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David Conn on Arsenal’s civil war

July 5, 2012

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Arsenal’s 30% owner Alisher Usmanov has written an open letter to the board of directors criticising their financial model

The morning after Arsenal’s captain and outstanding player, Robin Van Persie, announced he will not renew his contract and criticised th e club’s strategy and ambition, the club’s brooding, frustrated 30% owner Alisher Usmanov piled in. In an “open letter to the board of directors” the Uzbek steel and telecommunications billionaire savaged Arsenal’s direction and “self-financing model” under the 62% owner, the American Stan Kroenke, and argued the manager, Arsène Wenger, is being denied the wherewithal for success.

The “self-financing model” has been so sung by Arsenal in praise of their approach that it was presented as a beacon of good practice to the parliamentary select committee examining football’s unholy relationship with money last year. In essence Arsenal have for years prescribed that the club must live from its income, and no director or owner must put a penny into the club.

Usmanov lambasted it as hypocritical. He argued that it requires fans to pay the world’s highest ticket prices and gives Wenger a diminished budget for players while the long-term former English shareholders put nothing in, then made huge personal fortunes for themselves selling to Kroenke.

“This policy is leading to the loss of our best players, often to our main competitors, and even causes the players themselves to question their future at the club and the club’s ambitions,” the letter argued.

In its timing and Usmanov’s implied association of himself with players like Van Persie, this extraordinary intervention can justifiably be labelled opportunist. Yet there is a wounding coherence to the central argument, which goes to the heart of how Arsenal describe themselves, and are being run.

The attraction of “self-financing” which the chief executive, Ivan Gazidis, continually espouses,is that the cash available to Wenger comes from the money the club makes and not the beneficence of an owner. That accords with the thrust of Uefa’s “financial fair pla y” rules, due to be enforced from 2014-15, which view clubs’ reliance on individual rich men as unstable, generally inflationary and not what football should be about.

The fact that Van Persie could follow Samir Nasri and Gaël Clichy to Manchester City, the club powered by the polar opposite, Sheikh Mansour of Abu Dhabi, thrusting in around £1bn, makes Arsenal affronted, as regularly voiced by Wenger.

City also have financial fair play to grapple with but Usmanov argues he is not suggesting Arsenal become reliant on a billionaire like him. The Uzbek’s stated position is that Arsenal’s shareholders should invest some well-judged permanent money into the club, for shares, to repay the stadium mortgage and leave Arsenal debt-free.

The club has always set itself against that, arguing it is unnecessary because the debts owed from building the stadium are not punitive (net debt last year was £98m, the club paid £15m interest) and there are penalties for repay ing it early. Gazidis argues any other funding from outside would leave the club unsustainable.

Yet the moral basis for such prudence and sobriety was fundamentally undermined when the former shareholders, under the chairmanship of Peter Hill-Wood, made multi-millions personally. Having effectively sacked David Dein for introducing Kroenke to buy ITV’s 9.9% stake in 2007, they saw Dein sell his Arsenal shares to Usmanov, making £75m. With Kroenke rehabilitated as the board’s preferred alternative to Usmanov, Hill-Wood sold, making £5.5m for a stake his family had held for three generations without ever making a penny from Arsenal. Richard Carr made more than £40m, also selling a long-held family stake to Kroenke, in 2009. The timing of the final sales were prompted by the terminal illness of Danny Fiszman, who made £160m from his sale of Arsenal shares to Kroenke before he died last year. Lady Nina Bracewell-Smith, another who inherited her Arsenal shares, which we re formerly considered an emotional investment of support, made £116m selling them to Kroenke.

Usmanov’s take on the “self-financing model” which delivered such windfall profits to the people who had liked to describe themselves as “custodians,” verges on devastating.

“The self-financing model … allowed the major shareholders of the time to load the club with a liability [£260m debt building the Emirates],” he argued. “The board then appeared to pursue a policy of increasing ticket prices and squeezing the fans … until all of these shareholders … cashed out at vast profits.”

Rather than provide Wenger with “a war chest” for top players to augment his treasured youth policy, the manager, Usmanov argued, has had to sell his best players due to “the club’s tight finances”.

Kroenke, who attends few matches and sees Arsenal as a financial investment, is pursuing the same policy, according to Usmanov, by not putting any money into the club.

Ar senal, declined to respond to Usmanov, a spokesman saying only: “The letter has been received and its contents are being considered.” Read More

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