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Alibaba to gain brandvantage with soccer club deal

By Qiu Quanlin in Guangzhou | China Daily | Updated: 2014-06-07 07:18

The investment of Chinese e-commerce giant Alibaba Group Holding Ltd in a top soccer club could be more about building an international brand and preparing for a massive initial public offering in the United States than a move into sports, analysts said.

"Chinese soccer is an entangled business. Alibaba's investment in soccer is more like building a brand as the Guangzhou soccer club has already made a splash around the world," said Zhang Yi, chairman of iimedia Research, a consulting company based in Guangzhou.

On Thursday, Alibaba agreed to pay 1.2 billion yuan ($192 million) for a 50 percent stake in the Guangzhou Evergrande Football Club, the most successful Chinese club.

It's owned by Chinese property giant Evergrande Real Estate Group Ltd.

"In the short term, Alibaba's profile will be greatly increased in the soccer world, as the World Cup is around the corner and it will eventually be helpful for its public listing in the US," Zhang said.

In the long term, the Zhejiang-based company will benefit indirectly from the capital markets, as the soccer club also plans an IPO after it introduces more strategic partners, according to Zhang.

Alibaba chief Jack Ma said that the company, as a representative of the booming e-commerce industry, would work closely with traditional industries such as real estate for business growth.

"Alibaba doesn't 'do property' but it will support real estate companies like Evergrande. We want to use the Internet and technology to help traditional enterprises better transform their business," said Ma.

The capital injection from Alibaba represents a huge increase in value for the Guangzhou club, which the real estate developer bought in 2010 for 100 million yuan.

Xu Jiayin, chairman of Evergrande Real Estate Group, said the partnership with Alibaba was the company's strategic plan to introduce new capital to the club.

"It's the first step to expand the club's capital. We will bring in more shareholders and look for a public listing in the near future," Xu said.

After the capital injection from Alibaba, the club will issue new shares and invite 20 more strategic partners to each take a 2 percent stake in the expanded shareholding, eventually reducing Alibaba's and Evergrande's stakes to 30 percent each.

"We are building a club with a long history by introducing more partnerships, which will eventually provide solid financial support to the club's long-term development," Xu said.

Zhang said Evergrande's introduction of partnerships was part of its effort to spread risks in the soccer industry, as most Chinese clubs currently do not make profits from the sector. "After years of involvement in the soccer industry, Evergrande can't just rely on its own investment to boost the club's strength. It needs to team up with more investors to discover market potential and share market risk," Zhang said.

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