M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, November 5, 2009

Takeover Panel and Arsenal

I think I've said before that I love takeovers of sports teams - mostly because it let's me read the sports pages on company time.  Well, there's a bit of a to-do brewing in the Uk over Denver-based businessman Stan Kroenke's potential takeover of the Arsenal football club (that's soccer).  Of course, Kroenke is no stranger to the sports business.  In fact, he's a "sports mogul".  He reportedly has ownership stakes in the Colorado Rapids (MLS), the Denver Nuggets (NBA), the Colorado Avalanche (NHL) as well as a 40% stake in the St. Louis Rams (NFL).  Okay, so that's not the most impressive list of professional sports teams, but any one of them is certainly better than any team I own.  (If you don't count amateur youth league, I don't presently own any.) 

Well, if you had $3 billion to your name and you were looking to improve on that line-up, what better way to do that than acquiring a large stake in a venerable UK football club?  Over the past summer, Kroenke reportedly purchased 25% of the club's shares.  In recent weeks, he has been buying shares in small blocks, 427 shares here, 10 shares there and another 200 shares here.  He now controls 29.6% of the shares of Arsenal.  The Times of London provides a nice Q&A on what would happen should Kroenke acquire 30% of the shares of Arsenal:

What could happen next?
As soon as Stan Kroenke hits 30 per cent of Arsenal’s shares, he will have to launch a takeover bid for the whole company.
What would the Takeover Panel make of this?
The City regulator that monitors dealings in UK companies would expect Kroenke to have enough cash to launch a fully funded bid immediately if he hit 30 per cent. He would have to bid for the rest of the shares at the highest price he had paid in the preceding 12 months. On May 1, he paid £10,500 each in a 4 per cent block. That has to be his bid price.
Suppose Kroenke did not have the available funds?
The panel has been keeping an eye on the situation and would be angry with Kroenke if he hit 30 per cent without having the cash to buy the club. Kroenke’s only option would be to apologise to the panel, which would make him sell the shares to get back below 30 per cent.
How closely is the American being watched?
The panel has looked at Kroenke’s stake-building to see if he is “acting in concert” with other Arsenal shareholders, which includes Danny Fiszman, from whom he bought shares for which he still owes £50 million. “Acting in concert” means you have teamed up with other shareholders to gain control without telling the panel, which is against City rules. However, the panel decided this year that Kroenke had not teamed up with other shareholders, despite arguments to the contrary from Alisher Usmanov, the Russian, who owns 25 per cent of the club. 

The rules of the Takeover Panel govern Kroenke's next steps.  So far, he has remained silent on his intentions.  That's likely because he doesn't want to trip a put-up or shut-up offer order from the Takeover Panel pursuant to Rule 2.5.  Fans in the UK aren't taking any of this lightly.  Apparently, a group have already traveled to the US to see Kroenke and assure themselves of his intentions.


Arsenal coach providing sports reporters with a summary of the takeover rules:


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