Everton have announced that the club’s majority shareholder, Farhad Moshiri, has signed an agreement with Miami-based 777 Partners over the purchase of the Premier League club.
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. Here, The Athletic looks at what was announced on Friday, and the hurdles still to be vaulted before any takeover is complete.
What has Moshiri said?
Moshiri, a 68-year-old British-Iranian based in Monaco, bought Everton in 2016 having previously owned a minority stake in Arsenal with his business partner Alisher Usmanov. He has poured at least £750million ($931m) into Everton in the period since, with very little to show for his generosity.
“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.
“I have been open about the need to bring in new investment and complete the financing for our iconic new stadium at Bramley-Moore Dock, on the banks of the Mersey, which I have predominantly financed to date. I have spoken to a number of parties and considered some strong potential opportunities.
“However, it is through my lengthy discussions with 777 that I believe they are the best partners to take our great club forward, with all the benefits of their multi-club investment model.”
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.
“We are truly humbled by the opportunity to become part of the Everton family as custodians of the club, and consider it a privilege to be able to build on its proud heritage and values,” said Wander in the Everton statement on Friday. “Our primary objective is to work with fans and stakeholders to develop the sporting and commercial infrastructure for the men’s and women’s teams that will deliver results for future generations of Everton supporters.
“As part of this, we are committed to partnering with the local community over the long-term, working on important projects such as the development of Bramley-Moore Dock as a world class stadium venue, allowing thousands more Evertonians to attend our home matches and contribute to the economic and cultural regeneration of Merseyside.”
Moshiri added: “As a result of this agreement, we have an experienced and well-connected investor in football clubs who will help maximise the commercial opportunities, and we have secured the complete financing for our new stadium, which will be the critical element in the future success of Everton.”
How much are Everton worth?
So were 777 always the front-runners to buy Moshiri out?
No. The first group to be linked with a move for Everton was led by a Polish-American businessman called Maciek Kaminski. His interest in the club was first reported in September 2022, but months of talks went nowhere and he was last heard of failing to complete a deal to buy Belgian club Kortrijk.
However, for most of 2022 and the first half of 2023, Moshiri and his advisors repeatedly denied that he was looking to sell the club at all. They said he was only interested in finding some new investors to help finance the construction of the stadium. Having paid about half of the revised £760million ($943m) construction budget out of his pocket already, Moshiri was hoping to secure the rest of the funding via a combination of cheap, long-term debt and whatever a new partner could be persuaded to add to the pot.
Once it became clear that Kaminski did not have the funds for a deal of this size, Moshiri started talking to two U.S. groups: 777 Partners and MSP Sports Capital.
Based in New York, MSP Sports Capital was founded by American sports agent Jeff Moorad and American-Iranian investor Jahm Najafi in 2019. It has already invested in Spanish side Alcorcon, Germany’s Augsburg, Danish side Brondby, Estoril in Portugal and SK Beveren in Belgium, as well as having stakes in F1’s McLaren and the X Games.
At times earlier this year it seemed that Moshiri was set to announce a deal with MSP, only for the pendulum to swing back in 777’s favour.
Then, in May, it swung back. MSP signed an exclusivity agreement with Moshiri to invest £150million ($190million) in the club and its stadium subsidiary that would see it acquire a 25 per cent stake in the business.
But last month, as first reported by The Athletic, this deal collapsed because of opposition from one of Everton’s existing lenders, Rights and Media Funding Limited. Talks duly resumed with 777, culminating in Friday’s announcement.
MSP Capital withdraws from Everton investment talks
MSP did, though, agree to lend Everton’s stadium-construction company subsidiary almost £140million ($174m), with that money arriving in three tranches between May and August. That money has already been used to pay off the IOUs the club had been sending to Laing O’Rourke, the firm building the new ground. Those IOUs are mounting once more.
What does this all mean?
So, Moshiri is selling his 94 per cent stake in Everton, bringing the curtain down on a very expensive seven-year relationship with the club, and all parties can just move on… right?
Erm, not so fast.
As a sentence towards the bottom of the club statement notes, “closing of the transaction… remains subject to regulatory approval, including from the Premier League, the Football Association and the Financial Conduct Authority”.
If the statement came with sounds effects, “remains subject” would be emitting very loud groans due to the enormous weight it is holding up.
That regulatory approval is otherwise known as the owners’ and directors’ test, a hurdle that anyone who exerts some control over a football club must clear. For many years, this has been more of a draught-excluder than a genuine obstacle, but it is gradually getting higher and may actually become something resembling a fence when the UK government gets around to introducing the game’s first independent regulator at some point next year.
Some observers have suggested that Wander, 777’s co-founder, might struggle to pass the test because of his 2003 conviction for drugs-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.
Everton’s ownership: Moshiri, 777, MSP Sports Capital and what we are hearing
And beyond that?
But even if 777 gets past that stage, it will then have to convince the club’s existing lenders — owed more than £350million ($433.9m) 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 all, that is just to get the club back to square one. More cash will be required to meet Everton’s negative cashflow — the club is still losing money — and even more will be needed to give whoever is managing the team a fighting chance of survival. Or perhaps promotion, if it comes to that.
Oh, and there is still about £200million ($247.9m) needed to finish the stadium.
All of this adds up to about 777 fresh questions for Moshiri, Everton and their potential new owners.
Strewth, where do you start?
If we put aside the two big ones above — regulatory approval and the consent of Everton’s secured creditors — there is a massive question mark about the club’s cashflow.
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.
— EFC_FanAdvisoryBoard (@EFC_FanAdvisory) September 15, 2023
That leads to 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, and 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.
They might be doing well. They might not. It’s hard to tell.
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?
And how much is 777 actually giving Moshiri for his shares? Given the size of the debts and the likelihood of needing to borrow a lot more money, is £1 too much?
We are only half joking. What is more likely is that no money is changing hands at all until 777 knows which division Everton are playing in next season. We will all get a clearer view on that next month when the independent commission looking at the club’s alleged breach of the financial fair play rules last year announces its verdict. A points deduction is very much on the table as a possible punishment.
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?
Not that they will have a say in this but what does a colossal bet on Everton mean for 777’s other clubs? What will fans of Genoa, Hertha, Standard Liege and the rest make of Everton’s addition to the group. Who is the top dog here?
And spare a thought for poor old Laing O’Rourke. Times are tough in the stadium-construction business, as the margins in that industry have never been particularly generous. Does it down tools until it knows who is paying its bills or keep going, hoping it will get paid, eventually?
We could go on but you get the general picture and you do not want more questions, do you? You want answers.
When I started out as a reporter, I received some sage advice from an older colleague: if you are really stuck for a final line, consider this as your “break glass in case of emergency” stock phrase.
Well, it’s an emergency at Everton, alright, so the answer to all of the above is “only time will tell”.
Multi-club projects are dangerous to the future and fabric of football
(Top photo: Tony McArdle/Everton FC via Getty Images)