The potential winners and losers of an Everton takeover

By Chris Feeley 07/02/2016

For months now, the rumours and conjecture have abounded of Everton finally securing outside investment into the club. 16 years after declaring that he ‘promised to find investment’, Mr Kenwright’s ’24/7’ search is seemingly approaching its final act. However, with official information scarce in the public domain, there is increasing demand from supporters for the club to clarify whether this comes in the form of a takeover or simply an additional interest into an already convoluted and complicated ownership structure.

In the absence of clarity, fans are left to speculate what this means for Everton moving forward? Undoubtedly, the potential of a takeover brings with it both optimism and scepticism in equal measure. What appears clear though is that, in the advent of Mr Kenwright’s name no longer being associated with the Board of Everton Football Club for the first time since 1989, a seismic shift in the landscape will occur for everyone invested in the club. This is a look at how all parties involved could be affected by the change.

The Investors

It is widely acknowledged that John Jay Moores and Charles Noell, apparently under the umbrella of JMI Services, have been conducting due diligence during a 6-week period of exclusivity. This was reported by The Times on 22 December 2015; without evidence of an extension, it can be assumed that the exclusivity has now ended. Whilst other rumours have persisted regarding additional investment groups waiting in the wings, from places including China and the Middle East, these have remained unnamed and out of the press. JMI Services appear to be the most serious of perspective new owners, despite fluctuating rumours circulating that there are still issues preventing them and/or Mr Kenwright from signing off on the deal.

Whilst (from the outset) Messrs Moores and Noell appear to have the potential to allow Everton to compete again both domestically and on the European stage, their investment is viewed by many with a huge deal of scepticism and trepidation. Moores is acknowledged as a hugely successful tech entrepreneur and financier, as well as the previous owner of the San Diego Padres. Noell has an MBA from Harvard Business School, is the co-founder of JMI, and has spent the last few years investing heavily into Irish horse racing through his Merriebelle Farms stables.

Unlike many of the current US investors in the Premier League, there is evidence of the pair holding a longer term interest in ‘soccer’. On 28 December 2015 The San Diego Union-Tribune reported on the interest in Everton by adding that Moores and Noell are currently also looking into the possibility of adding an MLS expansion team in the San Diego area, and had discussed the idea as far back as 1996. So why is there growing discontent about a pair of wealthy and successful investors, who have a long standing interest in the game, taking over at Goodison Park?

The alarm bells started with their failed investment in Swansea City. The Welsh club did not reach an agreement with the Americans over an offer to purchase an initial 30% of the club, with the potential for JMI to double their share holding. A club that has an unconventional ownership structure, the supporters trust became increasingly wary of the proposals for all existing major shareholders to dilute their portfolio and influence to accommodate the new ‘investment’.

When Phil Slumber, Chairman of their Supporters Trust, met with Mr Noell, he was left ‘unsure’ as to why Messrs Noell and Moores wanted to invest. As the ‘investment plans’ were rumoured to involve solely paying for the purchase of the shares, with the potential to saddle the club with future debt to pay for its running and development costs, the board appeared less keen on the deal and declared it ‘not the right time’ for investment. The proposals also appeared to value Swansea at just £100M, which in the current economic climate approaching the new bumper TV deal was seemingly below its true market rate.

The history of Mr Moores as San Diego Padres owner also has raised some cause for concern. Although he was at the helm when they moved to their new home at Petco Park in 2004, the financing of that deal involved the Padres only contributing approximately 30% of the $456.8M total cost. Whilst this appears a good deal for Padres fans, $225M of the funding came from public money. This essentially meant that the fans part-funded their own stadium, and in the current economic climate is not going to be replicated by Liverpool City Council. Allegations of Mr Moores having a relationship with San Diego City councilwoman Valerie Stallings, who left her position in January 2001 rather than face criminal charges that she had voted on Padres stadium issues while taking gifts from Moores, also will not sit well with many Evertonians.

