Arsenal unsure of Kroenke's intent

English Arsenal's managing director, Keith Edelman, flew to Denver over the weekend for talks with Stan Kroenke, a billionaire who owns several American sports franchises, including the Denver Nuggets basketball club and the Colorado Rapids Major League Soccer club, and recently bought several shares of Arsenal.

Peter Hill-Wood, Arsenal's chairman, said that he and his fellow board of directors are "in the dark" over whether Kroenke is planning a takeover bid for the club.

Sources said the meeting was set up months ago to mark the opening of the Rapids' new GBP 65 million stadium, which is also home to the new Arsenal centre of excellence, part of a marketing deal that was signed last year between the club and Kroenke Sports Enterprises.

Kroenke made an announcement last Thursday that he had bought ITV's 9.9 percent stake in the club and Arsenal Broadband Ltd. in a combined GBP 65 million deal. Edelman was hoping to get some indication of Kroenke's intentions, but he returned to London with no information.

There is now speculation that Kroenke may try to take full control of the club in the coming weeks.

Hill-Wood told Inside Sport that he and his fellow board members were not concerned by the recent developments but added that he thought Kroenke would have informed them of his plans to buy ITV's shares.

"We are in the dark and I certainly have no idea of what his intentions are," Hill-Wood said. "It was no secret that ITV were looking to sell their stake but you would have thought that they (KSE) would have contacted us before they bought it. But they didn't and that's their business. So I am none the wiser."

ITV and KSE issued statements to the stock market late last Thursday afternoon that showed Kroenke paid the broadcaster GBP 42 million for its 9.9 percent holding at a price of GBP 6,800 per share, valuing the club at GBP 423 million. At the same time, he bought a 50 percent stake in Arsenal Broadband Ltd, a joint venture set up between the club and ITV at the time of its original GBP 77 million investment in September 2000.

Like media rivals Sky and NTL, ITV had taken a chance on buying up stakes in football clubs hoping that the Premier League would hand back some of the rights that it sells collectively. The plan backfired when the clubs voted to maintain solidarity, and as a result, the media looked to cut its losses and sell.

Despite Arsenal Broadband owning no rights to televise the club's games, Kroenke agreed to pay GBP 23 million for half of the business, which is 3 million more than ITV paid seven years ago.

The question being asked is why Kroenke would pay such a sum for a company that until 2005 was losing millions of pounds each year.

The most recent full set of accounts available, which goes through the end of May 2005, shows the company made an operating profit of GBP 164,000. That was the first time it had ever made a profit and the accounts show the company lost GBP 5.3 million the previous year.

Arsenal Broadband increased its profits to GBP 499,000 according to the club's group accounts for 2006, but even allowing for its recent successes, the venture's value is considerably less than the GBP 23 million Kroenke has agreed to pay. One Arsenal source claimed that Kroenke's GBP 46 million valuation was "very strange indeed."

ITV countered those views saying that the venture was always expected to lose money in its start-up phase and that the price Kroenke has paid is a "fair one" for the fourth largest football club website in the world.

Some shareholders are so concerned about the transaction that they are considering filing a complaint to the Takeover Panel, Arsenal's regulator. They claim Kroenke may have overpaid for the broadband business to artificially suppress the price he paid for ITV's 9.9 percent stake in the club.

They argue that if Kroenke paid ITV much more per share, perhaps between GBP 8,000 and GBP 8,800, then under Arsenal's takeover rules, he would be have to pay that price if he makes a full bid for the company in the next 12 months.

That would value Arsenal at almost GBP 500 million and with GBP 250 million of debt to cover on top of that, one insider suggests it might price him and anyone else out of making a bid.

Hill-Wood and his fellow directors own 60 percent of the club between themselves and maintain they are committed to the club. The key to a takeover bid is Danny Fiszman's 24 percent stake in the club, but by paying ITV much less for its stake, Kroenke is keeping the door open to a full bid.

Source: euFootball.BIZ © Copyright 2006 - All rights reserved.