Chinese Billions Flood Into Soccer, Snaring Hulk in Record Deal

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Hulk had quite the therefore welcomed China. Shortly after his plane landed at Shanghais Pudong International Airport, hundreds of chanting fans mobbed the Brazilian soccer starring as he pushed his style through the crowd on June 29. Hulk, who recently inked a record-breaking deal with Shanghai SIPG, is just the most recent football starring to sign up.

Long a soccer backwater, China has gone on a buying spree unprecedented in the history of video games. Chinese fund, of course, has been flowing into all sorts of sectors: technology, health care, retailing, you name it. And now its football, a move that follows Middle Eastern and Russian investments into the game.

What differentiates China is the speed and scale of the countrys new-found appetite for all things football. Chinese companies have invested $1.7 billion in athletics assets — the vast majority soccer-related — since the beginning of 2015, according to Bloomberg data. As recently as five years ago, that number was zero.

Its insane, said Brazil-based sports lawyer Marcos Motta, whos worked on several bargains. I have never seen anything like this before.

Richest Men

Led by some of the countrys richest men, including Dalian Wanda Group Co. founder Wang Jianlin and Alibaba Group Holding Ltd.s Jack Ma, Chinese business are at the table for almost every soccer asset up for sale. In recent months, a dizzying array of deals have roiled the industry — from signing football players and coach-and-fours to Chinese investments in storied clubs and buyouts of sports-media businesses.

Next year the Milan derby, one of European soccers most-prestigious games, will feature two teams lately purchased by the Chinese, presuming both deals conclude without a snag. Nanjing-based Suning Holding Group Co. in June paid 270 million euros ($ 298 million) for a 70 percentage stake in 18 -time Italian champion Inter Milan, while a separate consortium is nearing an agreement to acquire 80 percent of AC Milan, a seven-time European champion, from former Italian Prime Minister Silvio Berlusconi.

QuickTake China Inc.’s Shopping Spree

There will be more acquisitions and of very famous squads, said Feng Tao, chief executive officer of Shankai Sports, a Beijing-based consultant that has advised on deals, including Wandas $1.2 billion buy of Swiss-based sports-marketing company Infront Sports& Media AG.

Imported Talent

Most striking of all, though, has been the sudden rushed by teams to pay huge sums on importing talent. Chinese Super League clubs outspent those from any other country this past winter, spending a blended $280 million for European soccer superstars. And Shanghai SIPG, a squad owned by the Shanghai International Port Group, merely broke the Chinese record again with its trade to acquire Givanildo Vieira de Sousa , popularly known as Hulk, for $61 million. Paving the style have been agreements with soccers top agents. Alibabas sports unit has a partnership with Cristiano Ronaldos manager Jorge Mendes.

The dollars doled out to China-bound players and coach-and-fours are infinitely greater than they could command elsewhere, according to Motta. Its common for top players to get 7 million or 8 million euros, more than five times what they would get in Europe, he said. Motta is working on a deal that will pay one player 13 million euros per year, he added — and thats after taxes.

Audacious Goal

Chinese President Xi Jinping, an avid soccer fan, is fueling the spending spree. Hes eager for China to improve its global football standing: The national squad is ranked 81 st, just after Jordan and before Bolivia. And he covets hosting a World Cup — and winning it by 2050. Thats providing the green light for Chinese industries, eager to please the governmental forces, to open their wallets.

Coinciding with Xis zeal for video games is an effort on the part of the government to promote sports and exercise to the new urban working class, recently transplanted from farms. A national plan announced last year contains the audacious goal of spurring an industry worth 5 trillion-yuan ($ 747 billion) by 2025, when 50,000 schools are expected to offer specialized football training.

The Chinese are spreading out all over Europe with open checkbooks. On a visit to the U.K. in October 2015, Xi, accompanied by Prime Minister David Cameron, visited Manchester City, the English soccer team owned by the Abu Dhabi royal family. He posed for a selfie with Cameron and Citys star Argentine striker, Sergio Aguero. Two months ago City Football Group, which owns the team, announced a $400 million investment from China Media Capital for a 13 percent stake.

FIFA Deal

That same month, a division of Alibaba paid an undisclosed quantity, believed to be in the tens of millions of dollars, to become title sponsor of soccer governing body FIFAs annual Club World Cup. In March, Wanda signed a $150 million arrangement to become FIFAs first Chinese sponsor. The two companies are the only new sponsors to engage with FIFA since the U.S. Department of Justice unveiled an industry-rocking indictment that accused several senior FIFA officials of rampant corruption dating back more than two decades.

For a QuickTake explainer on football and corruption, click here .~ ATAGEND

Wanda has also bought a minority stake in Atletico Madrid, last seasons Champions League finalist. That bargain was followed by a slew of Chinese companies investing in European clubs to buy soccer expertise China doesnt have and to help develop young players. Buyers are popping up in every corner of the countrys business elite, from the owner of a monosodium glutamate company buying Englands Aston Villa to a consortium led by hotel entrepreneur Chien Lee taking control of Frances OGC Nice.

European Backlash

For Nice co-owner Lee, the clubs training academy, which has fostered players including French national team captain Hugo Lloris, is a model to export to the mainland. “I see this as a big possibility. Our scheme is to bring the Nice academy to China, to open a training center in China.”

Chinese investors risk facing a backlash for overreaching in Europe. Portuguese soccer fans cried fowl earlier this year when Chinese LED light manufacturer Ledman Optoelectronic Co. built sponsorship of a football division there contingent on top teams fielding Chinese players. Ledman backed off its demands.

The buying spree isnt limited to players and teams. A bid war ended with a division of China Media Capital paying $1.3 billion for a five-year contract to broadcast Chinas national league game. Thats about 13 hours the amount the contract was worth in 2015.

Its a very unique moment, said Adolfo Bara, marketing director of Spains top league, which has attracted significant Chinese investment recently. Theres so much money in China.

Read more: www.bloomberg.com

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