Whilst the Padres had a modicum of success under Moores, reaching the World Series in 1998 before being beaten by the New York Yankees, it could be said that they are still widely regarded as the same small market team that they were when he took over. There has also been criticism that his enthusiasm and interest in the team waned as a result of the breakdown of his marriage, a split that would ultimately push him to sell the team for an eventual $800M in 2012. When it was revealed that $200M of this was taken directly from the Padres' television deal, money that is arguably intended for the running and improvement of the club, it left many fans with a very sour taste.

It is also worth noting that Mr Moores is older than Mr Kenwright. With Mr Kenwright previously stating that his doctor wouldn’t allow him to run the club into his 70s, and Mr Noell well into his 60s, it raises questions over the long-term intentions of the pair's decision to invest in the club. Unsubstantiated rumours have surfaced recently on social media suggesting that the purchase is being viewed as a short-term opportunity to ‘flip’ the club for a sizeable profit with minimal investment. With suggestions of other interested parties waiting in the wings, the reported projections of Messrs Moores and Noell looking to make upwards of £60M when selling to the highest bidder in a matter of 18 months by simply performing remedial renovations at Goodison Park should not sit well with fans. It also raises notions of the pair potentially looking to asset- strip the playing squad in an effort to maximise profits.

In summary, Messrs Moores and Noell will ultimately view Everton as a decent short-term investment. The notion that they will run the club as anything other than a profit-making venture is unlikely, as their experience in venture capitalism will surely guard against seeing personal losses similar to those suffered by fellow American Randy Lerner at Aston Villa. This is especially likely when considering the new TV deal will come into effect in the summer, seeing the Premier League awash with further riches. Whilst Moores is unlikely to see the spectacular returns he achieved when selling the Padres, reported to be around $720M, the pair could well see potential within a squad that has extremely saleable assets. It remains to be seen whether they will more resemble FSG, providing funds for the desperately needed improvement in stadium facilities, or the unthinkable prospect of another Hicks and Gillett.

The Manager

Roberto Martinez has arguably now become the most polarising figure involved with Everton Football Club, filling the void left by Mr Kenwright in light of his seemingly enforced seclusion. Despite recent results, his ‘style’ is viewed as cavalier or kamikaze in equal measures and his dogmatic refusal to waiver from his principles on how the game should be played is now widely considered as less admirable and more arrogantly infuriating. What surely isn’t in doubt is that, if he was employed at anywhere other than Everton, he would likely not have been afforded the same support in the face of recently perceived underachievement. The manager’s repetitive insistence otherwise smacks of an interest in self-preservation rather than a basis in reality. The club is seemingly no nearer his reported promise of achieving Champions League qualification. This indicates that if the change of ownership were to happen, his tenure would be in the most perilous position of his managerial career to date.

However, if ownership of the Padres by Moores is anything to go by, this may not be the case. From the time he purchased the Padres in 1994 to when he relinquished control in 2012 he had only 3 managers, with both departures coming as a result of offers to manage bigger market teams: Jim Riggleman to the Chicago Cubs in 1995 and Bruce Bochy to the San Fransisco Giants in 2007. Discounting Riggleman’s tenure, due to his relatively short time working with Moores, both Bochy and Bud Black won less than half of their games in a win-loss league. This does not suggest a ‘trigger-happy’ owner, but arguably one who is happy to let the club ‘tick along’ regardless of results. Whilst this approach is unquestionably easier to adopt in a league free from the threat of relegation, it would surely give Martinez hope that his head would not be on the chopping block as quickly as many expect.

The prospect of a change in ownership could actually be secretly welcomed by SeÃ±or Martinez. Regardless of his public affability when discussing club matters in the media, very much appearing to toe and promote the company line, the frustration must surely be palpable when he regularly watches teams like Liverpool and Tottenham being able to spend £20M on a new player at the drop of a hat? Even more so when the likes of Stoke City and West Ham United are able to attract his ‘targets’ ahead of the historically more successful Everton?

