In the old days, football fans wanted a sugar daddy owner
who could fund extravagant spending sprees in the transfer market to power
their club to trophies.
Farhad Moshiri appeared to fit the bill. The British-Iranian
bought into Everton in 2016 and took majority control two years later. He
invested at least £750mn into the club to start construction on a new stadium
and snap up players.
Except his cash never paid off on the pitch. When business
partner Alisher Usmanov was sanctioned in the wake of Russia’s invasion of
Ukraine, it exposed how reliant Everton had become on external capital. The
club had to cut commercial ties with Usmanov-backed USM, while Moshiri’s own
shares in the Russian company were put out of reach.
Following months of talks, Moshiri has now agreed to
sell his 94 per cent stake in Everton to Miami-based firm 777 Partners, a
serial collector of football clubs. It will mark a stark change in approach.
Josh Wander, 777 co-founder, told the FT just a couple of week ago that fans “want
to be monetised.
The deal shows that one rich man is no longer enough in
football ownership, as the numbers get bigger, the stakes get higher. A
different breed of benefactors (sovereign wealth funds and private equity
firms) are getting in on club ownership, while scrutiny of who is in charge
intensifies.
Even so, £750mn should have bought a competitive team, not
one scraping to avoid relegation. Dud signings, payouts to former managers and
a capital-intensive new stadium are a bad combination.
Any prospective takeover is subject to regulatory approval from the Premier League, the Football Association and the Financial Conduct Authority, but if all progresses smoothly, the club suggested the transaction might go through by the end of the year.
The agreement, if approved, would see 777 Partners acquire
Moshiri’s full stake in Everton, which accounts for 94.1 per cent of the club’s
shares. The Athletic lhas
looked at what was announced on Friday and the hurdles still to be vaulted
before any takeover is complete.
“The nature of ownership and financing of top football clubs
has changed immeasurably since I first invested in Everton over seven years
ago,” said Moshiri, who has written an open letter to the club’s other
shareholders, in a statement. “The days of an owner/benefactor are seemingly
out of reach for most and the biggest clubs are now typically owned by
well-resourced private equity firms, specialist sports investors or
state-backed companies and funds.
Who are 777 Partners?
Everton’s prospective new owners are a private investment
firm, founded in 2015 and led by managing partners Steven Pasko and Josh
Wander, who claim to have “deep sector knowledge, underwriting expertise and
depth of vision” on the sports section of its website.
They boast investments across many different sectors, mostly
in the United States, including aviation, financial services, insurance, media
and sports. But they have also built a global multi-club network
featuring Genoa in Italy, Sevilla in Spain, Vasco da Gama in Brazil,
Standard Liege in Belgium, Red Star in France, and Melbourne Victory in
Australia.
In March, they added a German club to their portfolio after
purchasing a controlling stake in Hertha BSC, who were relegated at the end of
last season and currently languish second-bottom of Bundesliga 2.
Allegations of
racketeering emphatically denied
Some observers have suggested that Wander, 777’s co-founder,
might struggle to pass the Premier League owners’ and directors’ test because
of his 2003 conviction for drug trafficking.
Far more likely to cause him and 777 some difficulties, however, are the
various court cases they are fighting in the U.S., where the firm has been
accused of fraud and racketeering. The Miami-based business denies these claims
and is contesting them in court, but the Premier League et al will want a lot
of reassurance.
But even if 777 gets past that stage, it will then have to
convince the club’s existing lenders — owed more than £350million between them
— not to demand immediate payment of their loans, as is their right.
Because whatever bargain 777 has struck with Moshiri for his
shares — and it is likely to be a very conditional deal that will not see the
Anglo-Iranian businessman seeing any cash any time soon — it is difficult to
see how the numbers make sense if 777 immediately has to shell out £350million
to repay the loans.
After several years of heavy financial losses, Everton have
reduced the bleeding but they still require significant monthly top-ups.
Friday’s announcement says nothing about who is paying to keep the lights on
while we wait for a change of ownership.
More questions than
answers
There are numerous questions about 777’s motivation for
doing this and how they propose to fund a deal of this size. Once you add
everything up, this could be a $1billion turnaround project.
Does 777 have that kind of money? There is nothing on its
balance sheet to suggest it does. Its structured settlement business is not
making much money at the moment as rising interest rates have ruined the margin
on that game, while its aviation arm does not appear to be flying at the
moment, either. None of its football investments looks close to paying off,
which leaves its insurance and private credit businesses.
Perhaps the plan is to borrow the money via a bond issue.
That might explain why the FCA has a say on this, although it should be noted
that the FCA now has a say on all football takeovers as the Premier League has
tightened up its takeover rules in order to make them independent
regulator-proof. Or maybe the long-term
plan for the whole 777 portfolio of distressed clubs is to package them up and
float them?
Does this deal go ahead if Everton are likely to be playing
Championship football next season? Does any deal to take on their current
liabilities go ahead under that circumstance?
There are more questions than answers.
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