Premier League Probes Chinese Investors for Ties to Beijing

(Bloomberg) -- U.K. soccer authorities are scrutinizing a flurry of Chinese investments in English Premier League clubs to try to identify who ultimately controls the funds flowing into the teams.

The league’s rules prohibit the same owner from holding significant stakes in more than one team to prevent conflicts of interest and match-fixing. Pinning down the owner can be challenging with Chinese bidders because the central government has a hand in so many investments and business records are not always transparent, one of the people familiar with the situation said.

Spurred by the state, which wants to develop the country’s soccer prowess and attract a World Cup, Chinese companies have invested more than 500 million pounds ($668 million) in English soccer in the past nine months, enriching the league and driving up the value of clubs. League officials are worried that the Chinese government might, perhaps even inadvertently, end up with a significant stake in multiple teams, one of the people said.

Premier League Probes Chinese Investors for Ties to Beijing

“I’m sure the Premier League will want to ensure that future deals don’t lead to more than one club being significantly influenced by a single party, including where state-controlled investors are concerned,” said Marcus Shadbolt, a banker who advised on Chinese entrepreneur Lai Guochuan’s acquisition of Premier League club West Bromwich Albion in August.

The Premier League is reviewing a proposal from a Chinese investor group to acquire Hull City, a league spokesman said. Real Estate developers Dai Xiu Li and Dai Yongge have offered to buy the club from its current owner, British businessman Assem Allam, the China Daily reported.

Extended Inquiry

The Premier League has hired a corporate investigation firm to confirm details provided to it by the potential buyers, according to one of the people familiar with the matter. That’s a standard procedure, the person said, but this background check has taken longer than most others. Hull asked the league to expedite the process but officials turned down the request, this person added.

Dai Yongge’s Renhe Commercial Holdings Co. didn’t respond to an e-mailed request for comment about the status of its bid for the club and the Premier League’s investigation. Hull City did not respond to a request for comment.

“There is a rigorous process for any change of ownership or investment in our clubs that includes proof and provenance of funding, extensive background checks on owners and directors and who the ultimate beneficial owner is,” a Premier League spokesman said. “These governance procedures are to ensure the integrity of the competition.”

One Chinese state-backed consortium that includes Hong Kong-based China Everbright Group is interested in investing in Liverpool. The club’s owner, Fenway Sports Group, has said it’s not for sale but it would contemplate parting with a minority stake.

Another Premier League club, Manchester City, is 13 percent owned by state-backed investment fund China Media Capital. The league has satisfied itself that the state’s ownership is less than 10 percent, one of the people familiar with the situation said.

The Premier League considers any stake of more than 30 percent to represent an exercise of control. The league says it prohibits any single owner from holding more than 10 percent of multiple clubs.

As of this summer, two clubs in the second-tier Championship league also have new Chinese owners: Aston Villa was acquired by entrepreneur Tony Xia, while Wolverhampton Wanderers was bought by conglomerate Fosun International Ltd.

‘Fit, Proper’

The league’s background checks include a check on whether potential owners are “fit and proper” stewards, whether they have sufficient funds to buy the club and run it and whether the money comes from legitimate sources.

In the case of Chinese investment, officials also have to determine whether the funding comes from private or public sources, in order to enforce the rule against multiple team ownership. 

“I don’t think the Chinese government has anything to do with the purchase of English football clubs,” said Justin Zhang, head of the Greater China transaction desk at Ernst & Young in London. “These deals are driven by Chinese corporates who see the trend and huge growth potential of the Chinese sports industry.”

League officials are trying to avoid potential conflicts of interest like those that arose in the 1997/98 UEFA Cup, which used to be a tournament for top European clubs, when three teams owned by U.K. entertainment and sports company ENIC qualified for the quarterfinals. That prompted the UEFA governing body to adopt rules barring a single owner from entering more than one team in the competition.