Chinese buyers' 'shopping' spree for soccer clubs

By Guo Yiming
0 Comment(s)Print E-mail, July 23, 2016
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AC Milan has a great many fans in China. [File photo]

Chinese investors have gone one step further in their advance into the world of soccer as a consortium led by the country's financiers is said to grab Italian soccer club AC Milan by the end of this month, according to an insider close to the deal.

The buyer group, which includes Sonny Wu, whose business holdings span renewable energy and lighting, and Steven Zheng, a Chinese businessman with solar power interests, has launched a major 440 million euro swoop for the club currently owned by former Italian Prime Minister Silvio Berlusconi.

The agreement, expected to be completed this month, comes after the acquisition of French Ligue 1 soccer club OGC Nice and Australian-based A-league club Newcastle Jets by Chinese businesses last month.

Chinese investors have sped up their expansions on foreign soccer markets since last year and have completed Mergers and Acquisitions (M&A) for at least 10 soccer teams from England, Spain, Italy, France, Netherlands and Australia, with 8 of these deals sealed with Chinese financiers controlling the majority stake.

A growing force

Chinese capital involvement in the world of soccer started with rotational advertising on soccer fields.

With the Chinese sport industry entering the fast track, Chinese M&A in domestic and overseas sports markets have seen exponential growth since 2015, when it spent almost 40 billion yuan (around US$ 5.99 billion) in total investments with 33 deals valuing over 10 million yuan (around US$ 1.50 million).

Chinese investors have become a growing force in European soccer amid the continent's sluggish economic recovery that has left the world-class soccer clubs desperate for money.

China's retail giant Sunning needed to cover the debt of Inter Milan as soon as it gained a controlling stake of the Italian soccer club.

Foreign soccer clubs have also gained a liking in China, which boasts huge room for development in its emerging sports market.

China's total sales of event tickets, products and commercials in 2015 was estimated to be US$3.4 billion , only 5.3% that of the US, according to data released by PwC, indicating huge room for further growth.

European soccer teams are also eager to profit from the Chinese market. World-class teams like the Manchester United, Manchester City and Dortmund are expected to put on exhibition games in China this month in a bid to woo more fans and gain more profits.

"China is extremely fertile ground from a commercial point of view, especially as it awakens to the beauty of football," said Jean Pierre Rivère, President of OGC Nice. "All this bodes well for the continued international development of OGC Nice, our city and our region."

Analysts say that swooping for foreign soccer clubs helps boost investors' brand image and thus drives their businesses and profitability.

Though it has a long investment cycle and slow returns on investment, the sports industry can create brand and commercial values that are hard to measure by immediate benefits, said Yao Zhenyan, vice president of Oceans Sports, a full-service sports marketing agency.

Legacy on China's soccer

In the wake of China's export of capital into the overseas soccer clubs, investors are still eager to contribute to the country's disappointing soccer industry by facilitating Chinese players' overseas transfer and boosting domestic youth soccer training.

Some European soccer clubs are eager to buy Chinese players in an aim to boost their brands among avid fans in the world's second largest economy. Due to relatively low qualifications, however, Chinese players aren't up to the standard of those top leagues.

This drives Chinese investors to focus more on the younger generation as they have incorporated youth training projects in almost every deal with foreign clubs by either building soccer schools at home or financing young players to study abroad.

Though all of these efforts might not deliver favorable results in the short term, it will, at least, bring a glimmer of hope to China's struggling soccer industry.

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