SPORTS: Baidu’s Li in Milan, Shenzhen Businessman in Australia

Bottom line: A rumored Chinese purchase of 80 percent of AC Milan, together with a new Chinese soccer buy in Australia and NBA purchase in the US, show a recent Chinese buying spree of western sports teams continues to gain momentum.

China in 3 new foreign sports team investments

China’s roll into western sports teams continues, led by word that a Chinese group including Baidu’s (Nasdaq: BIDU) chief Robin Li is on the cusp of a deal to buy 80 percent of soccer club AC Milan for 750 million euros. But that group isn’t the only one making soccer headlines, as a Shenzhen businessman has also reportedly bought Australia’s Newcastle United Jets club. And my prediction that someone in China would make a bid for an NBA club in the US is also in the news, with word that a businessman from southern Fujian province has purchased a small stake in the Minnesota Timberwolves.

This trio of headlines continues a flurry of professional sports team investments by Chinese buyers, as a club of rich businessmen look to cash in on their country’s growing appetite for high quality professional sports. All 3 headlines are notable for different reasons. The AC Milan purchase, which could get announced this week, would mark the biggest and most high profile deal to date for a western sports team by a Chinese buyer.

Meantime, the developments in Australia and the US are notable because they involve smaller wealthy businessmen, showing the sports buying trend is moving beyond China’s richest men to a much larger group of buyers. And the NBA purchase, while small, marks the first major move into basketball by a Chinese buyer, extending a spree that began with purchases of soccer clubs mostly in Europe.

Let’s begin with the AC Milan deal, which first bounced into the headlines in April with reports that Robin Li was part of a larger group in talks to buy a controlling stake of the club. (previous post) Now a number of sources are all reporting that the talks are in the late stages, and would see the group that includes Li and a top executive from real estate giant Evergrande (HKEx: 3333) buy 80 percent of the club for 750 million euros ($825 million). (Chinese article)

Baidu isn’t commenting on the reports, and Evergrande is denying them. But such denials are quite common in China, even when the news is actually true. The earlier reports in April said that He Xiangjian, founder of appliance maker Midea (Shenzhen: 000333) was also part of the group.

There’s not much more detail besides the price and word that the Chinese buyer group includes 7-8 wealthy entrepreneurs like Li, founder of China’s biggest search engine and one of the country’s wealthiest men. Li would be following a number of others into the European soccer club, including retailing giant Suning (Shenzhen: 002024), which last month was reportedly close to a deal to purchase about 70 percent of crosstown rival Intern Milan for 263 million euros ($290 million). (previous post)

Bargain Hunting in Australia

Next there’s the relatively small deal in Australia, which has Shenzhen businessman Li Mantie buying 100 percent of the Newcastle United Jets for an undisclosed price. (Chinese article) This particular deal looks rather opportunistic and typical of Chinese buying overseas, since the club was reportedly in financial difficulties. One observer said that because of that fact, Li probably didn’t pay a very big price.

Finally there’s the NBA deal in Minnesota, which has another relatively unknown businessman named Jiang Lizhang joining a group that purchased a stake in the Timeberwolves and its sister club from the women’s basketball WNBA league. (Chinese article) Again there’s no word on what Li paid for the 5 percent stake he now owns, making him the first Chinese to buy into an NBA club. But based on the 2 teams’ combined value of around $1 billion, Li would have spent about $50 million.

So what’s next in this buying binge that has suddenly developed over the last 2 years? As I’ve said previously, I do think a Chinese buyer will make a bid for control of an NBA team, since the league is extremely popular in China. But I’ve also said that this flurry of buying could ultimately result in a wave of negative publicity over concerns of too much foreign ownership, which could dampen the buying binge heading into next year.


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