Everton acts on oligarch, but there will be costs

Much of the focus on links between oligarchs and football has been on Chelsea, but there are also issues relating to Everton.   In all fairness, it should be said that there have been links across the economy with so-called Russian ‘dirty money’ with London being nicknamed ‘Londongrad’ because of the presence of oligarchs.   It has been claimed that many in the financial services sector and in leading law firms have done well from their presence.

Everton has suspended its sponsorships with Russian companies connected to Uzbek-born billionaire Alisher Ushamov, who was hit by EU sanctions earlier this week.    It is suspending all commercial sponsorship arrangements with the Usmanov-related companies USM, Megafon (Russia’s second largest phone network) and Yota. The club will also remove the Megafon logo from the side of Goodison Park, the USM signage from the Finch Farm training ground and the sponsor from their women’s team’s shirts.

The club said, ‘Everyone at Everton remains shocked and saddened by the appalling events unfolding in Ukraine.’   Chelsea has been criticised for not making a similar statement, although it is open to question how far football clubs, and in particular their managers, should be expected to make political statements.

On Monday evening, Usmanov’s assets were frozen by the European Union, who called him a “pro-Kremlin oligarch with particularly close ties to Russian President Vladimir Putin”. On Tuesday, one MP called for the UK government to do the same.

Usmanov defended himself on Tuesday afternoon in a statement that called the EU decision “unfair” adding that “the reasons employed to justify the sanctions are a set of false and defamatory allegations damaging my honour, dignity, and business reputation. I will use all legal means to protect my honour and reputation.”

The 68-year-old Uzbek is a business associate of Everton owner Farhad Moshiri and co-owns USM Holdings and MegaFon, two of the club’s major sponsors. He has long been considered a key investor in Everton, but is not a shareholder in the club. 

Usmanov’s presence would appear to go beyond just money. The Athletic has previously reported that former manager Rafa Benitez met Moshiri and Usmanov on the Russian billionaire’s luxury yacht last summer before joining the club. 

Everton, though, insist the latter has no influence in the interview process for new managers.

Usmanov, a former shareholder at Arsenal (where he had ambitions to become owner), was once Russia’s richest man and built his wealth through metals. He previously welcomed links to Putin, telling Forbes in a 2010 interview: “I am proud that I know Putin, and the fact that everybody does not like him is not Putin’s problem.”

Usmanov, whose wealth is estimated at £13 billion, owns Sutton Place, a Grade I listed Tudor mansion near Woking, Surrey, that once belonged to J. Paul Getty.

USM is a holding company, domiciled in Russia, with substantial investments in minerals, telecommunications and technology. According to its website, it was founded in 2012 with a view to “streamlining and consolidating various projects of Alisher Usmanov and his partners”.

In January 2017, USM agreed an initial five-year deal to sponsor Everton’s training ground, which became known as USM Finch Farm. By 2019, the value of that deal had risen to £12 million a year, with Everton and USM also agreeing to an enhanced partnership that would see USM and MegaFon branding displayed at Goodison Park. 

In January 2020, Everton announced that USM had agreed to pay £30 million for an exclusive first option to acquire naming rights for their new stadium. This was not for the actual rights, but merely the right to buy them.

In their accounts for the 2019-20 financial year, Everton announced their sponsorship, advertising and merchandising revenue reached a record £63.7 million, an increase of 119 per cent on the previous year. They attributed this large growth to “the one-off impact of the club receiving a £30 million option premium under the new agreement with USM Holdings for the purchase of a naming rights contract for our new stadium at Bramley-Moore Dock at a pre-agreed annual value and term”.

Everton recorded combined losses of £265 million in their last three sets of accounts (£140 million in 2019-20, £112 million in 2018-19 and £13 million in 2017-18), attributing £67 million of the 2019-20 total directly to COVID-19.

Premier League profit and sustainability rules allow for losses of £105 million over a three-year period, although restrictions have been relaxed as a result of the pandemic. Crucially for Everton, that calculation does not include spending on capital expenditure — such as a new stadium — as well as areas such as the women’s team, community projects and the academy.

Yet even taking into account deals with USM, MegaFon and Yota, the accounts showed a clear need to diversify and continue to grow revenue streams. 

It is not yet clear what, if any, financial hit Everton have taken in their decision to suspend the deals but sponsorships are important to the club’s ability to fall within FFP guidelines and there will be an extra onus on the club’s commercial department to bring in new forms of revenue to compensate for any potentially significant chunks of the money the club rely on that will be lost.