Can Asian tycoons score with their investments in football?

Can Asian tycoons score with their investments in football?

For Asia’s super rich, owning a European football club may mean more than having a plaything at their disposal, with experts noting that such investments can have the potential to generate rich returns.

SINGAPORE: Asian tycoons have been digging deep into their pockets for stakes in European football clubs, and the latest to join the ranks is Chinese businessman Tony Xia Jiantong who acquired one of England’s most historic clubs Aston Villa last week, subject to governing body approval.

Despite being a Villa supporter, Mr Xia, who will be the first mainland Chinese to fully own an English football team, has emphasized that the deal was done primarily for business reasons.

“We intend to make more moves in investing in the soccer industry in China and I believe this purchase can give me the best learning opportunity in how to run the business,” he said in an interview with the Wall Street Journal on May 19.

Experts told Channel NewsAsia that the tidal wave of Asian money that has flooded the world’s most popular game in recent years underscores how Asian businessmen see football clubs as a viable business proposition and an opportunity to bolster their personal reputations internationally.

And in the case of Aston Villa, the deal made business sense, despite the 142-year-old club being relegated to the second-tier League Championship, after finishing rock-bottom in the English Premier League (EPL) this season.

“It has been a bad year for Aston Villa but it is a good time to buy,” said Thibaud Andre, senior consultant at Daxue Consulting, who described Mr Xia’s buyout of the Midlands club “a strategic long-term business move”.

“With Aston Villa going to the second division, Xia’s objective is to get back into the EPL and if he succeeds, it means a chance for greater exposure. Between now and then, they also have the time to develop a stronger identity and following for the club in China,” Mr Andre said.

Recon Group, the Chinese magnate’s privately-owned holding company, will likely benefit, according to Beijing-based sports marketing firm Yutang Sports.

“The acquisition of Aston Villa will act as a crucial link between Recon Group’s business segments of smart travel and the cultural industry,” said project director Lv Lei, referring to the businessman’s plans to develop an integrated business district around the Villa Park in Birmingham.

In addition, the company could receive a boost in the capital markets amid growing investor optimism about China’s sports industry. That has already been seen, with shares of Shanghai-listed Lotus Health Group, in which Recon controls 75 per cent of, jumping 5.1 per cent following news of the Aston Villa deal last week.


Xia Jiantong (R), the chairman of Recon Group. (REUTERS/Damir Sagolj)

A BEELINE FOR EUROPEAN FOOTBALL CLUBS

The Aston Villa deal marks the latest in a string of hefty football investments from the world’s second-biggest economy as President Xi Jinping, an avid soccer fan, looks to make the country a global powerhouse in the sport.

Last December, China made its biggest overseas investment in football when a consortium of mainland investors bought a 13 per cent stake in Manchester City's parent company for US$400 million. Prior to that, toys and video games maker Rastar Group took control of heavily indebted Spanish La Liga side Espanyol, while property conglomerate Dalian Wanda bought a 20 per cent stake in 10-time Spanish champions Atletico Madrid in Jan 2015.

Beyond China, other Asian tycoons have also ploughed hundreds of millions of dollars into football clubs, ranging from Indonesia’s Erick Thohir at Inter Milan to Singapore’s Peter Lim at Valencia.

The latter was hailed as a “hero” for saving the debt-ridden Spanish club in 2014.

“He saved the club from going bankrupt, funded the purchase of some players, and got the club into the top four in 2014-15,” said Lars Voedisch, principal consultant and managing director at PRecious Communications in Singapore. “He apparently has a vision for the club too. Peter Lim is known (for wanting) to grow the international branding of Valencia in Asia, as well as finance a new, bigger stadium which would translate to increased match-day revenue.”


Valencia's Singaporean owner Peter Lim (top, centre) at a Champions League match. (AFP/Biel Alino)

LEICESTER CITY OPENED DOORS FOR KING POWER: EXPERTS

The biggest success story, however, belongs to Thailand’s duty free magnate Vichai Srivaddhanaprabha following Leicester City's journey from 5,000-1 outsiders to English champions.

