ENTERTAINMENT: Alibaba Kicks Up China Soccer Spree, NBA Club in Sight?

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Bottom line: A recent spree of European soccer purchases by Chinese buyers could auger a similar bid for an NBA team in the next 1-3 years, with Alibaba and Wanda as 2 of the most likely buyers.

Alibaba in talks for FIFA sponsorship

A recent stream of global sports investments from China has bounced back into the headlines, with word that e-commerce juggernaut Alibaba (NYSE: BABA) is near a major sponsorship deal with soccer giant FIFA, even as a Chinese businessman has just signed a separate deal to buy British club Aston Villa. The 2 latest deals spotlight China’s sudden fascination with global sports, as millions of Chinese embrace these globally famous names over local leagues that are far less professional and tainted by corruption scandals.

Nearly all of the deals to date have been focused in Europe and on soccer, which is hugely popular in China. But basketball is equally popular in the world’s most populous country, which raises the intriguing question of when we might see a Chinese buyer bid for an NBA team, in what would be a first-of-its kind deal sure to make global headlines.

I’ll offer some extremely speculative NBA analysis shortly, but first let’s review the latest headlines starting with Alibaba and FIFA. According to a Bloomberg report, Alibaba is in discussions to become a top-level sponsor of FIFA, the world’s biggest soccer-governing body that is also embroiled in a major bribery scandal. (English article; Chinese article)

The reports say such a sponsorship would typically last 4 years and cost $40 million per year, putting the final price at about $160 million. Alibaba would become a top-level FIFA sponsor alongside fellow Chinese firm Wanda Group, a local real estate giant with entertainment aspirations. (previous post) Other top-tier sponsors included beverage giant Coca Cola (NYSE: KO), credit card issuer Visa (NYSE: V) and Korean car maker Hyundai.

FIFA has reportedly had difficulty signing up new sponsors following the scandal that broke a year ago, resulting in the arrest of a number of top officials on suspicion of taking bribes. That could be leading FIFA to offer relative bargain prices for such top-level sponsorships, a factor that would undoubtedly appeal to Chinese companies that are known for their fondness for global bargain-hunting.

At the same time, companies like Alibaba and Wanda are eager to raise awareness of soccer in China, in line with Chinese President Xi Jinping’s own recent call to transform the country into a global powerhouse after years of disappointment. Xi himself is a big soccer fan, and thus this recent spree of soccer investments by Chinese companies is partly aimed at currying favor with central leaders in Beijing. Most of the buyers are also investing heavily in entertainment ventures, and thus these sports investments could provide new content to feed those machines.

Bargain for Underperformer

The second headline has a relatively unknown entrepreneur named Tony Xia agreeing to purchase the decidedly underperforming Aston Villa soccer club for 60 million pounds, or nearly $90 million. (English article; Chinese article) Reports on the deal point out that the club’s current owner, American billionaire Randy Lerner, bought Aston Villa for 62.2 million pounds in 2006, and put it up for sale in 2014.

The unknown Xia is head of Recon Group, a holding company with controlling stakes in 5 publicly listed firms employing 35,000 people in 75 countries. Xia says he aims to turn around the struggling club, though I suspect his foreignness and also probable lack of willingness to invest heavily in the team could thwart those ambitions.

All of that said, let’s close with a look at the NBA, and the chances for Alibaba or another company to make a bid for a US basketball team in the next few years. Such a bid would be far more expensive than the Aston Villa deal, since NBA teams have typically sold for around $500 million over the last 6 years and the Los Angeles Clippers even fetched a record $2 billion 2 years ago.

While the $2 billion price tag looks a bit out of range, the smaller $500 million deals are quite consistent with some of China’s other recent sporting investments. Those include Wanda’s purchase of European sports marketing firm Infront Sports & Media for $1.2 billion, and $400 million paid by 2 Chinese buyers last year for a stake in the company that owns the Manchester City soccer club. (previous post)

It’s hard to know which NBA clubs might be up for sale, though various websites say that a few could come into play if the right buyer emerges. Alibaba chief Jack Ma and Wanda founder Wang Jianlin probably head the field of most likely candidates to make such a bid, and I wouldn’t be surprised to see one of these big-name executives launch such an effort within the next 1-3 years.

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