, it would depend on the size of the offer is from the individual at the time," Bedi said. "These things are always impossible to judge - who would have thought that the Manchester United board would have recommended the Glazer bid? But in the end they did.

"It really is a question of what is going to emerge between now and April next year. At 50 percent plus one share, any one individual would have a voting majority - but they would not be unconditionally in charge. If that got to 90 percent, then they can forcibly buy the rest of the shares."

The Arsenal board have already held what was described as a "constructive meeting" with London-based Farhad Moshiri, who jointly owners RAWH with Usmanov.

The Russian is set to travel to Emirates Stadium for the Barclays Premier League match against Manchester United in November, and it remains to be seen what sort of reception his presence would generate among the Gunners faithful.

Usmanov could yet press for a place on the board of directors, which given his large shareholding would be an understandably request - although one which is not always common corporate practice.

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