Changes of ownership at football clubs can be tectonic moments for a team’s long-suffering fans. Sheikh Mansour’s transformation of Manchester City is one of the more notable cases. His infusion of cash in 2008 brought world class players to a club that had suffered from decades of underachievement. So ingrained were the emotional safeguards against failure that a lifelong City fan once told WiC “I can cope with the disappointment; it’s the hope I can’t bear”. He’s a different man today, with City winning the English Premiership twice in the last three years. That would have been unimaginable before Mansour’s purchase.
More of a cautionary tale in respect to ownership changes is Glasgow Rangers, a team that’s won the Scottish league 54 times, and a record nine titles in a row between 1989 and 1997.
That golden era of success was overseen by local industrialist David Murray. But when he sold in 2011 – having suffered severe losses in his property portfolio during the global financial crisis – a succession of new owners sent an already indebted Rangers into what the Financial Times terms a “financial freefall”.
Under new boss Craig Whyte, the club failed to pay its tax bill and in 2012 it was put into administration. As a punishment, the club was relegated to the Scottish league’s fourth tier.
Even today the sense of crisis hasn’t lifted, with a variety of parties vying for control.
Over in China and another saga is ongoing over a change of ownership at a big club. In this case it is provoking the wrath of fans in Chongqing, a municipality with more than 30 million citizens. Late last month news began to circulate that the 77 year-old owner of Chongqing Lifan wanted to sell the club. Yin Mingshan, who made his fortune in motorcycles (see WiC84), was ready to quit the team that he’d backed for 15 years.
According to Xinmin Weekly, the decision to exit was a monetary one, given that “Yin’s real estate and financial sector businesses had not developed as healthily as he hoped”.
The newspaper added that “by conservative estimates” Yin had spent Rmb600 million ($96.6 million) of his own cash developing the team over the years. But funds have been getting tighter. Apparently his most recent annual dividend from Lifan Industry was estimated by media to be about Rmb112 million.
Another problem? Chongqing Lifan won promotion last season to the Super League. Ordinarily that should be good news for any owner, but over the last couple of years the costs of fielding a team in the top division has surged thanks to an influx of money from high-profile tycoons like real estate mogul Xu Jiayin and internet billionaire Jack Ma.
Xinmin Weekly reckons that Yin is reluctant to spend the Rmb300 million required to keep the club competitive, noting that other Super League teams have upped their budgets to between Rmb500 million and Rmb1 billion for the coming season.
(Another mark of how much more costly it’s becoming to operate a top-tier club: last week Guangzhou Evergrande signed Brazilian striker Ricardo Goulart for Rmb110 million, China’s record transfer fee.)
Of course, broadly-speaking much of the money pumped into football in recent years has had a positive outcome (though Didier Drogba might disagree, see WiC181). Attendances at grounds have grown, as have television viewing figures. Corruption seems to have been reduced and the quality of play has risen – a fact nowhere better illustrated than at Guangzhou Evergrande, which transformed itself under Xu Jiayin’s ownership from match-fixing villain to Asian championship winner.
But Xinmin Weekly says that Chinese football clubs have yet to evolve business models along the lines of Real Madrid and Manchester United – both of which use their successful franchises to generate a diverse range of revenues.
Nor do the Chinese clubs enjoy monies from TV rights on anything like the scale paid out in Europe. This means that their viability depends on the finances of their backers (a potential concern, points out Xinmin Weekly, when 14 of the 16 clubs in the Super League last season were backed by real estate companies or firms closely related to the property industry, which is going through a rough patch).
Yin’s snap decision to sell in Chongqing demonstrates the risks for a club when its future is so closely tied to an owner’s personal fortunes (football fans in Dalian were among the first to realise this, when their club’s owner Xu Ming was jailed for his links to Bo Xilai).
But Xinmin Weekly says that what shocked Yin was that when he shopped the club around, he discovered that there weren’t many buyers at a decent price.
With no high-profile tycoons stepping forward to take over the Chongqing club, Yin dropped his asking price from Rmb150 million to Rmb10 million, Xinhua claims. He then sold to a little-known entity called Chongqing Changsheng. According to Chonqing Business News, it only has two employees and currently works out of a hotel room.
No matter: as of January 1, the team was renamed Chongqing Changsheng Football Club.
Speculation about Changsheng’s background has been keeping the local media busy. For example, Time Weekly says the firm is connected to Beijing Huaxia Guorui Football Club. This is not one of China’s better-known teams and according to Time Weekly made a net profit of just Rmb160,000 in 2013.
Others speculate that the new company is being positioned for a stock market listing (fuelling this rumour is the State Council’s recent recategorisation of sport as priority sector for economic growth).
However, the team’s fanbase in Chongqing is far from impressed at the change of ownership. Xinhua reports that many supporters turned up at the ground to protest, with a few even threatening suicide if Lifan didn’t rescind the takeover. More serious still for Yin, the Football Association has rejected the deal on the basis that the paperwork was incomplete. That seems to have left the club in limbo. With the Super League due to start on March 7, the club may not be eligible to participate, and even the governor of Chongqing is getting involved in the negotiations over the team’s future.
In fact it’s all a bit humbling for the city of Chongqing, once a high-flyer under its princeling boss Bo Xilai.
“How is it possible there isn’t even one good company in Chongqing which can take over from Lifan,” lamented one of the team’s supporters on Sina Weibo.
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.