Although it must be said that Martinez has been afforded significantly more funds (when required) compared to his predecessor, his budget seems to only be available to him during the final hours of a transfer window. Whilst this could be argued as being a ‘negotiating strategy’, the perception is of a club scraping the barrel. By adopting a ‘one in, one out’ policy, seemingly to part finance any incoming deals and penny-pinching at a time when the rest of the league is cash rich, comes at the expense of embedding often much needed reinforcements to take the club forward. Without the reliance on private financing from murky sources (Vibrac, JG Funding, Rights and Media Funding etc), the manager may be able to secure targets in a timely manner and enable them to integrate quicker. This would surely benefit the team and consequently his standing amongst the footballing public.

The CEO

Unlike Messrs Kenwright and Martinez, Robert Elstone does not polarise opinions. It is fair to say that he is widely disliked by the majority of Evertonians with an interest in the running of the club. Social media is awash with ridicule for his rumoured love of a halogen-induced tan. His promotion of Everton’s commercial partner Power 8, an apparent Ponzi scheme, brought shame on the club. His dismissive refusal to answer shareholders’ questions during and since the recent AGM is contemptible. Supporters and shareholders have every right to question his insistence on retaining commercial deals with Chang and Kitbag, especially when they appear to be significantly lower than those acquired by the club’s rivals. For many supporters, it has come to the point of asking ‘what does he actually do?' If a takeover was to happen, it is suggested that Mr Elstone would stand to lose the most, especially as the redevelopment of Goodison Park has always been something Elstone has declared as ‘not viable’.

However, taking a look across Stanley Park will give Mr Elstone hope. Were the club’s prospective new owners to adopt an operations model similar to that of FSG at Liverpool, Elstone could take on a role similar to that of Ian Ayre. It allows the new owners to run the club from afar, ultimately having final say on matters of importance, whilst retaining someone to manage the day-to-day issues ‘on site’. However unpopular that may be, this scenario offers them some continuity and guidance in their initial forays into what would be a new business market. This is surely the outcome that Mr Elstone is hoping for, as a successful working relationship with JMI could also open up opportunities for him in future to ply his ‘trade’ in the US.

Kenwright, the Board, and the ‘Friend of Everton’

From a financial perspective, selling the club for a reported £200M is good business. Dependent upon whether the price is based on the valuation of the whole club or just the Board’s shares, Mr Kenwright stands to receive between £50-65m for his shareholding. After the True Blue Holdings takeover valued Everton at approximately £30M, and it is reported that the current board members have invested nothing other than the cost of purchasing their shares, this is a healthy return on a club that has neither won a trophy nor significantly developed Goodison Park during the 16 years since. Indeed, Robert Earl stands to make well in excess of £40M on a club that he reportedly visited just once since acquiring Paul Gregg’s shares 10 years ago.

However, for Kenwright, it is the legacy of this takeover that will either enhance or severely tarnish his reputation amongst Evertonians. Although the fervour for his removal has quietened somewhat since the widespread rumours of his ill health were leaked into the public domain, he is still an exceedingly divisive figure amongst supporters. The labels ‘pro’ or ‘anti’ Kenwright are bandied around social media on a daily basis, and have been ever since the failed move to the Kings Dock. History lessons are not needed when discussing the contentious issues of NTL, FSF, and Destination Kirkby amongst others.

What does create suspicion amongst factions of Evertonians is the timing of these apparent takeover rumours. For a club that has supposedly adopted a ’24/7’ investment search since the turn of the century, to finally garner interest when the principal owner is apparently gravely ill appears disingenuous at best. The missed opportunities that subsequently were realised by Manchester City and PSG will ultimately be the yard stick that any new owners will be judged against, largely due to Mr Kenwright’s insistence that he will only relinquish control to the ‘right’ parties.

