Everton are the subject of takeover rumours once again.
A report in The Telegraph on Monday evening claimed that former Manchester United and Chelsea CEO Peter Kenyon was the frontman for a consortium that wished to acquire the Toffees from Farhad Moshiri, with chief executive of Minneapolis-based Talon Real Estate, Maciek Kaminski, and American businessman John Thornton among the group interested in purchasing the club.
The report goes on to state that Moshiri, whose Everton dream has turned into something of a nightmare over the past two years due to ongoing heavy losses and regression on the pitch, wants in excess of £500m for the Goodison Park outfit. The British-Iranian, who issued an apology to fans last week, has been known to be open to investment for some time, especially with a new stadium to fund, but giving up equity in the club has not been on the agenda, although the developments of 2022 could change that.
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It has been a year of tumult for Moshiri and the Toffees. The Russian military invasion of Ukraine had a significant knock-on effect on the business dealings of the club, with Moshiri's long-time friend and business partner Alisher Usmanov's sanctioned due to historical ties to Russia president Vladimir Putin. That forced Everton to end their association with major commercial partners USM and MegaFon, while Moshiri himself stood down from his position on the board of USM.
Throw into the mix a relegation battle that the team were mired in until late in the campaign, where their Premier League survival was at stake, and the not-so-small matter of losses of £372m losses over the past three season, and it has been a more than challenging period for a club that is also in the process of trying to realise their new stadium vision, a project that will require more capital to be raised.
Only time will tell whether or not the reported consortium interest transpires into something more concrete, although the start point of a reported £500m asking price has raised some eyebrows, especially given the club's debt and the fact that Moshiri, who attempted to reinforce the balance sheet by reducing debt when he converted £100m of loans into equity at the start of the year, would almost certainly be leaving at a considerable loss if he accepted such terms.
But team values, in football and other sports, are not beholden to normal market trends. Their value is predicated on whatever the bidder is willing to pay. Football is an industry like no other and the strength of the media rights that exist over the next six years - some £10bn for the Premier League - make it an attractive proposition to would-be owners betting that the sums continue to rise as they have done for the past two decades, especially with new revenue streams and ways to engage a global fan base coming on board.
Chelsea were sold for some £2.5bn last month, with Roman Abramovich's forced sale to a US consortium fronted by Los Angeles Dodgers part-owner Todd Boehly pushed through due to UK sanctions related to ties to Putin. It was a deal where Abramovich had agreed to wipe out the £1.5bn debt that the club owed to him through his Fordstam Ltd company, and one that was at the time the biggest team sale in sporting history. It took just four weeks for that to be beaten, however, with the Denver Broncos NFL team to be sold for $4.5bn (£3.7bn).
Now, you can't compare the values paid for mid-range NFL teams to mid-table Premier League teams as there is no relegation, meaning the risk is substantially less. Would-be investors and owners know that they will be a part of the elite group that shares the enormously lucrative media rights regardless of how bad they are on the pitch in any given season. That, unless you are one of the established 'big six', doesn't apply to the Premier League, and Everton's close shave in 2021-22 is something that investors will know they are not infallible or immune to the threat of relegation and being outside the '£10bn club'.
Renowned US business magazine Forbes have been placing valuations on teams for some years. As of May 2022, their own valuation of Everton stands at around £754m, and while the reports of Moshiri wanting £500m may seem like overvaluing the club based upon its current financial state, the strength of team valuations in the current climate, where a lot of capital from private equity has been making its way into the game post-pandemic and team valuations have soared, the Forbes valuation may not be too far off.
Whatever happens, it is hard to see Moshiri getting a return on his investment that he made in 2016, one that now stands at £600m+ in terms of what he has put into the club through loans, his shareholding of the club standing presently at 94 percent.
Premier League football clubs don't come up for sale very often, especially storied ones such as Everton that have a global reach and have undoubted potential to achieve far more than they are currently. The fact that a new stadium is already moving through the gears is appealing, although any new owner will take on a project where much of the funding for it still needs to be found, and that kind of heavy capital expenditure so early on means that a £500m deal can quickly turn into one that costs £900m, with Bramley Moore Dock's development set to cost at least £500m.
The cachet of owning a Premier League football club is enough for those with deep pockets to enter into the market. A look at Moshiri's willingness to spend only to potentially end his time at the club several hundred million lighter in the pocket shows that sometimes the pull of football sees normal business sense thrown out of the window. If Everton were a normal business then the current situation it finds itself in financially, and with the capital expenditure required for completion of an ongoing development, would mean the figure would likely be less than the £500m mooted in The Telegraph report.
But football clubs aren't normal businesses and their values have continued on an upward trajectory.
Speaking to Bloomberg earlier this year, Gerry Cardinale, who recently acquired AC Milan through his RedBird Capital Partners firm and who owns 11 percent of Liverpool owners Fenway Sports Group said: "The valuation discussion is complicated. There isn't a great amount of rigour to it. There is a little bit of LIFO (last in, first out) to it, as in you look at the last trade and you put a mark-up on it. What is alluring there, and deceptive, is that people have become used to everything always going up in sports. That's anti-Darwinian, that's not possible. Now, the slope of that curve may change, but for the foreseeable future everything keeps going up.
"The valuations signal the fact that there is something very premium here, there is scarcity value and there is something very unique in everything that is going on in media and the convergence of (sports, media, entertainment, technology) streams where this is some of the best content that you can access."
The Premier League's continued growth as a global brand, now reaching markets such the US in ways that it never previously did, means that clubs are valuable assets. Whether or not the value of the Toffees reaches the kind of levels that see Moshiri get a return on his considerable investment, or attract the kind of investor willing to commit to considerable capital expenditure on top of a purchase price, remains to be seen. Turning around a football club that is having to work under the watchful eye of the Premier League to ensure that it meets profit and sustainability regulations, and one that has seen three consecutive periods of heavy financial losses, will be a tall order for whoever is at the helm, Moshiri or otherwise.
