As Everton owner Farhad Moshiri inches closer to closing an investment deal with US firm MSP Sports Capital, rumours of a full takeover that had previously been mooted have fallen away.
On Monday it was revealed that New York-based MSP had entered into a period of exclusivity with Moshiri so that they could conduct further due diligence and have the time required to go through the finer points of a deal without the pressure of other bidders being in the frame.
The exclusivity agreement, which usually lasts for a period of 30 or 60 days, forbids Moshiri from entering into any discussions with any other party other than MSP. In recent weeks interest from Miami-based 777 Partners had become more prominent.
READ MORE: MSP chief has already hinted at what Everton investment deal would look like
READ MORE: Everton investment state of play after Moshiri and MSP strike 'exclusivity' deal
The MSP deal that is being negotiated at present is a little different from what maybe was expected initially. Moshiri wants to find the final tranche of funding for the stadium build at Bramley-Moore Dock while also bringing in some expertise to aid the future growth prospects of the club as a business, especially at a time when the stadium offers a unique opportunity to explore revenue streams that have previously been unavailable at Goodison Park.
MSP are set to take a 20 to 25 per cent stake in the Blues, although they are pursuing a deal that would see them purchase preferential shares instead of taking equity in the club itself. What that means is the deal is essentially debt financing for Everton, with MSP charging interest on the deal.
But there is the opportunity for MSP to turn those preferential shares into equity further down the line, providing Moshiri with a potential way of raising further capital in the future or an exit route at a later stage. For MSP the deal protects their position and reduces the risk factor by limiting their exposure at what remains a fragile time, fraught with uncertainty for Everton, whose final game of the season on Sunday will determine whether it will be the Premier League or the Championship next season.
Acquiring preferential shares does not come with voting rights for the business, but despite that it is understood that MSP, who have been keen on Everton as an investment opportunity since the turn of the year, will have an element of operational control at board level that would allow the club to lean on the expertise of new faces with new ideas, bringing about some change at the top that fans have been calling for.
Sources familiar with the matter have told the ECHO that as many as two board seats could be available for MSP should the deal close, with the potential for departures from the current board.
Having operational control of its investments is very much part of the modus operandi for MSP, who have a significant stake in the McLaren Formula One team where co-founder Jahm Najafi sits as vice-president.
Writing in an op-ed for US sports business website Sportico last year, MSP co-founder and former super agent Jeff Moorad, explained the approach that the firm, who have indirect football investments across Europe through a tie-in with Bolt Football Holdings, take to where it deploys capital.
Moorad wrote: "At MSP Sports Capital, we only pursue investments with operational control or significant influence.
"Fundamentally, investors are attracted to the disproportionate annualised returns available in sports, with limited relative downside risk. In order to achieve favourable risk-adjusted returns, investing discipline remains critical in an industry where emotion can easily take hold of the uninitiated. We believe it’s critical to evaluate both macro dynamics (trajectory of the sport, league management, league competition, regulatory environment) and micro dynamics specific to the asset (management team, brand power and digital presence, fan/sponsor loyalty, local market dynamics and real estate opportunities).”
Moorad, who was the inspiration for the titular character in the 1996 movie ‘Jerry Maguire’, also expanded on MSP’s relationship with Bolt Football Holdings, a firm where he and Najafi sit on the board alongside founder and Crystal Palace part owner David Blitzer. Bolt currently have investments in clubs such as German side FC Augsburg, G.D. Estoril Praia in Portugal, Spain’s AD Alcorcon and Belgian side SK Beveren.
"We’re thrilled to be building a global soccer platform with partners David Blitzer and Bolt Football Holdings,” wrote Moorad in his guest editorial last year.
“We’re also fortunate to have a law firm like Morgan Lewis (a firm where Moorad has a role as partner and chairman of the firm's global sports practice) on retainer—there is a premium on having the right professionals in place to be able to strike when a deal is hot."
For MSP, they are highly unlikely to deviate from their way of investing through having operational control, which points to seats on the board and a say in the direction of the football club. That, in turn, points to them potentially seeing a longer term path at the club, especially given the value proposition they believe exists through the construction of the state of the art 52,888 seater stadium on the banks of the River Mersey.
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