Usmanov preparing to launch take over bid for Arsenal

True to form, Usmanov has begun to make his move to take over Arsenal. To be sure, I want Kroenke to buy the team and hope I’m wrong, but I have my doubts. Bracewell’s inexplicable move to sell her shares on the open market smells more of a wounded ego than actually caring about the Club and Usmanov has quickly jumped on the opportunity.

For those that don’t know, Arsenal shares are publicly traded, but they are traded in a special market. This market is for public firms that have small numbers of shares, trade infrequently and have other special rules. This means that shares, typically, are extremely valuable, e.g. now £10k per share; and, they trade hands very infrequently, e.g. 10 shares or even 1 share at a time.

More often, shares are traded privately. Investors sell their shares to others directly. This is what Kroenke has largely done, as has Usmanov. Bracewell, however, has decided to break from tradition, and stability for that matter. Instead, she contracted with an outside a US firm, to sell her shares on the open market. With 15.9% of the shares, this is a big deal.

Because of the large amount of shares she owns, should Kroenke or Usmanov purchase the shares, they can launch a take over bid. They would own approximately 43% and 40% respectively -50% is ownership. Not surprisingly, a few investors threw their shares on the market to take advantage of the jump in price. Indeed, should Kroenke decide to launch a take over after May, the price of the shares would have been £8.5k, but now the same shares are worth £10k.

Without blinking an eye, Usmanov moved quickly to snap up at least 37 more shares at £10k. This is important for two reasons. First, it means that if Usmanov wants to launch a take over bid in the next year, he’ll have to pay £10k. That drives the cost of the purchase up significantly for him. This might mean more stability for the Club since he could decide to hold off on a take over attempt for another year. Second, and more likely, Usmanov’s purchase at that price likely indicates a take over attempt is coming and his willingness to pay £10k per share for the Club. To wit, Bracewell wants £10k and her shares are basically needed to launch a takeover. In addition, by purchasing the shares, he’s directly challenging Kroenke since a take over attempt at £8.5k by Kroenke would mean Usmanov loses money.

Finally, Kroenke is unlikely to pay £10k per share now, when he (1) needs money to buy the Rams, and (2) can pay £8.5k per share beginning in May. Usmanov obviously believes Kroenke won’t pay the £8.5k in May and is sending Bracewell a message that he will pay £10k, the price she wants. Just as important, Usmanov may have just told Kroenke he’ll pay him £10k per share. That’s a solid return on Kroenke’s investment at just the right time. So now we have to wait until May 1 to see what he’ll do. Unless Bracewell sells to Usmanov now.

-the student

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