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China Business

Chinas $2bn football buying spree has fans fearful of result


Clubs in Europe question whether new owners have the commitment needed to seek long-term
success

Antoine Griezmann of Atltico Madrid, Mauro Emanuel Icardi of Inter Milan and Kevin De Bruyne EPA; Reuters
AUGUST 26, 2016 by: Ben Bland in Hong Kong

AnobscureChineseinvestorbuysanunfashionablePremierLeaguefootballcluband
promisestotransformtheirprospects,makingthembiginChinabysigningleadingChinese
playersandsealinglucrativesponsorshipdealsthankstohisguanxi,orconnections.
ButthereignatBirminghamCityFC(http://next.ft.com/content/444794182d3a11e6a18d
a96ab29e3c95)ofCarsonYeung,aformerhairsalonownerwhobecamethefirstChinese
proprietorofanEnglishtopflightteamin2009,endedinignominy.Theteamwasrelegated
tothesecondtierofEnglishfootball,YeungwasjailedinHongKongformoneylaunderingin
2014andtheclubremainsbarelyknowninChina.
TheChinesetycoonswhohaveinvestedmorethan$2bninEuropeanfootballclubssincethe
startoflastyearandthefanswhosupporttheseteamsarehopingthatthistimeis
different.
KeentofulfilPresidentXiJinpingsambitiontoturnChinaintoafootballpowerhouse,and
supportedbyreadyfinancingforacquisitionsofoverseasassets(http://next.ft.com/content/a

2be15f03daf11e69f2c36b487ebd80a),Chineseentrepreneurshaveembarkedonan
unprecedentedbuyingspreeofforeignclubs.
[Chinais]thelargestconsumermarketintheworldandtheyarelookingtoleveragebrands
fromEuropeandbringhometheassociatedexpertiseinrunningfootballclubs,saysSteve
Horowitz,apartneratInnerCircleSports,aUSbasedboutiqueadvisoryfirmthathasworked
onseveralEuropeanfootballdeals.
ChinesegroupshaveinvestedinoracquiredfamousclubsincludingItalysACMilanandInter
Milan,EnglandsManchesterCityandAstonVilla,andastringoflesserteamsacrossEurope.
Manymoreclubs,includingLiverpool(http://next.ft.com/content/3a4a580a670111e6ae5b
a7cc5dd5a28c)andHullCity,areunderconsiderationbyChineseinvestors.
Someofthebuyersarepoliticallywellconnected,financiallywellendowedgroupssuchas
DalianWanda,FosunInternational(http://markets.ft.com/data/equities/tearsheet/summar
y?s=hk:656)andChinaMediaCapital.
OthersarelittleknowneveninChina,includingAstonVillasnewownerTonyXia(http://nex
t.ft.com/content/86e008f21da211e6a7bcee846770ec15),whorunsalossmakingproducer
offoodadditives,andLaiGuochuan(http://next.ft.com/content/471e39905b1a11e68d054
eaa66292c32),whoacquiredWestBromwichAlbionthismonthfor150m200mand
previouslybuiltacompanyhedescribedastheIBMoflandscapegardening.

WiththePremierLeagueinEnglandandothertopleaguesnowmorecompetitivethanever,
fansandfootballexecutivesarequestioningwhetherthesenewlyarrivedChineseownershave

thepersonalandfinancialcommitmentneededtofightforlongtermsuccess,orwhetherMr
XisChinesefootballdream(http://next.ft.com/content/3a4b5e92e5e411e5bc31138df2ae9
ee6)willturnintoanightmareinEurope.
Investmentbankerssaythereisabigdifferencebetweenthefirstdivisionacquirerssuchas
WandaandFosun,whichhavedeeppocketsandabroaderplantodeveloptheirsportsand
mediabusinesses,andtheseconddivisionofinvestors,whoofferfewersynergiesandwhose
financesarehardertotrace.

