Billionaire Zhu Jun takes on state firms by refusing to pay Drogba and Anelka
By withholding wages, the boss of Shanghai Shenhua football club is telling government companies that he will not bend to their whims
Former Chelsea strikers Didier Drogba and Nicolas Anelka are not the only ones coming to grips with the hardnosed and unpredictable style of Shanghai Shenhua boss Zhu Jun . The state-run enterprises trying to renege on a deal to give him full control of the club are also facing his wrath.
The flamboyant tycoon's decision to withhold massive pay cheques from the stars may have grabbed the headlines in recent weeks, but the affair also illustrates how the mainland's billionaires are increasingly willing to take on the powerful state firms which have long held sway.
The salary fight is the latest boardroom dust-up stemming from the 2007 deal that gave Zhu management of the club. Under it, Zhu took a 28.5 per cent stake from five local-government-controlled firms who agreed to cover all operating costs.
In exchange, the firms were expected to remain silent partners and give him a controlling stake of 70 per cent once his investment exceeded 150 million yuan (HK$183 million).
Zhu, 46, who made his fortune by founding the Nasdaq-listed gaming firm The9, has spent around 600 million yuan on Shenhua in the past five years, according to local media reports.
A fight over a mainland club might seem like a head-scratcher because they rarely turn a profit. But they are prized by governments and private businesses as a way to build prestige or as a promotional vehicle.
Zhu's pursuit of control of Shenhua has acquired new intensity because of a dramatic increase in the market value of the club's training facility in Shanghai's suburban Kangqiao area, according to a person familiar with his thinking.
It is said to be worth more than eight billion yuan.
Not surprisingly, Shenhua's state-owned partners, who include the city's top radio and television broadcaster, Shanghai Media and Entertainment, were reluctant to give away their share. Moreover, it is believed the local state-asset watchdog barred the companies from doing so for fear of asset erosion.
In response, Zhu declared war on his fellow shareholders, if not the local government itself. He withheld the salaries of Drogba and Anelka, arguing the state-run businesses should foot 71.5 per cent of the bill - in line with their stake - or grant him full control.
The stand-off has thrown a damper on what was supposed to be a triumphant first season for Drogba, who signed a 21/2-year, 248-million yuan deal with the club in June. A source close to Zhu said Shenhua had not yet paid Drogba and Anelka their salaries for August.
During drawn-out talks between Zhu and the five other shareholders, senior local government officials stepped in, hoping to iron out the issue.
In China, private business owners understand that authorities and regulators will almost always support their state-owned counterparts when disputes arise. But signing Drogba and Anelka - alongside Colombian midfielder Giovanni Moreno and Argentinian coach Sergio Batista - gave Zhu the upper hand.
Their arrival in Shanghai was widely seen as confirmation of the city's rising wealth and international profile. City officials know that Shanghai's reputation could be equally damaged if the stars leave angry.
In the meantime, the fight has only raised Zhu's own profile as a shrewd and tough business operator. The gaming magnate's colourful behaviour and penchant for interference had already earned him countless headlines since taking over the club's operations.
In August 2007, he put himself on the pitch for five minutes during a friendly between Shenhua and Liverpool. Three years later, Zhu announced he was considering a leveraged buyout of the Liverpool club.
Last Saturday, he successfully persuaded his frustrated foreign stars to play in a Chinese Super League game against Liaoning Whowin. Drogba scored the final goal to seal Shenhua's impressive 3-0 victory.
Batista had assured Drogba before the match that the pay dispute was "basically resolved". But comments by Zhu suggested otherwise. "It was a difficult decision to choose to believe you one more time," he wrote on his personal Sina Weibo microblog.
It was a clear message to the state-owned shareholders that Zhu would stand firm. He gave a deadline: two weeks.
Win or lose, his stance will earn Zhu respect among fellow entrepreneurs. He will be seen as a trailblazer who dared to challenge state-owned enterprises.