Is Dangote’s potential purchase of Arsenal a smart business move?
If he had his way, Africa’s richest man, Aliko Dangote would purchase Arsenal. Over the last few months, Dangote has reiterated his desire to buy the London based English Premier League club which he supports and while his previous attempts were far from concrete, he appears to be considering a serious move in the future.
To buy Arsenal, Dangote will have to stump up hundreds of millions of pounds as the club is currently valued at over 900 million pounds. Being a shrewd businessman, it is unlikely that Dangote’s probable purchase of Arsenal for close to a billion pounds is driven solely by passion as there must be an attractive business proposition behind the bid. And so with the immense outlay needed to take control of the club, the big question is this: Is buying Arsenal a smart business move?
The answer, according to data from MailSport research over the last ten years, is yes. Since 2005, English football has seen an influx of foreign owners investing millions of pounds to assume ownership and control of the clubs in both the first and second divisions. Of the 44 clubs in the top two divisions in England, 27 (61 percent) are controlled by foreign owners who paid a total£2.765 billion when they bought them. However, years later, the values of these clubs has risen to £5.788- an increase of more than 100 percent.
If Dangote’s bid proves successful, he will become the third African party with ownership interests in the top two divisions of English football as Hull City, relegated last season from the Premiership are owned by the Allam family from Egypt while South Africa’s Brian Katzen owns 20 percent of Swansea City.
At the time Stan Kroenke, the current majority owner of Arsenal took control in 2011, the club was valued at £731 million but four years later, the value has risen to over £900 million. While there are many other expenses to factor into consideration, a club with the global stature of Arsenal is mostly self sustaining as it generates significant income to cover running costs. In the 2013-2104 season, for example, Arsenal’s financial analysis showed that the club had a total turnover of £304 million- the 4th highest in the English Premier League- with gate takings and match-day income bringing in £100 million while £121 million was generated from TV and broadcasting rights. Commercial operations earned the club £59 million while another significant income generator was retail with a total intake of £18 million. Other income components were property development and player trading. Compared to its turnover, the club’s wage bill- its single highest annual cost item- was £166 million thus representing 55 percent of turnover.
The bottom-line is that Arsenal, as a business entity, will generate enough income to cover its own expenses without the owners having to incur major additional costs.
Dangote’s expected takeover bid of Arsenal will be anything but straightforward though as current majority owner, Stan Kroenke, is regarded as a tough boardroom operator however, Dangote appears to have his moves figured out. “I might buy the club,” he says. “Not at a ridiculous price but a price that the owners won’t want to resist. I know my strategy.”
The post Is Dangote’s potential purchase of Arsenal a smart business move? appeared first on Ventures Africa.