By Mark Baber
June 6 – Hangzhou-based e-commerce giant Alibaba Group Holding Ltd announced Thursday that it is taking a 50% stake in Guangzhou Evergrande for 1.2 billion yuan ($192 million). The valuation of $284 million would put Evergrande into 20th place in the latest (2013) Forbes List of the World’s Most Valuable Clubs.
The deal reportedly took just 15 minutes to agree following a chat over drinks between Alibaba founder Jack Ma (pictured right) and club owner Xu Jiayin (pictured left) in Hong Kong, and comes prior to Alibaba’s massive IPO in the US. The Alibaba IPO could exceed Facebook’s 2012 IPO as the biggest technology IPO of all time, mainly due to the value of Taobao (a Chinese equivalent to ebay and Amazon) which is amongst the world’s top 10 most visited websites.
Xu Jiayin’s property company Evergrande Real Estate Group Ltd will retain 50% of the club. Xu has a reported net worth of $7.7 billion and is a member of the Chinese People’s Political Consultative Conference.
Guangzhou Evergrande won the Chinese Super League and the Asian Football Federation AFC Champions League title in 2013 and under Marcello Lippi has reached the quarter-finals of the Champions League this season.
Whilst Evergrande may benefit from Alibaba’s deep pockets, the deal will be seen as a boost to Chinese football as a whole, as was affirmed by Ma who said: “We’re not only investing in Evergrande, we are investing in Chinese football.”
Ma insisted the price was cheap, although he did confess that he hadn’t been particularly interested in football and “to be honest, I don’t know much about it.” This, Ma argued, wasn’t a problem, as he didn’t understand ecommerce or the internet before he founded Alibaba. Despite some misgivings from analysts, according to Ma, the investment fits in with Alibaba’s future strategy which is in health and entertainment.
Alibaba’s stock is currently held by a number of the firm’s employees as well as investors such as Japanese telecoms firm SoftBank Corp (34.4%) and US-based Yahoo (22.6 %).
The Chinese football market has huge potential, as has been recognised by European clubs. A recent survey of Chinese fans by Coventry University found Arsenal to be the most popular international football team among fans in China, followed by Manchester United.
The Alibaba deal suggests European clubs may face far stronger competition in the Chinese market from domestic clubs in the not-too-distant future. The increase in investment in Chinese domestic clubs may also help China in any future bid to host the World Cup.
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