Everton fans, there is no sugar-coating it. This is bad.
The club statement about the latest collapse of takeover talks tried to put a positive spin on things by referring to exploratory discussions concluding, “good faith” and “alternative options”, but it is very hard to glaze a sandwich this unappetising.
To mix sporting metaphors, this spin ended up being a juicy full toss that Manchester United fans have mercilessly dispatched into the upper deck of the Jarrad Branthwaite Stand.
The fact that 99 per cent of the replies to the tweets we posted about the demise of the Friedkin Group’s (TFG) takeover related to United’s pursuit of Everton’s talented centre-back is almost as depressing as the state the 146-year-old club find themselves in today.
Almost but not quite because Everton — nine times champions of England, founding members of the English Football League and co-creators of the Premier League, Liverpool’s senior club — are in a deep hole and that is far more serious than transfer banter.
So, having set the scene, let us dive into the details.
What has happened to the Friedkin takeover?
In short, it is off.
The Texas-based firm, which is run by American billionaire Dan Friedkin, emerged as Everton’s potential saviour last month.
As first reported by The Athletic, TFG had been looking to add a Premier League club to its existing multi-club stable of Roma in Italy and Cannes in France for some time. The implosion of Everton’s last would-be hero, 777 Partners, appeared to present an opportunity to swoop in, tidy up the debts and pick up a top-flight club, with a large fanbase and storied past, that is about to move into a wonderful new stadium.
And that remains an attractive headline offer to anyone looking for an English club. Unfortunately, the rest of the story is less attractive, and that is what TFG discovered over the last four weeks of due diligence.
Rumours about the deal unravelling started to circulate this week, but TFG and Everton’s owner Farhad Moshiri initially denied the takeover was in difficulty.
That changed late on Thursday, though, when TFG informed the Moshiri, who purchased his initial 49.9 per cent stake in Everton in 2016, that it was out.
It was agreed by both parties to formally announce the news at 11am, UK time, on Friday. “Blue Heaven Holdings (Moshiri’s ownership vehicle) and the Friedkin Group entered discussions in good faith to explore whether a sale could be agreed,” the official statement said.
“Those discussions have concluded. The parties agree it is in both their interests for Everton to explore alternative options.”
Roma president Dan Friedkin and son Ryan (left) (Archivio Massimo Insabato/Mondadori Portfolio via Getty Images)
OK, so what really happened?
This was always going to be a complicated deal.
Everton lost almost £400million ($517m) between 2019 and 2023 and, while the club have desperately tried to rein in their spending, the annual loss actually doubled last year to £89m from 2022’s deficit of £45m.
These losses, and the construction of the new stadium at Bramley-Moore Dock, have been funded by debt. The biggest amount is owed to Moshiri in the form of £450m worth of unsecured shareholder loans — money he will never see again. The rest has come from three external lenders: Rights and Media Funding (RMF), 777 Partners and MSP Sports Capital. The combined total of those loans was almost £60om.
We say “was” because one thing has changed in the last month. TFG has paid off MSP’s loan of £158m and taken the New York-based investment firm’s mortgage over Everton Stadium Development Limited, the club subsidiary that owns the new ground.
However, TFG has actually lent Moshiri £200m, as he also needed to pay the next bill from Laing O’Rourke, the construction firm building the stadium, and the price of that extra money was a charge over Blue Heaven Holdings, too, which means TFG could, if Moshiri is unable to pay it back, end up with the stadium and 94 per cent of the club.
That sounds a lot better for TFG than it really is, though. MSP had the right to claim 51 per cent of the shares in April but did not because it knew the shares are basically worthless. What anyone who buys Everton is really acquiring is the debt and the responsibility to fund the team and finish the stadium.
That sum is a matter of debate that we will return to, but it is not the reason TFG has walked away.
The obstacle that it has decided it cannot clear is the debt to 777 and it is not just because £200m is a large number. The real issue is who that debt belongs to. That is why TFG’s decision is more concerning than just one interested party changing its mind after a period of reflection.
Work continues on Everton’s new stadium at Bramley-Moore Dock (Paul Ellis/AFP via Getty Images)
Go on…
The debt to 777 was accrued in chunks of £20m-£25m between September 2023 and May of this year, a nine-month fever dream during which Moshiri tried to convince himself and the Premier League that the Miami-based investment firm could afford an asset this precious (narrator: it could not and is now in the hands of insolvency experts, sparking crises at the various airlines, insurance companies and sports teams it owned).
But most of that money, like most of the money 777 invested in all of its other ventures, was somebody else’s money… and that somebody is A-Cap, an insurance group based in New York.
With its future in some doubt, largely thanks to its exposure to 777, A-Cap has taken control of 777’s assets and is trying to recoup as much money as it can. Those loans to Everton are assets and they are currently doing sterling work on A-Cap’s balance sheet at full value.
Nobody buying Everton, however, would want to pay that amount back, not least because 777’s security was junior to MSP’s and is still junior to RMF’s.
But who would a buyer do a deal with? A-Cap, right? If only it was that simple.
To cut a long story short, 777 left quite the trail of disgruntled customers and investment partners. The most disgruntled and frightening of those is Leadenhall Capital Partners, a London-based investment firm that specialises in the insurance industry.
In a blistering lawsuit filed in New York in May, Leadenhall accused 777 and A-Cap of fraud. The central claim is that 777 borrowed hundreds of millions of dollars from Leadenhall secured on assets it had already used as security on other loans, most notably from A-Cap. Known as “double-pledging”, it is like you or I mortgaging our house with multiple banks. And, if that is not serious enough, Leadenhall says 777 also used collateral it did not even own to secure loans.
