Everton’s Ownership, Moshiri and John Textor – Part II

The Everton ownership conundrum continues to meander along a not so merry path, a path littered with many kicked cans. It is now 51 weeks since Moshiri confirmed his desire to sell Everton and was quoted by many media outlets as follows:

 “The nature of ownership and financing of top football clubs has changed immeasurably since I first invested in Everton over seven years ago.

“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.”

There were other potential  suitors before September 15th 2023, all of whom fell away or were proven to be incapable of funding the acquisition of Everton.

A familiar pattern of excited “Farhad Moshiri has agreed to…” type reports have all faded away, some – as was the case with 777 Partners extended with increasingly implausible reasons for an extension or cause of delay, to stories disappearing almost as if they never existed with no plausible reason given by Moshiri or the failed acquirer. 

Patterns of behaviour and reporting that are extremely consistent with the reporting since 2018 of senior debt packages to fund Bramley-Moore, and indeed the completely unsubstantiated claims (as yet) that the stadium is fully-funded.

The latest iteration of a potential buyer is, of course, John Textor, of which I wrote extensively in Part I – here 

For the record, I have approached Eagle Football Holdings to discuss the potential takeover of Everton Football Club by email on two occasions and had no response.

The situation at Everton

Time and time again I see complacency over Everton’s position, Everton’s current ownership, what needs to be done to make the club more marketable, and what the impact of no change of ownership is having on the club, including football operations currently, and the potential impact should this matter not be resolved going into 2025 and towards the end of the season.

Just as was the case with the 777 Partner announcement made on 15th September 2023, there was no real expectation of resolution before the then year end (possibly late Q4) we are approaching a similar time frame for 2024. Shareholder, creditor and regulatory approval would even under optimal circumstances, now take us to the end of 2024. Yet again, with a less than full strength squad and with players out of contract next summer, we face going into the January transfer window (which may be critical) with a fair chance of a change of ownership not being resolved.

With every passing month the club’s financial position deteriorates. What’s the justification for saying that? We have approximately £650 million of external debt. On a conservative basis that debt grows by, or requires interest payments of £1.2 million a week – for the avoidance of doubt, we don’t have to pay that in cash, but that’s the estimated  and conservative ongoing cost of the club’s debt pile – whether some is paid or just added to the outstanding balance.

The failure to secure long-term, lower cost debt financing for the stadium (i) damages the club on a weekly basis and (ii) by virtue of our choice of creditors, makes the sale of the club much more difficult.

Equally, the intransigence of the creditors. They will see it as their confidence in their security arrangements, makes the purchase more difficult also. Moshiri, whose debt of £450 million is not included in these figures, is set to lose all that previous funding, but the external creditors believe their individual positions to be secure.

Rights and Media Funding have an effective charge over the club’s bank accounts (providing them with financial control in a default position); 777 Partners, now A-Cap have a subordinated security arrangement with Rights and Media Funding and believe themselves to be relatively secure. It should be noted though that they are the least secure of the three main creditors. Finally, Friedkin Group have a charge over Everton Stadium Development Company (the owners of the stadium and the Bramley-Moore lease) plus a charge over the entire share capital of Blue Heaven Holdings, the Isle of Man Company that holds Moshiri’s 94.1% holding. It is believed that their loan is due for repayment before the end of June 2025. A default would see Friedkin with the legal right to acquire Everton Football Club.

All of the above, plus in some quarters, some concerns over Moshiri’s status as the beneficial owner – a claim not evidenced, in fact wholly contradicted by evidence in the public domain such as audited accounts, Everton and Premier League statements – makes the due diligence required by a potential purchaser an essential and pivotal act.

So, again, we have to turn our attention to the latest potential suitor, John Textor.

Sky Sports News reported the following on 15th August 2024:

On the 24th August 2024, the Daily Mirror  and others quoted him as follows

“I am still an owner in Palace – I would have to clear out of that before I could buy anything else.

“We have made clear our interest in having a majority interest in a UK club, whether it is Championship or Premier League.

“Yes, we are looking at Everton along with everybody else. I would have to rationalise my interest in Palace before I could close anything.

“I am an Anglophile when it comes to football. When I see these legendary teams come along, some in the Premier League, some in the Championship, clubs that I grew up with, they have an appeal.”

There’s no questioning Textor’s desire to majority own and control a Premier League club. Whether he can and the possible reasons for doing so are discussed below.

John Textor and the listing of Eagle Football Holdings on the New York (or other) Stock Exchange

For a considerable period of time Textor has mused about and promoted the benefits of listing Eagle Football Holdings on the New York Stock Exchange. Eagle Football Holdings has interests in four football clubs, through a subsidiary company, Eagle Football Holdings Bidco Limited. “Eagle Football” has invested in Crystal Palace, Brazil’s Botafogo de Futebol e Regatas, the Belgian club, RWD Molenbeek and Olympique Lyonnais.