According to Weber Shandwick’s vice president and sports lead Khushil Vaswani, the self-made businessman and his duty-free franchise King Power have “struck gold” with the club’s stunning victory bringing with it plenty of business opportunities.

“In the case of King Power, they struck gold and enhanced their international reputation with Leicester City’s recent Premier League win. Khun Vichai’s commitment and passion for the fans and the city have earned him global respect,” Mr Vaswani said.

He added: “Business-wise, King Power is likely to see doors open ahead of them at major airports around the globe (which are) craving the association with the Cinderella story. It’s an opportunity for (Khun Vichai) to take his business global.”

And the Thai billionaire is reportedly moving in that direction, with plans to leverage Leiceseter's growing international appeal to boost Thai brands abroad via a new online business under development, said a Reuters report in Jan 2016.

Simon Chadwick, professor of sports enterprise at Salford University in Manchester, noted that consumers are more likely to patronise or make purchases at King Power after being “positively predisposed” towards the duty-free brand.

“With the biggest ever television deal in Premier League history about to start, with ticket sales buoyant and with a Champions League bonanza to come, one imagines that it is financially beneficial for them to own the club,” he added.


Thai billionaire Vichai Srivaddhanaprabha attends a parade to celebrate Leicester City's EPL title in Bangkok on May 19, 2016. (REUTERS/Athit Perawongmetha)

LACK OF UNDERSTANDING, CULTURE SHOCKS STAND IN THE WAY

To be sure, there have been less-than-successful ventures for Asian business leaders in European football.

Blackburn Rovers, for one, has seen its fortunes nosedive since the takeover by Indian poultry giant Venky’s in 2010. Mr Voedisch believes a lack of understanding towards the beautiful game, which in turn led to financial mismanagement, is a key reason behind the dismal situation of the former Premier League winning team.

“The ownership team is mainly based out of India, and there have been claims that none of them know football, let alone how to run a football club. Key players had to be sold to balance the books, shareholder value has dropped in value and the club is deemed 'worthless' as a commodity.”

Other factors such as culture differences may also make Asian ownership of European football clubs even tougher, Valencia's Singaporean president Chan Lay Hoon told reporters during a visit by the club’s players to the city-state last week.

"Spanish people are more expressive. But as Singaporeans, we are more reserved, so direct and every thing is short and sweet,” AFP quoted her as saying. “Such culture differences can sometimes cause a little bit of misunderstandings. They may feel that we are being cold.”

On that, Mr Chadwick said: “Understanding football culture is one challenge (while) understanding European business culture can be another. At the same time, Asian businessmen also have to convince Europeans that 'their' way of leading and managing is appropriate and can be effective.”

As such, new club owners from Asia could consider “enlisting the help of experienced European professionals in order to ease the transition into club ownership and management”, the UK-based professor added.

ON THE LOOKOUT FOR THE NEXT LEICESTER CITY?

Despite the potential pitfalls, investing interest from Asian billionaires will likely be here to stay, given the benefits of being associated with one of the world’s most popular sports.

Apart from broadening their nets to Spanish and Italian teams, Asian investors might be more willing to consider clubs that have fallen from their previous prestigious positions or lower-level clubs following Leicester City’s remarkable rise, observers said.

But it will take much passion and commitment from the management, alongside the ability to translate that into results on the pitch, for a team to pull off another underdog fairytale.

In the case of relegated Aston Villa and its new owner, a steep uphill climb lies ahead.

“To turn Aston Villa into another Leicester City is not an easy task. It needs a professional management team, talents and lots of capital. For a club that remains a familiar yet strange name in China, attracting more Chinese fans will also need time and effort. Besides, given the constant shifts in the capital market, capital will leave quickly without the presence of a healthy and sustainable revenue model,” Yutang Sports’ Mr Lv said.

Source: CNA/sk