Also, the speculation that there is intent to redevelop Park by the prospective new owners will raise questions as to why the current incumbents haven’t shown any intent to do so despite at least two failed ground moves and feasible plans available for some time showing the potential to do so? Goodison Park, however much adored by the Everton faithful, has become a tattered old relic that is seemingly a metaphor for the club itself: a once proud front-runner on the global stage that is now an irrelevant mark resigned to the history books. Any plans to revamp and modernise the Old Lady will leave questioning fingers pointed squarely at the current board as to why this approach was not adopted sooner?

Finally, all the while lurking in the shadows, is the man Mr Kenwright gushed about being a ‘Friend of Everton’ — Sir Phillip Green. To some, he is the puppet master, pulling the strings behind every deal at Everton. To others, his involvement is a myth, a conspiracy theory, a fantasy created to drive the notion of Kenwright seeking council from an arch-villain in the vein of a Cardinal Richelieu. Whilst no-one from within the corridors of Finch Farm is likely to acknowledge the involvement of Green in the day-to-day running of the football club, the lapsing of the exclusivity period would provide the ideal opportunity for his influence to instigate the potential for a ‘bidding war’ from a rival consortium.

Conspiracists will point to the potential for a ‘perfect storm’. The sale of the highly maligned Kitbag recently saw Green withdraw his interest in the company at a time where Everton are having their books examined. Coincidental? With the money from China becoming more evident than ever in the European game, with the likes of AC Milan being recently linked with a buyout and numerous relatively high profile players being attracted by the exorbitant salaries, how long before a British club is acquired? These factors would point to the potential for the highest bidder to takeover, which would only serve to further line the pockets of those at boardroom level and possibly a few of their very good ‘friends’.

The Fans

The lifeblood of Everton will undoubtedly be affected most on a personal level by any takeover. It is fair to say that, bar the FA Cup success in 1995, being an Evertonian has not been easy since the creation of the Premier League. The club has gone from being a member of the ‘Big 5’ to being an irrelevant non-entity, largely due to brief flirtations with relegation and an incapability to recapture their form of the mid-to-late ’80s. Having teams like Chelsea and Manchester City rise to prominence, winning titles, and surpassing Everton so that they are now considered as ‘Global Giants’ was hard to watch but not hard to understand. The catalyst was a billionaire taking an interest. Simple. The notion that these clubs should be considered soulless sell-outs is one born out of bitter envy, and scant consolation considering that the Goodison trophy cabinet hasn’t been opened for 20 years. The potential of new investment should give fans hope that Everton will no longer be shackled with the financial handcuffs of yesteryear and will be able to once again compete with their rightful peers at the top of the English game.

Unfortunately, a cautionary note must be considered. Any new owner is unlikely to be able to profess the same love for the club as Bill Kenwright. The club is going to be run as a business, and one that is going to be expected to make profit. The recent vote against capping away ticket prices by owners in the era of bumper TV deals supports this. Even closer to home, the recent protests across Stanley Park at rises in ticket prices should indicate that fans are indeed now considered as customers that are expendable and easily replaced. With the slate of AGM questions posed by the club’s historical watchdog (the Shareholders Association) being disregarded and dismissed recently by the CEO, it does not bode well for future concerns. The thought of arbitrary rises in ticket prices (justified by nothing other than greed) should fill supporters with an element of dread, especially if the on-pitch product doesn’t represent value.

The one over-riding positive of this impending takeover is that it should serve as a vehicle to reunite the fan base. Go on any form of social media and you will see Blues arguing, some with valid arguments on either side and some just for the sake of it. The issues are plentiful; Kenwright, Martinez, relocation, planes, planned demonstrations to name but a few. All this has served to do is to stagnate any forms of progression. A takeover, good or bad, should be viewed as a point in history which enabled all supporters to draw a line in the sand and unite for the betterment of the club. Whatever that may be.

Note: At the request of a representative of JMI Equity, references to that firm have been changed to JMI Services, an independently managed firm. While John Moores was one of the principal, early investors in JMI Equity he no longer has operational involvement in that concern.

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