LEISURE: Fosun’s Guo Courts Beijing with Sports Investment

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Bottom line: Billionaire Guo Guangchang’s new sporting venture reflects his desire to move into entertainment, and also to win goodwill by supporting Beijing’s initiative to build up Chinese athletics.

Fosun’s Guo in sports tie-up with Europe’s GestiFute

After his brief and somewhat ominous disappearance last month, the man once called China’s Warren Buffett is back in the headlines, with word that Guo Guangchang has joined the growing ranks of Chinese billionaires making major investments in sports. In this case Guo is teaming up with Portuguese “super broker” GestiFute, whose main business is engineering the deals that allow European players to move from one soccer club to another. Among its deals, GestiFute was involved in previous transfers involving superstar Cristiano Ronaldo, showing the company is itself a major player in the business.

This particular deal is just the latest by some of China’s richest men and biggest private companies, which have suddenly discovered a huge appetite for all things sports. Previous investors in the growing trend include Alibaba (NYSE: BABA) founder Jack Ma and Wanda Group chief Wang Jianlin, who are 2 of the country’s wealthiest individuals. They also have been joined by a growing number of entertainment-related companies like online video firm LeTV (Shenzhen: 300104) and electronics retailer Suning (Shenzhen: 002024), which also owns a major online video site.

Two things are driving this recent move into sports, one economic and the other more political. On the economic front, investors like Ma, Wang and LeTV are searching for exclusive content to put on their online video sites, which are vying with one another for China’s growing audience that watches most of their video over the Internet.

On the political front, Chinese President Xi Jinping has also said publicly that he wants to build up a stronger sports culture in China to improve the country’s national teams in sports like soccer. That political element is an important factor in a country like China, where maintaining good relations with Beijing and local government leaders is often critical to building a successful business.

The political element certainly looks like an important driver in this latest deal involving Guo Guangchang, who is better known for his role as founder and chief of Fosun Group, one of China’s most successful private equity investors. According to the latest reports, Guo has signed a deal with GestiFute to set up a sports brokerage for the trading of athletes between sports clubs in China. (Chinese article)

Guo is forming the partnership using  one of his smaller companies called Fuyu Culture, which is listed on China’s year-old over-the-counter (OTC) market. The move represents the first by Fosun into the entertainment sector, and Guo said he chose GestiFute because it’s one of the premier names in its field. Fosun is usually better known for its investments in areas like insurance, real estate and other financial products.

Poor Sport

China has a number of major domestic sports leagues, but all are poorly run and prone to corruption that is common throughout the country’s business culture. Foreign players frequently come to the Chinese leagues for brief stints in sports like basketball and soccer, but often leave after just a season or two due to contract disputes and broader dissatisfaction with the system.

Accordingly, the entry of Guo and all these other major investors could provide a big boost to cleaning up the system and making it more professional. Guo undoubtedly sees a business opportunity in helping to broker the movement of players between teams, which is a hugely lucrative business in big markets like the US and Europe. But in this case there’s also a strongly political element, since Guo is trying to show his support for Xi Jinping’s national sporting agenda with this new strategic tie-up.

Guo was in more ominous headlines in December, when he suddenly went missing for several days after being seen talking with investigators. (previous post) Rumors quickly spread that Guo might become the latest victim of China’s ongoing anti-corruption campaign, which has claimed a wide range of officials from the government and big state-run companies. But so far the clean-up campaign has largely avoided big private sector companies like Fosun.

Guo reappeared a few days later, and tried to ease investors’ concerns by explaining that he was only assisting in an investigation. But doubts continue to linger over Guo’s own situation, since nearly all of China’s most successful businessmen inevitably have numerous dealings with government officials that might be considered suspicious. Accordingly, Guo is not only acting in his own commercial interests with this latest move into sports, but is also protecting his personal interests by joining Xi Jinping’s campaign to improve China’s position in sports.

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