Fans Comment
Carl Marlens

CLEVER FORTRESS: WHY THE PRICE DOESN’T FEEL RIGHT..
7 January 2005

When wondering why the parties involved in the Fortress Sporting Fund have been stalling on an agreed deal that has continued for months and more months, just refer to the above graph.  It is quite clear that by prolonging any payment made on a deal negotiated in Pounds Sterling, Mr Samuelson’s fund has saved fortunes in the real cost of buying a 29.9 % stake in Everton Football Club. This is because we know that his investment partners are wealthy European individuals who will be holding their riches in Euro currency bank accounts.

In real terms this means that in August when negotiations are believed to have been finalised the Euro rate to the pound was circa 1.52, whereas now it is fluctuating around 1.4. Forgive the use of decimal points but the reality is therefore:

• £12.8 million cost circa 19 million Euros in August 04

• £12.8 million costs circa 18 million Euros today

So it's a tidy 1million Euro’s cheaper to buy the exact same stake in Everton today than it was in August, and when you also consider the interest rates paid on savings accounts of that size, Fortress look to have been clever to keep onto the money for as long as they have.

What is not clever, from Everton’s point of view, is that £12.8 million is allowed to buy a whacking 29.9% of the club!

Firstly, it is a 3^rd lower than the share price, which may have been the flexibility needed to be shown by the board to any investor at the start of the season because the club could not offer security for avoiding relegation. There was significant risk and that has its price. The stunning reality is that Everton now look certain to survive this season (and many more) in the Premiership and with that risk taken away, not to mention the possibility of European qualification, the investment deal should be tweaked to accommodate the increased value of the product.  The investment sum would be more realistic at £15million; at the very least Fortress could be haggled for the extra 1 million Euro’s they are likely to have saved by delaying the transaction; Everton will also have lost any interest it could have gained by having the funds in the club's accounts.

I am certain the board had every intention to do the right deal at the right price in the early part of the season; few could therefore criticise them, after all a share is only worth what someone is willing to pay for it and they had found a buyer.  However should nothing in the deal be changed now, to accommodate the different economic and risk circumstances, fans would surely question the very bad deal being struck.  To quote Clay Harris’s article in yesterday’s Financial Times “Kenwright's offer to sell an ultimate controlling interest in his club at a near one-third discount to the recent £1,250 share price is hardly the stroke of a financial genius.”  Proving he can do a good deal is surely an opportunity the Chairman must grasp; it would counter all his doubters once and for all.

Carl Marlens