Everton’s U.S. Buyer Leaves Trail Of Questions Over Its Finances

(Bloomberg) -- Life for Everton seemed to be finally looking up. After more than a year of fruitless takeover discussions, its $700 million stadium was progressing, the team had turned a corner on the pitch, and a US investor with a history of football deals had agreed to buy the English Premier League club.

That optimism now looks misplaced. Everton has been docked 10 points for breaking financial rules, and its buyer, 777 Partners, is under scrutiny. 

Over the past five years, the Miami-based investment firm has rapidly become one of football’s biggest multi-club owners, targeting teams in financial distress. It previously stated it has up to $10 billion of assets under management, with businesses ranging from airlines to film studios. It has used assets from its insurance arm to build out its push into football.

But Premier League officials studying the suitability of 777 Partners to own a major English football club have also begun adopting a more skeptical stance in recent weeks after questions were raised about its finances, according to people with knowledge of the deliberations. They asked not to be identified because the information is private.

With the sale of Manchester United looking downsized, Everton is the biggest club in English football changing hands since American investor Todd Boehly and his consortium bought Chelsea last year. The Liverpool-based team would be the prime asset in the burgeoning footballing portfolio of 777 Partners, along with a stake in Sevilla FC in Spain.

Fears over the future of Everton as a Premier League club have continued, though. Narrowly missing the drop to the second tier last season, current legal owner Farhad Moshiri has halted funding. 777 Partners decided to make loans of at least £100 million ($126 million) to keep the club running, according to two people familiar with the matter.

“The Moshiri years have seen Everton being increasingly stressed financially,” said Christina Philippou, principal lecturer in accounting, economics and finance at the University of Portsmouth. “While the potential change in ownership could positively affect Everton’s financial situation through investment and refresh, it is important to ensure that the new ownership is right for the club.”

As the Premier League decides whether to approve or block the takeover of Everton, 777 Partners says there’s a campaign to torpedo its purchase.

In October, the New York Times reported the deal had stalled because the firm failed to provide audited financial statements to the UK regulator. The US Attorney’s Office in Manhattan has started probing 777 Partners, its investments in sporting teams and whether the firm ran afoul of US money laundering laws, according to a person familiar with the inquiries. The investigation, which was first reported by online news site Semafor, is at an early stage and may not lead to criminal charges.

“777 Partners considers these scurrilous and damaging accusations to be deliberately timed to undermine its ongoing commercial activities, including the ongoing period of regulatory approvals for the proposed acquisition of Everton FC by 777 Football Group,” the firm said in a statement.

Yet people involved with the firm say there are questions about the company’s financial practices. According to three of them, bonuses that were offered to some staff never materialized and on some occasions payroll was delayed due to a lack of available funds.

A consultant hired for its acquisition of Belgian club Standard Liege in 2022 was paid only last month. The person said the money arrived after they had threatened to complain to the Premier League. A 777 Partners spokesperson said the company “endeavors to pay financial commitments on time to the best of our ability and knowledge.” 

Everton, founded in 1878 in Liverpool, is one of England’s biggest teams and has played continuously in the top flight since the early 1950s. Its most recent heyday, though, was in the mid 1980s, when it last won the league championship. Its points deduction means it’s third from bottom in the drop zone before hosting Saudi-owned Newcastle United on Thursday evening. 

It’s the kind of club that fits into 777’s stable. The company has picked up stakes in teams ranging from Vasco da Gama in Brazil to Genoa Cricket and Football Club, a 130-year-old Italian club that last won the league title in 1924. The strategy is to focus on businesses that can offer predictable long-term recurring revenues, according to a person familiar with the company. 

Josh Wander, one of the firm’s founders, has sought to allay concerns among Everton fans. He told them in October that 777 Partners has more than 3,000 employees who have built “relatively conventional but profitable finance and insurance businesses that enabled us to invest and build positions in more exciting industries such as aviation and sports.”

“Not all of our 60 businesses will be profitable at any one time but the fundamental underlying business performance of the 777 Group is strong,” he said in an open letter.  777 Partners declined to give Bloomberg information regarding its group accounts, which are not publicly available. 

The investments have also enabled Wander to gain influence within European football. He was elected to the board for the European Clubs Association as the representative for Standard Liege. 

More often than not, owning football clubs means footing annual losses with the hope of recouping money when the club manages to put together a successful run on the pitch, or cashing in on the rising valuations of sports teams.

When Everton is included, 777 Partners is forecasting €180 million (£194 million) in losses across its eight football teams for 2023, according to documents seen by Bloomberg. 

Earlier footballing deals attracted attention. 777 Partners this year purchased a majority stake in Hertha Berlin from Lars Windhorst, a German financier who is selling assets to repay creditors. Windhorst told a UK court in July that he sold Hertha for €65 million, adding that it helped repay a €50 million loan previously provided by 777 Partners.

But he also told the court that the firm had not yet paid the remaining sum. The company, though, wouldn’t have been able to take over the club had it not paid, according to a person familiar with the situation. 

777 Partners was founded in 2017 and led by Wander, 42, who started his career focusing on insurance settlements for injury claims, and former investment banker Steven Pasko, 75.

Its initial success came from structured settlements, a controversial US industry where claimants agree to settle personal injury claims in exchange for a series of payouts. Its Bermudan reinsurance business, 777 Re, is the group’s biggest business, according to people familiar with the matter.

The various subsidiaries involved in structured settlements have been accused of using predatory financial practices, according to reports from the Washington Post and football investigations site Josimar. The 777 Partners spokesperson said many of the cases described in recent media reports either found in favor of the company or were dismissed.

In November, credit rating agency AM Best downgraded 777 Re.’s financial strength rating from “excellent” to “fair,” due to 777 Partners LLC not providing audited financial statements for the past two years. 

Based on the Premier League’s test for owners and directors at its 20 clubs, prospective buyers must show sources of funding. 777 Partners also has to get the blessing of the Football Association, the sport’s governing body in England. 

Everton has several contingency plans that have been in place for months, in case the Premier League rules against the American buyer, according to one person familiar with the matter. 

“We recognize that change can be unsettling,” Wander said in his letter to Everton fans. “We also acknowledge that there have been a number of misleading and concerning reports in the media which have created a perception of instability and unrest around our proposed purchase. Rest assured, in this case, that the truth is far more boring than the fiction.”

--With assistance from Luca Casiraghi, Ava Benny-Morrison and Giulia Morpurgo.

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