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Alibaba buys half of top soccer club

2014-06-06 10:12 Global Times Web Editor: Qin Dexing

Guangzhou Evergrande deal kicks off rise for other teams

China's e-commerce giant Alibaba Group Holding announced on Thursday the purchase of a 50 percent stake in Guangzhou Evergrande Football Club, Asia's top soccer club, for 1.2 billion yuan ($192 million), marking a high-profile move ahead of its US listing.

Evergrande Real Estate Group will see its stake in the soccer club, winners of last year's Chinese Super League and the AFC Champions League, fall to 50 percent, the two companies said at a joint press conference on Thursday. The property firm acquired a 100 percent stake in the club for just 100 million yuan in 2010.

The deal not only boosted Evergrande Real Estate shares by 2.78 percent in Hong Kong trading on Thursday, but also inflated soccer club-related stocks on the Chinese mainland. Jiangsu Sainty Corp surged by its daily limit of 10 percent, while Tianjin Teda Co jumped by 8.92 percent.

Evergrande Football Club also plans to invite 20 strategic investors in the future. Each of them will take a 2 percent stake, which will eventually reduce Alibaba and Evergrande Real Estate's stakes to 30 percent each, according to Xu Jiayin, chairman of Evergrande Real Estate.

"When the conditions are mature, the club will go public," Xu said.

Alibaba's Chairman Jack Ma Yun has shown interest in soccer teams since mid-May when he paid a visit to Hangzhou Greentown's training venue. Song Weiping, owner of the club, told local media last month that Alibaba was mulling taking on a 49 percent stake in the club.

Song expressed his dissatisfaction with Ma's alliance with Evergrande. He claimed that he will lead 20,000 Greentown fans to protest Ma's move, the Xinhua News Agency reported Wednesday.

Ma responded Thursday that Alibaba always prefers to partner with the No.1 in the industry. According to the latest ranking by the International Federation of Football History and Statistics, Evergrande ranks No.41 globally, the highest in Asia.

The two industry giants' alliance has raised suspicions over their future cooperation. Xu stressed that the soccer club deal marks a start for bilateral collaboration.

"We want to use Internet technology to help traditional industries transform and upgrade," Ma said.

Analysts said the deal has shown Ma's ambition to expand Alibaba's business portfolio into the sports industry after setting a foothold in social networking, finance and entertainment sectors.

"Ma is good at building platforms. A soccer team is just another platform in his business kingdom," Dong Lu, a well-known soccer commentator, wrote on his Weibo Thursday. "For China's soccer industry, Ma Yun means large sums of money."

Dong said the deal will also extend Alibaba's business territory to China's Pearl River Delta, which is widely seen as the stronghold of Alibaba's major rival Tencent Holdings.

The deal came ahead of the opening of the World Cup in Brazil and Alibaba's IPO in the US. Ji Ning, a sports marketing expert and CEO of Beijing-based Vning Cultural Media Co, believes it is no coincidence.

"It's a worthwhile deal for Alibaba given the club's good reputation, and such a high-profile purchase will increase Alibaba's exposure and help boost its valuation once it makes its market debut," he told the Global Times.

Bloomberg reported Wednesday that Alibaba will debut in the US on August 8, but Ma declined to comment on the issue at Thursday's press conference.

China's soccer industry is at the bottom and many soccer clubs have actually been undervalued, so it's a good time to buy in, Wang Guanxiong, a Beijing-based tech investor, told the Global Times.

Alibaba is also the first e-commerce firm to invest in China's soccer teams, which have long been sponsored by property developers.

"Many developers aim to improve their relationship with local governments by supporting the city's soccer team, few of them have experience in running a soccer club," Ji said.

Among the 16 Chinese Super League Clubs, only Evergrande and Liaoning Hongyun made a profit in 2013, according to a report released by the league in November 2013.

"Xu is a smart merchant, and Evergrande has gained a lot via selling half of its stake to Alibaba at a time the soccer club's commercial value has almost reached its peak," Ji told the Global Times.

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