From Bloomberg this morning…
Bloomberg
Everton-777 Is a No-Win Game for England’s Football Chiefs.
The Premier League needs to prove it can be trusted to oversee the beautiful game.
April 3, 2024
By Matthew Brooker
Matthew Brooker is a Bloomberg Opinion columnist covering business and infrastructure. Formerly, he was an editor for Bloomberg News and the South China Post
Many are called to be owners of Premier League football teams, and very few fail to be chosen. Russian oligarchs, Middle Eastern petrostates and a Hong Kong ex-hairdresser who was later convicted of money laundering are among those who have passed the tests of suitability for stewardship of a club in the world’s richest domestic soccer competition. That makes the extended scrutiny drawn by 777 Partners LLC’s attempted takeover of Everton FC all the more notable.
The saga looks to be approaching its end game, more than six months after the US investment firm agreed to buy the struggling Liverpool-based club from British-Iranian billionaire Farhad Moshiri. The Premier League’s board said in a letter last month that it “is currently minded” to back the offer subject to conditions, Bloomberg News’s David Hellier reported. These include providing proof that Miami-based 777 has the funding to support Everton’s operations and to finance the completion of a new stadium that’s under construction.
When the transaction was announced in mid-September, advisers expected the deal to close by the end of the year. In January, Premier League Chief Executive Officer Richard Masters said that a conclusion was “hopefully weeks” away. Mid- to late-April now looks more realistic. The delay isn’t unprecedented: The league took 18 months to clear the sale of Newcastle United FC to Saudi Arabia’s sovereign wealth fund. It can move rather more quickly if it wants to, though. The $5.25 billion deal that saw US businessman Todd Boehly and Clearlake Capital take control of Chelsea FC was approved less than three weeks after it was formally announced in May 2022. The sale of a minority stake in Manchester United Plc was waved through in February after two months.
Masters told a parliamentary committee that the Everton process was dependent on 777 Partners providing “satisfactory answers” to questions, implying that the source of any holdup lay with the would-be acquirer. Still, anyone in the Premier League’s shoes might well be tempted to drag their feet on a decision, at least if they’ve read media coverage about the US investor.
Buying a top-tier club in the world’s most-watched sports league brings a level of public attention that is far beyond what most privately owned companies are used to — and this scrutiny has not been kind to 777.
The deluge of adverse publicity could fill several columns on its own, even in summary. Details unearthed extend as far back as 777 co-founder Josh Wander’s arrest on a cocaine charge as a student more than two decades ago. (Wander has been honest about his mistakes and they have no direct bearing on his business operations, the firm has said.)
Of more relevance, 777 was called a “house of cards” last month in a lawsuit filed in New York over a disputed debt, the latest in a series of legal claims the firm has faced.
A Canadian budget airline in which 777 is a minority investor had four jets repossessed last year over alleged missed lease payments, the subject of another lawsuit filed in London.
In February, AM Best, a credit-rating firm specializing in the insurance industry, downgraded the group’s Bermuda-based reinsurer 777 Re to C-, or “weak.” As recently as November, its financial strength was rated A-, or “excellent.”
The barrage of negative developments has fed doubts over the soundness of 777 Partners’ business model and the robustness of its finances.
The group, co-founded by Wander and former investment banker Steve Pasko, started in 2015 in the structured settlements business, where companies pay a lump sum for the rights to a stream of periodic payments that are typically awarded to resolve a personal-injury lawsuit. It expanded into football club ownership after what the firm called “multiple high-value wins” provided capital to invest in new areas.
777 has followed the model of multi-club ownership, pioneered most notably by Manchester City’s Abu Dhabi-based backers and now widely imitated. Among other advantages, multi-club groups can smooth financial performance and source talent more widely. The US firm has bought teams such as Standard Liege in Belgium and Vasco da Gama in Brazil — storied names, though lacking recent success. Everton would be the last and most important piece in this jigsaw: a major name in the most lucrative league, yet a perennial underachiever that hasn’t won a trophy since 1995.
The link between an insurance-like annuity business and professional football might not seem obvious, but in some respects they’re not so different. In effect, 777 is making a bet on undervalued media rights — exchanging the lump sum that the firm will pay for Everton (likely to be low given the club’s $415 million debt and the amount the Miami firm has already extended in loans) for these regular payments.
There is a clear commercial logic here: The question is whether 777 has the management expertise and financial resources to effect the necessary improvement in its club network.
For the Premier League, though, it’s hard to see much upside. It needs this decision process like an on-field concussion. Potential owners are subject to what’s popularly known as a “fit and proper” test of suitability, and this was tightened last year in anticipation of the government’s intention to create an independent football regulator, a plan that’s now going ahead. The less confidence that the government has in the league’s ability to police itself, the more interventionist the new regulator is likely to be.
This puts the Premier League in an unenviable dilemma. Wave through the 777 Partners acquisition, and it becomes hostage to the possibility that things may turn south, leaving an impression of laxness on the part of the game’s administrators. Turn the deal down, and Everton could be pushed into administration, leading to recriminations from fans — and charges of hypocrisy against the Premier League, given the parade of undesirables and occasional incompetents that have been allowed to own clubs in the past.
The best policy might be to stall and wait for the situation to resolve itself, by 777 Partners losing heart, perhaps, or another bidder emerging. Every Premiership team worth its salt knows how to run down the clock when the occasion demands. Don’t be surprised to see a bit more of time wasting.
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