777 and A-Cap have denied these claims, but the matter is being argued in a district court in New York. A settlement conference — a last chance for the parties to come to a deal — was scheduled for last week. I think we can assume no deal was reached.
So does TFG, or anyone in TFG’s shoes, do a deal with 777, A-Cap, Leadenhall or the court? Whose £200m is it really?
The uncertainty does not stop there, though, as there is a very real possibility that once Leadenhall’s civil case is resolved, the U.S. Department of Justice will file criminal charges.
Again, 777, A-Cap and their principals deny any wrongdoing, but serious allegations have been made by Leadenhall — and others in separate cases. Any self-respecting corporate lawyer would have to warn a client looking at Everton that there may be a potential Proceeds of Crime Act (POCA) issue down the line.
TFG was certainly concerned about this and talked to Moshiri’s lawyers about indemnity insurance — but it is very difficult to indemnify anyone against something as open-ended as a POCA liability, even if Moshiri was minded to do it. And he was not.
Branthwaite is one of Everton’s principal playing assets (James Gill – Danehouse/Getty Images)
Gulp… so what happens next, then?
Let us start with some good news. Everton/Moshiri do not have to repay TFG for a year and the interest on the loan is the same rate they are paying RMF — five per cent over base rate — which means those two loans are currently costing the club about £40m per year.
Another bite has been taken out of the £800m bill to build the stadium, too. There is somewhere between £50m-£70m left to pay for “fitting out” the ground’s interiors and the project remains on target for Everton’s moving date next summer.
We are afraid that is where the good news ends.
The 777/A-Cap loans are more expensive. The rate has never been revealed, but we know that A-Cap has been borrowing money itself at 18 per cent — global investment bank JP Morgan has just bought a corporate bond from A-Cap at that rate. Nobody, not even that lot, is daft enough to borrow at 18 per cent and lend at 10 per cent.
A conservative estimate would be that Everton are paying £1m per week in interest payments. It is probably a little bit more than that.
So, the club’s underlying financial position is not improving and Everton have still not fully replaced the generous sponsorship income they were receiving from companies linked to Moshiri’s business partner, Alisher Usmanov. The latter’s placing on the UK’s list of sanctioned individuals, following Russia’s invasion of Ukraine in 2022, was one of the key moments in Everton’s recent history.
Everton does, however, hope to bank a decent-sized cheque through Amadou Onana’s sale to Aston Villa in the coming days, which will help. As did the two sales they made in June — Lewis Dobbin to Villa and Ben Godfrey to Atalanta.
Onana, the Belgium midfielder, is expected to move to Aston Villa (Image Photo Agency/Getty Images)
But, in reality, these transfers only help Everton avoid any further problems with the Premier League’s profitability and sustainability rules (PSR) and perhaps provide some spending money for manager Sean Dyche to perform another minor miracle by keeping Everton up. The sums earned from Dobbin, Godfrey and Onana do not really move the needle in the bigger picture.
Selling Branthwaite might, but Everton have refused to budge from their £70m-plus valuation of the 22-year-old.
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Manchester United appear to be the only dance partners at the moment but before Friday’s takeover news, Everton had felt pretty relaxed about being able to ignore an initial offer of £35m, plus add-ons, and a slightly less cheeky follow-up of £45m, plus add-ons.
Suitably rebuffed, United have just spent more than £50million on 18-year-old defender Leny Yoro, a move that appeared to vindicate Everton’s valuation of the Premier League-proven Branthwaite. But a day is a long time in football and valuations of players can change even quicker than valuations of clubs.
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Where one player ends up, though, is small beer compared to what happens to Everton, a club that employs hundreds and is loved by hundreds of thousands.
The search for a new owner has already restarted — The Athletic was told the club is back on the market on Wednesday — and the obvious starting point will be all those who were kicking the tyres when TFG arrived on the forecourt.
Of those, perhaps the most likely is the group fronted by London-based entrepreneur Vatche Manoukian, as it did actually make an offer of £400m, which is significantly less than the sum of the debts but we are looking for straws here.
Crystal Palace co-owner John Textor also put his head above the parapet, but it is hard to see how he could get past the A-Cap/777 obstacle that frightened TFG as he has U.S.-based investors, too, and is looking to float his Eagle Football Group on the New York Stock Exchange. He would also need to sell his 45 per cent stake in Palace.
Textor counts the French club Lyon in his portfolio (Xavier Laine/Getty Images)
Are there other saviours out there? Sure, there will be people who see the same upside the Friedkins did and perhaps be as rich as them, too. But they will have lawyers who make the same observations as TFG’s lawyers.
And there is also the very stark question of how much Everton are really worth. There are no hard and fast rules for valuing football clubs — a multiple of annual revenue gives you an idea, but how much you multiply by is more art than science — but most experts have Everton in the middle bracket of Premier League clubs at around £600m, give or take £100m depending on your buyer’s feelings about history versus geography, or the number of fans compared to the number of academy prospects.
For some buyers, Everton will tick the right boxes and maybe they will go to the upper end of the range. For others, they will look like a reclamation project a long way from London.
The timing is not helpful, either, as there are at least half a dozen Premier League clubs for sale, all of whom have less debt and legal uncertainty than Everton.
This is probably enough doom and gloom for any Evertonian to handle in one go. As if the above is not bad enough, Everton are still meant to play Roma in a pre-season friendly at Goodison Park next month. I suspect the Friedkins will not be attending.
For the record, as a supporter of Southend United, a club that has been drinking in the same last-chance saloon, I am horrified by what has happened to your club and hope that you find, as we just have, better owners so you can go back to worrying about misfiring centre-forwards, full-backs who cannot cross the ball, the design of the away shirt and the price of a pint. As opposed to wondering if you even have a club anymore.
(Top photos: Getty Images)