The potential for listing Eagle Football Holdings was first mooted by the now disbanded New York listed, Cayman domiciled, SPAC Iconic Sports Acquisition Corp. The last published confirmation statement of Eagle Football Holdings showed a related (one assumes) company, Iconic Sports Eagle Investment LLC as their 2nd largest shareholder, holding 16.79%.

In January of 2023, John Textor was quoted extensively as “planning a $1.2bn flotation, later this year”  – clearly, for whatever reason that listing failed to materialise.

More recently, (August 26th 2024) new reports of a planned listing at a much higher valuation ($2.3bn) appeared in the media.

Current Crystal Palace position, impact on Eagle Football Holdings and Steve Parish

Interestingly, because Eagle Football Holdings shareholding in Crystal Palace is a minority position (45.18%), Palace’s financials do not appear in the consolidated accounts of Eagle Football Holdings Bidco Limited. That, apart from control – although John himself admits he has no issues with the way Palace is run effectively by Parish – is the probable reason why Textor has on several occasions, including recently, sought to acquire the shares of his three other significant shareholders at Palace. 

That offer to purchase has been rebuffed, and as yet, an offer to acquire Textor’s holdings has not been accepted or perhaps even made. Remember that in order to acquire Everton (assuming for a second he has the resources to do so) he has to dispose of his Palace shares.

It seems to me, as an observation, that a listing of Eagle Football Holdings on the New York Stock Exchange is contingent on Textor gaining control by way of a majority shareholding of either Crystal Palace or Everton Football Club. By doing so, the size of Eagle Football Holdings virtually doubles overnight (at least in turnover terms) – making the offering much more significant. There is a parallel in the logic of acquiring control of Palace or acquiring Everton with 777’s logic in trying to acquire Everton. Albeit the comparison stops there.

 To gain control of Palace, one, some or all of the existing Palace shareholders have to sell stock to Eagle Football Holdings, and effectively all agree to rip up the existing shareholder agreement surrounding voting control. One would imagine that any of the other shareholders would want a premium for their shareholding for ceding control, and de facto becoming significant minority shareholders in Crystal Palace. A position most are unlikely to permit.

Particularly with Steve Parish, who, reportedly, shares  similar concerns to me that there is always the potential for a conflict of interests between the shareholders of the multi-club operator and the interests of an individual club. 

The potential for a conflict of interests increases if the multi-club operator, in this case Eagle Football Holdings, becomes a listed entity. As such, with public, minority shareholders, the duties of the directors of the listed company always have to lay with the interests of the publicly listed company, even if that’s not consistent with the interests of the individual club. Therefore the sale of a key player, or a restriction on transfer budgets may be necessitated by the financial demands of the listed parent company, even if it is absolutely apparent it is not in the interests of the individual club.

In the case of Steve Parish and Crystal Palace he is absolutely correct to express such concerns. If, in the unlikely (in my opinion) event of Textor selling his Palace shares and acquiring Everton, exactly the same potential for a conflict of interests exists and is, in my opinion, the primary reason for not joining a multi-club operation. 

The only situation where a multi-club operation works is when there is a clear lead club. I have used the analogy that the multi-club operation is an ecosystem, and can only exist and thrive if there’s a healthy apex predator at the top of the food chain, Manchester City being the clear example. There is no guarantee that Everton, in the event of being acquired, would be that apex predator – how for example would Olympique Lyonnais fans react to such a scenario. Equally, and particularly in a listed entity which requires growth (as Textor himself admits) is there any certainty that a bigger club in another league might not be acquired, taking over that apex position?

A public listing raises cash

Of course, another reason for listing a company is to raise cash. We have already seen the amount of debt taken on in the acquisition of Olympique Lyonnais (Editors' note: see clarification below) and the selling of non-core assets post acquisition. Acquiring Everton, or alternatively acquiring a majority interest in Crystal Palace requires fresh capital, predominantly equity not further debt. Everton of course, being a much more expensive and cash demanding acquisition.

It’s not altogether certain that the latest attempt to list or float Eagle Football Holdings will be any more successful than the previous attempt – especially with the uncertainty over which Premier League asset Eagle Football Holdings holds in the future. Yet as mentioned earlier, it almost seems like a requirement for such a purchase to occur.

Offering document seeking $25 million

There’s an additional piece of evidence that raising new cash is an important objective for Eagle Football Holdings and that’s an offering document currently being circulated to professional, suitably qualified investors looking to raise what might be considered pre-IPO money. In the context of the sums required, this offering document of  $25 million is relatively small. It’s published by and led by a small investment house operating out of Miami. It is perhaps another indication of the need for cash, and in my opinion at least, continues to raise the question as to the suitability as well as the ability (for all the reasons given) for the John Textor majority owned Eagle Football Holdings to be in a position to acquire Everton.

Question to Moshiri

All of which, whilst interesting to Crystal Palace fans and Textor observers, points the finger back to Moshiri regarding Everton and asks plainly “what is going on and when is a suitable new owner going to come forward?”

It’s a situation that desperately needs resolving.

 

This article was originally published at theesk.org and is reproduced here by permission for the benefit of ToffeeWeb readers.

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