Melbourne Victory lost $6.7 million and was in deep financial trouble just months before it struck a deal that could hand control of the club to a US private equity investor within five years.
So bad were the financial problems at the A-League’s best supported club that Victory’s auditors warned there was “material uncertainty” it could continue as a “going concern”, the club’s 2021-22 accounts show.
Melbourne Victory fans invade the AAMI Park pitch during the A-League game against Melbourne City on December 17.Credit:AAP
The club’s revenue was badly affected by the pandemic – as were other professional sports clubs – but higher expenses also left it in the precarious position of having its liabilities exceeding its assets.
The deal with investor 777 Partners and the club’s financial woes pre-date last month’s violent pitch invasion at AAMI Park that has led to initial sanctions against Victory, including limiting the number of fans it can have at games. Final penalties are yet to be determined by Football Australia.
The investment from 777 Partners was described by Victory as a “strategic” move in October, but a recent 145-page document sent to shareholders shows the deal could give the investor the right to buy up to 70 per cent of the club on what appear to be favourable terms.
The deal requires shareholder approval, which major existing Victory investors have indicated they will give, but this is yet to occur.
Melbourne Victory declined to comment when approached by The Age about the agreement.
News of the deal comes amid ongoing fallout from the December 17 pitch invasion and violent attack on Melbourne City goalkeeper Tom Glover. Police have charged 32 people over the incidents that made international headlines.
The pitch invasion came after fans voiced strong opposition at the move by the Australian Professional Leagues – which now runs the A-League – to sell the next three grand finals to Sydney. Until now, the top-ranked team had hosted the final.
Original Style Melbourne – the Victory supporter group that organised a fan walk-out at the City game that later turned violent – described the APL as having chosen “corporate greed over football’s needs” in the lead-up to that game.
In October, Victory announced a deal with 777 Partners that was pitched as giving the firm a minority stake in return for up to $10 million. While that was correct – the initial investment was worth $8.7 million for a 19.9 per cent stake – there was more to the deal.
The private equity investor was given the option to own up to 70 per cent of the club within five years through an investment of up to $30 million, the documents show. After four or five years, 777 Partners also had the right to walk away from Victory and be repaid the $30 million at a compounding interest rate of 10 per cent a year.
The deal would also give it a preferential position over existing shareholders if Victory was liquidated.
When the deal was announced, Victory chairman Anthony Di Pietro described it as a “strategic investment” that would “supercharge its growth strategy”.
Melbourne Victory, pictured celebrating winning the 2015 A-League grand final, have been one of the most successful A-League clubs.Credit:Getty
While the pandemic has had a significant impact on Victory’s finances, the club has been losing money since 2018-19, with total losses of $13.2 million in that period.
Before the investment from 777 Partners, Victory’s auditor Moore Australia said the state of the club’s finances “indicate a material uncertainty exists that may cast doubt on the group’s ability to continue as a going concern”.
Victory’s major shareholder Mario Biasin, the co-founder of major builder Metricon, died in May. Metricon was a major Victory sponsor, while Biasin owned 26 per cent of the club.
The Miami-based 777 Partners is a significant investor in world soccer, with stakes in Spanish La Liga side Sevilla, Italian Serie B team Genoa and Brazilian club Vasco De Gama. It recently struck a deal to make a significant investment in German Bundesliga side Hertha Berlin.
Mario Biasin (left) and Victory chairman Anthony Di Pietro (right) in 2015 with the club’s former goalkeeper Mitch Langerak.Credit:Melbourne Victory Twitter
It invests across insurance, finance, media and entertainment and aviation. The investor also backs new low-cost Australian airline Bonza. That airline will replace Metricon as a major Victory sponsor and its logo will appear on the front of the club’s jersey.
The deal with 777 Partners, if approved by Victory shareholders, will dramatically dilute the interest of existing major shareholders in the club including Di Pietro and businessmen Joe Mirabella and Sam Cuteri.
According to documents filed with the Australian Securities & Investment Commission, they intend to vote in favour of the 777 Partners investment. An expert report from RSM recommended the deal be approved by shareholders.
Private investment is playing a growing role in Australia soccer, with private equity firm Silver Lake now the biggest shareholder in the A-League. Victory also owns a stake in the A-League, along with the other 11 teams in the competition.
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