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Tuesday, March 28, 2023

Hertha BSC: New investor secures future profits

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The new shareholder 777 Partners has taken over almost 80 percent of the shares in Hertha BSC. Should the Bundesliga club, which has been in deficit for years, make profits again, the US investor will receive 95 percent of the distributions. In return, his voting rights are limited.

The new Hertha investor 777 Partners has secured a large stake in the Bundesliga club’s future profits. This emerges from new documents in the commercial register star and evaluated “Capital”. According to this, the US financial investor from Miami is entitled to 95 percent of the amount to be distributed in the event of a profit distribution via preferred shares. The parent club Hertha BSC eV, which continues to hold a minority in the outsourced corporation Hertha BSC GmbH & Co KGaA, with which the club participates in Bundesliga operations, is entitled to five percent of the distributed profits.

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777 Partners joins Hertha BSC

Hertha, which has been in deficit for years, officially announced the entry of the new investor 777 Partners at the weekend. The US company, which already has stakes in other football clubs in Spain, Italy, France, Brazil and Australia, has taken over the 64.7 percent stake in Hertha BSC KGaA, which previously owned Lars Windhorst’s Tennor investment company Had kept. After months of mudslinging over power at Hertha, during which it became known that Windhorst was said to have hired an Israeli security company to attack former club president Werner Gegenbauer, Tennor announced his departure from Hertha in the fall.

Tennor and 777 Partners are said to have agreed months ago on the sale of Hertha shares – the terms of this deal are not yet known. On the other hand, negotiations between the club side and 777 founder Josh Wander were still dragging on. The process took longer than expected, partly because of the legal formalities, Wander said when presenting the deal on Monday. Wander announced there that he wanted to invest a further 100 million euros at Hertha.

The minutes of a shareholders’ meeting last Friday show that 777 increased its stake in Hertha BSC KGaA to 78.8 percent as part of a capital increase – via a mixture of common and preferred shares. The investor thus holds significantly more shares than Windhorst before.

However, the parties have agreed that the voting rights of a majority owner will be capped in the event of changes to the company’s articles of association – at around 63 percent. As a result, Hertha BSC eV effectively continues to have a blocking minority, even if its share in KGaA has fallen to 21.2 percent after the capital increase subscribed by 777 partcapners alone. The new investor is entitled to two of the five mandates on the KGaA’s supervisory board, and Wander and his 777 co-founder Steven W. Pasko will sit there in the future.

Wander “respects” the 50+1 rule

At his presentation on Monday, Wander said he had “the greatest respect” for how football is organized in Germany. He was alluding to the so-called 50+1 rule, which limits the control of external investors in Bundesliga clubs. In the case of Hertha and other Bundesliga clubs set up as limited partnerships, this is guaranteed, among other things, by the fact that management decisions are made solely by the general partner controlled by the club. Hertha managing director Thomas Herrich had also announced that the contracts with 777 would now be submitted to the DFL for approval.

The entry of the US company and the provision of a total of 100 million euros of fresh capital announced by Wander help Hertha out of a serious financial crunch. In the past three financial years, the losses have totaled more than 200 million euros – mainly due to expensive transfers and high spending on player salaries, but also due to loss of income in the corona crisis. In the first half of the current 2022/2023 financial year, Hertha posted another minus of almost 45 million. Euro. In addition, the repayment of a 40 million bond is due this fall. Observers therefore already saw the DFL license for the capital club in serious danger.

Chief financial officer Herrich and club president Kay Bernstein announced another tough consolidation course on Monday. Referring to the former investor Windhorst, who had openly spoken of the “Big City Club” quickly qualifying for the Champions League, Bernstein said the time of “megalomania” was over. Herrich spoke of drastic cost reductions in the next two to three years. The renovation will be “not a sprint, but a marathon”. But if Hertha ever makes a profit again, it will primarily end up in the new investor’s pocket.

Source: Stern

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