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Dark tales of Chinese investment into European clubs

HONG KONG — The Chinese company that bought French Ligue 2 football club Sochaux-Montbeliard never looked like a great fit when carmaker Peugeot SA sold out in 2015 after 87 years of ownership. The buyer is a maker of LED lighting and managed a property for the People’s Liberation Army in Shanghai — not obvious qualifications for reviving a team trying to haul themselves back into the top French league after being relegated two years ago.

Sochaux fans and shareholder activists have questioned Tech Pro and its S$10.8 million purchase of the club. Fans are worried about the sustainability of their team as the lack of investment in the squad is glaring. Photo: Getty Images

Sochaux fans and shareholder activists have questioned Tech Pro and its S$10.8 million purchase of the club. Fans are worried about the sustainability of their team as the lack of investment in the squad is glaring. Photo: Getty Images

HONG KONG — The Chinese company that bought French Ligue 2 football club Sochaux-Montbeliard never looked like a great fit when carmaker Peugeot SA sold out in 2015 after 87 years of ownership. The buyer is a maker of LED lighting and managed a property for the People’s Liberation Army in Shanghai — not obvious qualifications for reviving a team trying to haul themselves back into the top French league after being relegated two years ago.

Now, Li Wing Sang, the chairman of Hong Kong-listed Tech Pro Technology Development Ltd, faces bankruptcy proceedings. The company’s share price has fallen 92 per cent since a short seller’s attack in July, closing last Friday at HK$0.17 a share, a loss of more than US$1.7 billion of market value.

In August, a Hong Kong court froze some of Li’s assets, according to Tech Pro, which said the personal matter didn’t affect the company.

“We don’t understand Peugeot’s decision to sell the club to this investor,” said Fabrice Lefevre, president of one of the French team’s supporters’ clubs. “It took us just a few hours and a few clicks on the web to find enough bad things to make us strongly doubt this sale.”

The saga in the industrial city of Montbeliard in eastern France highlights the risk that a wave of Chinese investment in European football — including more than US$2 billion (S$2.75 billion) in completed or planned deals since 2015 — will bring buyers with questionable credentials.

Chinese investors have agreed to buy teams including AC Milan and Inter Milan in Italy, Aston Villa in England, and RCD Espanyol in Spain and taken minority stakes in Manchester City and Atletico Madrid. All those teams except Aston Villa play in their countries’ top divisions.

Fans are not the only ones with questions about Tech Pro and its €7 million (S$10.8 million) purchase of the team. In September 2015, David Webb, a shareholder activist and former member of the board that operates the Hong Kong stock exchange, called Tech Pro a “bubble stock”. This year, two short sellers went after the firm.

A money-losing LED business “really doesn’t make sense buying a French football team that also loses money”, Dan David, a co-founder of Pennsylvania-based research firm GeoInvesting LLC who invests in Hong Kong-traded stocks, told Bloomberg Television in August.

Glaucus Research Group earlier said the company — a “roll-up of unrelated businesses” — had overstated profits and inflated the price of acquisitions. Tech Pro “vigorously” denied the allegations.

In Montbeliard and nearby Sochaux, fans are alarmed by the headlines from Hong Kong. In the latest in September, a brokerage filed a bankruptcy claim against Li. The company did not respond to questions about the status of the legal proceedings.

“When Li bought the team, he said he had big ambitions and was ready to build a big team, to get us back to the first division,” Lefevre said by phone from Montbeliard, adding that the chairman had said he was ready to invest as much as €100 million in the club. A few million euros would allow the club to build a proper roster, Lefevre said. “Well, we’ve not seen it.”

During the summer period when players can transfer between clubs, more players exited Sochaux-Montbeliard than joined, according to data compiled by the French sports newspaper l’Equipe.

The club did not pay transfer fees for the players who arrived, because they were on loan or out of contract, the data show. This year’s season began on July 29 and ends in May.

The team now lack players in two key positions, according to Lefevre.

Tech Pro sees itself as aligned with Chinese President Xi Jinping’s campaign to turn his nation into a football super power. In a statement dated Sept 23, the company said the club have sufficient funding and that Tech Pro is ready to give additional support if needed. “Tech Pro has sufficient resources to support its business operations as well as the football club,” the company said, without specifying how much money it had put into the club since buying it.

The firm’s push into football, which it says is a vehicle for promoting its LEDUS lighting product brand, added to existing businesses of subletting a military-owned property in Shanghai for commercial and retail use, and making lighting products at factories in southern China. The company has reported losses every year since 2010.

“We have no assurance that Tech Pro will ensure the sustainability of the club,” said Mathieu Triclot, another fan. “The lack of investment in the primary team is glaring.”

Now, 10 games into the 38-game season, Sochaux have three wins, six draws and one loss, and sit in sixth place — lower than the third-place spot that qualifies for a promotion playoff. Their next match is against RC Lens, who are currently ranked fourth, on Oct 17.

“We are not beginning this season as favorites for promotion,” said Lefevre, “and I fear we don’t have the depth in the team to achieve it.”

THE CHINESE SPLURGE

Since 2015, Chinese buyers have invested more than US$2 billion into European football clubs:

In France:

IDA Capital Partners - US$112 million into Olympic Lyonnais

Tech Pro Technology Development - US$8m; FC Sochaux-Montbeliard

In Italy:

Li Yonghong-led group - US$821m; AC Milan

Suning Holdings Group - US$307m; Inter Milan

In Spain:

Rastar Group - US$60m; RCD Espanyol

Dalian Wanda Group - US$52m; Atletico Madrid

In England

Lai Guochuan-led group - US$230m; West Bromwich Albion

Fosun International - US$40m; Wolverhampton Wanderers

Tony Xia’s Recon Group - US$86m; Aston Villa

China Media Capital - US$400m; Manchester City

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