SPORTS: China Soccer Binge Rolls on in Milan, Backlash Coming?

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Bottom line: European alarmism could soon start to grow over a sudden Chinese buying spree of local soccer clubs, including the latest purchase of Inter Milan by Suning and a looming purchase of AC Milan by a Chinese buyer.

Suning bounces into Milan

The new week is kicking off with a couple of China soccer deals in Europe, led by the purchase of a majority of Italy’s Inter Milan by consumer giant Suning (Shenzhen: 002024), and buzz that another deal is near that would see crosstown rival AC Milan sold to a Chinese buyer. This kind of news is becoming quite common these days, following other recent deals that have seen Chinese companies buy or purchase stakes in soccer clubs and other sporting assets in Spain, Britain, Switzerland and even New York. All of which raises the question of if and when Europeans might start to feel uneasy about this sudden buying binge of so many assets from their favorite past-time.

Such backlash wouldn’t be unprecedented, and is almost certain to happen if the buying continues at the same frenzied pace. The trend looks a bit like what happened in the 1980s when Japanese started snapping up US real estate and film studios at breakneck pace, resulting not only in asset bubbles but also breeding fear and resentment among local Americans. Similar things are happening now as China embarks on its own buying binges 30 years later, and I expect the final results could also be similar.

All that said, let’s take a closer look at the Suning deal, news of which broke over the weekend and which is set to be formally announced at a media event later today. According to the reports, Suning, best known for its chain of retail stores and its e-commerce site, will purchase a majority stake of about 70 percent of Intern Milan for 263 million euros ($290 million). (English article; Chinese article)

The reports say the purchase is part of Suning’s plans to build a broader “ecosystem” around soccer. That ecosystem is already taking shape with Suning’s PPTV Internet TV service, which presumably has a sports channel, and also its purchase last year of the domestic Jiangsu Sainty Football Club for about $80 million. (previous post)

Ecosystem Overdose

Frankly speaking I’m getting a bit tired of all the Chinese companies that talk about building such “ecosystems” these days, which also include names like smartphone maker Xiaomi and online video giant LeEco (Shenzhen: 300104), previously known as LeTV. In too many cases it seems like these companies use the term as an excuse to make purchases and diversify into a wide array of businesses where they lack expertise and chances of failure are high.

This particular deal is the latest in the soccer space for a Chinese company, as they scramble to fulfill a call by President Xi Jinping to boost the nation’s play level in the world’s most popular game. Other companies making investments in teams and other related assets include e-commerce giant Alibaba (NYSE: BABA), real estate leader Wanda Group and media giant SMG, just to name a few.

Most recently, an unknown Chinese businessman purchased the struggling Aston Villa soccer club for about $90 million. Another related headline had media reporting over the weekend that local liquor giant Moutai (Shanghai: 600519) was near a deal to buy a major stake in Italy’s AC Milan, though the company denied the reports. (Chinese article) Earlier reports in April said search giant Baidu’s (Nasdaq: BIDU) chief Robin Li was leading a group trying to buy AC Milan, though no progress ever reported. (previous post)

All of that brings us back to the question I raised at the outset of this post, namely whether we might soon see some European resistance to this sudden buying binge. I suspect the answer is “yes”, and that some people may even question these latest 2 deals in Milan. At the end of the day, this is all business that’s driven by commercial factors, so there’s not much these countries can do to stop the buying. But growing alarmism could ultimately dampen enthusiasm from Chinese buyers, and I suspect that most of these purchases will ultimately fail anyhow due to lack of experience and understanding.

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