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US businessman John Textor has been threatened with legal action by three investors who backed his takeover of Olympique Lyonnais after the French club was demoted from the top division because of its financial troubles.
Hedge fund billionaire Jamie Dinan and co-investors Alexander Knaster and Edward Eisler wrote to Textor on Wednesday claiming he is obliged to repurchase $93mn of shares in his company Eagle Football Holding, which owns Lyon and two other football clubs, and demanding he do so within a week.
Textor confirmed receipt of the notice, but rejected the suggestion that any money was owed to the three investors, adding they were “not entitled to the contractual benefits they now claim”.
The dispute puts further pressure on Textor and his network of clubs. On Monday, he announced he would sell his stake in English Premier League side Crystal Palace partly to help raise funds for Lyon, which has been forced by the regulator to set out plans to improve its finances.
In March, Lyon reported a net loss of €117mn in the first half of its financial year, and outstanding debt, excluding money owed on player transfers, of €445mn.
Textor bought Lyon in 2022 at a valuation of almost €900mn including debt. It was the biggest takeover in French football history.
The original purchase was funded by more than $400mn of financing, mostly provided by US investment firm Ares Management, and $75mn in equity from Iconic Sports Management, the investment vehicle of the three investors led by Dinan, founder of York Capital Management and co-owner of the Milwaukee Bucks NBA franchise.
The contribution from Dinan, Knaster and Eisler was part of an agreement to merge Eagle Football with a special acquisition company owned by Iconic. Dinan and Knaster became board members at Eagle and Iconic took a stake in the company.
But the Spac merger was called off in 2023, and in July that year, Iconic’s backers exercised an option that they say required Textor to repurchase their shares, according to people familiar with the details. When this did not happen, they then hired M&A advisers at Perella Weinberg to find a buyer, but without success.
Following Lyon’s demotion on Tuesday, Iconic’s three backers sent Textor a letter threatening legal action if he did not repurchase the shares by July 2, the people added.
Dinan, Knaster and Eisler claim Textor owes them $93.6mn, consisting of the original $75mn plus interest. Iconic declined to comment.
Textor said: “Iconic have failed to comply with their obligations, including their complete failure to deliver a viable Spac, which was the basis for their involvement in the first place. They simply are not entitled to the contractual benefits they now claim.”
Earlier this week Textor agreed to sell his stake in Crystal Palace to Woody Johnson, the billionaire owner of the New York Jets NFL team. The sale will raise about $200mn, some of which has been earmarked to help reduce Lyon’s debts.
He is also looking to raise money by listing Eagle Football in the US. The group owns Brazilian champions Botafogo, which has been hugely successful on the pitch but has faced disciplinary action over unpaid transfer fees.
Lyon said it would appeal against this week’s “incomprehensible” decision to demote the club, and that equity contributions from Eagle shareholders had alleviated pressures. “Through our appeal, we will establish our substantial cash resources as necessary for Olympique Lyonnais to keep its place in Ligue 1,” the club said.
French football clubs have all been hit by a sharp drop in TV revenue because of a botched media rights auction.
Textor has previously sold other Lyon assets, including its indoor arena and its women’s team, and recently sold young attacking player Rayan Cherki to Manchester City for close to €40mn.
