By Nick Harris

24 May 2010

The latest failed attempt to kick-start a high-stakes auction for Lady Nina Bracewell-Smith’s 15.9 per cent stake in Arsenal ended in a whimper this afternoon when a Nigerian billionaire emphatically denied any interest in buying the shares, effectively rubbishing earlier reports to the contrary.

Aliko Dangote, 53, is Nigeria’s richest man, the owner of the Dangote Group – the largest conglomerate in West Africa – who has a fortune estimated around £2bn. He is reportedly an Arsenal fan of long standing via his association with David Dein, Arsenal’s former vice-chairman.

Dangote was linked with an interest in Lady Nina’s stake over the weekend but said in a statement today: “I am a longstanding supporter of Arsenal Football Club and have been involved in conversations around investment in the past.

“However, I can say categorically at this time that I have no intention of investing in the club and will not be acquiring a stake. I wish Arsenal Football Club the best for the future and will continue to follow the team as a fan.”

Lady Nina appointed Blackstone, a New York-headquartered global investment and advisory firm, to seek a buyer for her shares some months ago, although this became public knowledge only in April.

At the market rate of around £10,000 per share, Lady Nina’s holding (9,893 shares) is nominally worth £98.93m.

Bizarrely, some reports say she is seeking £150m to £160m for her shares and that a buyer could be selected from a list of up to 10 interested parties. On the face of it, this is fantasy; if Lady Nina potentially has so many great offers that she can pick and choose where the shares go at such an enormous premium over market rates, it seems odd in a deep recession that she hasn’t cashed in already. Blackstone declined to comment.

Today’s market rate was pretty much £10,000: a buyer assumed to be Alisher Usmanov paid £10,000 each for two shares at shortly after 11.00am this morning, and also paid £10,050 each for another two shares at the same time. Latest trades and other information can be tracked at the PLUS Market website.

The main problem for Lady Nina in finding a buyer is that neither of the club’s current two largest shareholders – Stan Kroenke and Alisher Usmanov – have shown any interest in her shares to date, certainly not at the price she is apparently seeking. And that same pair are the only two people who could use the stake to get anywhere close to outright control of the club.

Kroenke owns a few shares short of 30 per cent, while Usmanov – via his Red and White Holdings vehicle – owns just over 26 per cent.

Kroenke has effectively been in the box seat at Arsenal for some time already. He already has allies in fellow director Danny Fiszman (16.11 per cent stakeholder) and the board. As things stand, he can get to the crucial 50 per cent-plus holding more easily than anyone, and pretty much at a time of his choosing. But he won’t accumulate any more shares that will push him past 30 per cent until he is ready to launch a full takeover; going past 30 per cent requires a full bid under Stock Exchange rules.

Buying Lady Nina’s stake would force Kroenke to make a full bid for all the club’s shares, but self-evidently he does not want to do that yet, and certainly not at Lady Nina’s asking price. Nor does he have to.

Usmanov can’t easily get beyond 50 per cent as things stand. Because even if Usmanov bought Lady Nina’s stake, he would hold around 42 per cent and would struggle to attract another eight per cent of fan-shareholders (of 12 per cent) to sell to him to get him to a controlling interest.

Kroenke also has the qualified support of the influential Arsenal Supporters’ Trust. Of the AST’s 750 members, around 300 of them own shares, and they control about 1,860 shares (three per cent) between them. It is estimated that around one per cent of Arsenal’s shareholders, dating back generations, are dead and untraceable, so the ownership battle actually focuses on 99 per cent. Again, that favours Kroenke.

A 15.9 per cent stake for a completely new shareholder would be useless to them for the foreseeable future if they had ambitions to own Arsenal and were not already allied to either Kroenke or Usmanov. That level of ownership would not even guarantee a seat on the board (Usmanov has no seat), let alone any shot at control.

A new buyer may fancy a £100m chunk of Arsenal if there were genuinely a passionate Arsenal fan, had no desire for control or meaningful influence, had the spare cash to spend, and perhaps wanted to see a long-term upside either in dividends or growth in value of the stock.

Yet speculation that a completely new, unaffiliated face on the scene can buy 15.9 per cent and becoming a serious player for control betrays a lack of understanding of the current ownership structure and power balance.

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