ThetoptierofChineseinvestorsseeanopportunitytobuildintegratedsportsbusinessesthat
cansatethehungerforentertainmentintheworldssecondbiggesteconomy,inadditionto
satisfyingthewhimsofMrXi.
LastyearWandaboughta20percentstakeinSpainsAtlticoMadridfor$52mandacquired
SwisssportsrightsagencyInfrontMedia(http://next.ft.com/content/92157ce8b07011e4a2
cc00144feab7de),inadditiontocontinuinginvestmentsinthefilmandthemepark
industries.
ChinaMediaCapital,whichboughta13percentstakefor$400mintheparentcompanyof
ManchesterCity(http://next.ft.com/content/feb69226980311e595c7d47aa298f769)last
yearafteravisittotheclubbyMrXihimself,hasalsoacquiredthebroadcastrightstothe
ChineseSuperLeagueandlaunchedafilmmakingjointventurewithWarnerBrothers,ontop
ofitsothermediabusinesses.

Everbright(http://next.ft.com/content/45d4a9bc677b11e6ae5ba7cc5dd5a28c),whichhas
approachedLiverpoolaboutapossibleinvestment,previouslyacquiredjointcontrolofMP&
Silva(http://next.ft.com/content/f631e7a8f2ac39549672d646a67245f1),anothersports
rightsgroup.

Lai Guochuan, the new owner of West Bromwich Albion, poses with a fan Reuters

ButAlexanderJarvis,whosecompanyBlackbridgeCrossBordershasadvisedonseveral
footballdealsinvolvingChineseinvestors,saysthatmanysmallerChinesecompaniesappear
tobeactingonimpulseeventhoughtheyhavenoexperienceoffootball.
Headded:Somefootballtypeswillselltheirgrannytodoadeal,sotheresariskoftheclubs
andtheChineseinvestorsgettingduped.
AnadviserwhoworkedonthesaleofWestBromwichAlbionsaysthatroughlyadozen
Chineseinvestorslookedattheclubbutonlyfourhadthefinancialcapabilityandagood
rationaletoproceedwiththedeal.
Itsverydifficulttoassessthequalityofpotentialbuyersunlessyouhavehandsandfeeton
thegroundinChina,hesays.
FengTao,chiefexecutiveofShankai,aChinesesportsmarketingcompany,saysthatsome
entrepreneursbelievetheycanmakequickprofitsbybuyingunderperformingEuropeanclubs
withalargefanbaseandturningthemround,eventuallycapitalisingonahighervaluationby
injectingthemintoChineselistedcompanies.

TheEnglishPremierLeagueisseenastheholygrailforinvestors.Ithasthehighestrevenues
ofanyclubfootballcompetitionintheworldwith17ofthe20clubsgeneratingoperating
profitsonthebackoftherapidlyrisingvalueofbroadcastrights.
ButthenewChineseownersofsecondtierEnglishclubsAstonVilla,BirminghamCityand
WolverhamptonWanderers(http://next.ft.com/content/7a7f3d4a4fc911e68172e39ecd3b8
6fc)willnotfinditeasytosecurepromotiontothetopdivision.
MrJarvissaysthatthesebackerswillneedtoinvestsignificantlyinplayersandcoaches,while
managingtheexpectationsofthefansandtryingtoboostincomeandcovertheirfinancing
costs.Itis,hesays,anexerciseakintoamonkeydancingonarazorblade.

KeithWyness,therecentlyinstalledchiefexecutiveofAstonVilla,admitsthatgettingintothe
PremierLeagueiswithoutdoubtoneofthehardestfootballchallenges.
HeaddsthatMrXiafullyunderstandsthisalthoughtheownerhasbeensomewhatmore
quixoticinhispublicstatements,tellingtheclubwebsitethatmylongtermaimistomake
AstonVillathegreatestclubintheworld.
LikeothersrepresentingthenewwaveofChinesefootballtycoons,MrWynessarguesthat
AstonVillacanuseMrXiasconnectionstogainaccesstothebestemergingChineseplayers
andtapcommercialopportunitiesinChina,sayingthatbeingontheinsidegivesusabig
advantage.
ButMarkDreyer,anindustryexpertwhorunsablogcalledChinaSportsInsider,saysthe
ideathatclubswillbebiginChinajustbecausetheyhaveaChineseownerisnonsense.
Headds:EveryclubacrossthebigleaguesistryingtoappealtotheChineseaudience
throughTV,socialmediaandpreseasontours.
Someofthesepurchasesaregoingtoendintears.
AdditionalreportingbyArashMassoudiinLondonandChuckPanginHongKong
Printasinglecopyofthisarticleforpersonaluse.Contactusifyouwishtoprintmoreto
distributetoothers.TheFinancialTimesLtd.

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