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Many known unknowns about Everton deal

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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