ENTERTAINMENT: Wanda Eyes IPO From New Guangzhou Sport HQ

Bottom line: Wanda’s decision to set up its sports division headquarters in Guangzhou is part of a diversification away from Beijing, and could presage an IPO for the unit in Hong Kong as early as next year.

Wanda sets up sports HQ in Guangzhou

A recent series of major sporting moves is back in the financial headlines as 2016 approaches, with word that real estate giant Wanda Group is setting up a new headquarters for its growing sports business in the southern city of Guangzhou. Those same reports hint at another major theme in the new year, which could see a new wave of IPOs for some of these big new sporting investments by names like Wanda.

Sporting investments have become a major theme in the current year, reflecting a sudden desire for content and related services to feed China’s fast-growing entertainment sector. E-commerce giant Alibaba (NYSE: BABA) kicked off the wave last year with its investment in a domestic soccer club, and has been joined this year by a wide range of companies that includes Wanda, electronics retailer Suning (Shenzhen: 002024) and online video operator LeTV (Shenzhen: 300104).

The current wave of sports buying also has some political overtones, as Beijing tries to clean up domestic sports leagues that are riddled with corruption, and also eyes those leagues as a vehicle for improving China’s own national sports teams. The recent spree of high-profile investments have cost billions of dollars, and soon names like Wanda and Suning are likely to look to IPOs to try and recoup some of their money.

Wanda announced its selection of Guangzhou at a ceremony where it also disclosed its new sports division will have registered capital of 1 billion yuan ($150 million). (Chinese article) The new company will include Wanda’s various sports assets, including Swiss sports marketing firm Infront Sports & Media, which Wanda purchased earlier this year for $1.2 billion. (previous post)

Other assets will include World Triathlon Corp, organizer of Ironman Triathlon races, which Wanda bought for $650 million this summer. Wanda also bought a stake in Spanish soccer club Atletico de Madrid this year.

Wanda founder Wang Jianlin said he chose Guangzhou for its rich background in sports, including an abundance of facilities and teams and also its experience hosting major sporting events. The move looks similar to Wanda’s announcement in May that it would relocate its larger corporate headquarters to  Shanghai from Beijing. (previous post)

Diversification Play

In that light, this decision to set up a headquarters for its sports group in Guangzhou looks a bit like a move to diversify its corporate offices into other major Chinese cities outside of their current home in Beijing. I’ve previously said that Wang Jianlin could become a future target for the growing wave of anti-corruption probes that has recently started creeping into China’s corporate sector, due to his close early connections with disgraced former high-flyer politician Bo Xilai. So Wang is probably happy to spend as much time as possible away from the spotlight in Beijing.

The choice of Guangzhou looks relatively good, because the city is quite well developed and does indeed have a strong sporting history. By choosing the city, Wang will also get goodwill from local officials, and his sports empire will be just a short train ride away from the nearby financial hub of Hong Kong.

That proximity is a good transition into the next major point, of whether an IPO might be coming for Wanda’s sports division in the near future. Wang said at the time of the Ironman purchase in August that he aimed to consolidate his various sports businesses into a single company, which could then make an IPO.

Hong Kong would be a logical choice for such an offering due to the international nature of the new company’s holdings, and also its proximity to Guangzhou. A year ago Wanda listed one of its core units, its Dalian Wanda (HKEx: 3699) real estate division, in Hong Kong, in a year-end IPO that raised $3.7 billion.

If Wanda’s sports unit makes an IPO in Hong Kong, it  could easily be the largest to date for a Chinese sports company. But it wouldn’t be the first. That distinction would go to soccer club Evergrande Taobao, which is part owned by Alibaba founder Jack Ma and made an IPO on China’s year-old over-the-counter (OTC) board in November.

A number of other players who have made major sports moves this year could also contemplate spinning off those divisions for separate IPOs. One of the largest would be LeTV, which conducted a fund raising for its sports division earlier this year that valued it at 2.8 billion yuan. (previous post) The unit was previously a channel on the company’s bigger video service platform for most of its life, but was split off as a separate division in late 2014.

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