Is China-owned MP & Silva about to become the biggest fail in sports marketing history?
Everbright Securities and Beijing Baofeng Technology acquired a 65 per cent stake in 2016 but the firm is struggling to fulfil payments to the Premier League
The Chinese majority owners of London-based MP & Silva, one of the world’s leading sports agencies, are said to be making a desperate effort to save the company from collapse as the mainland continues to rein in investment in overseas sporting properties.
Chinese brokerage Everbright Securities and internet entertainment company Beijing Baofeng Technology, which together own a 65 per cent stake in MPS, face a loss of US$700 million if MPS goes into administration – one of the biggest fails in sports marketing history.
The company, which has bought the rights to a number of high-profile sporting events such as the English Premier League and Italian Serie A, are struggling to fulfil payments for these rights since a promised recapitalisation by Everbright in January this year failed to materialise.
MPS was valued at US$1 billion when Everbright and Baofeng bought a majority stake in the company two years ago – based on the company’s annual turnover in excess of US$600 million for the year ending June 2015 –at the height of Chinese overseas investment in entertainment and sporting properties.
The swoop won the 2016 TMT Finance media deal of the year but in late 2017, the Chinese government started clamping down on overseas investments in property, sports, and entertainment, labelling them as “irrational”.
MPS’s cash flow problems are a result of a lack of funding from its Chinese stakeholders, as they weigh its commitment to the agency amid Beijing’s campaign to crack down on overseas investments, according to a source familiar with the matter.
The source, who declined to be named because he is not part of the company, said Everbright executives Fan Nan and Xue Feng were in London trying to save the company.
Fan, the general manager of Everbright Sports Industries Fund, refused to comment when contacted by the Post on Friday. Texts messages sent to his mobile phone went unanswered as of Friday night. Baofeng could not be reached for comment.
The source said when President Xi Jinping determined some years ago that he wanted to fast-track China’s growth in sports, a number of investors moved money offshore with investments in football club ownership, Wanda’s Fifa and Club World Cup sponsorship and their purchase of sports marketing company Infront for US$1.2 billion, and Everbright’s takeover of MPS.
He said Beijing last year made a U-turn because the flood of Chinese money was driving up the value of the very assets the investors thought were being bought in support of Xi’s vision.
He said the tragedy was that MP & Silva was a strong company with smart management, abundance of goodwill and some of the best properties on the market. But the ownership has spent the past five months hesitant on making important decisions because of China’s reverse stance on overseas investments.
If MPS is placed into administration, it would dwarf the size of any past sports marketing company failures. In 2001, Fifa’s marketing company ISL was placed into administration with debts of around £150 million (HK$1.55 billion).
Trade publication TV Sports Markets reported last week that MPS had missed scheduled payments to the Premier League and the European Handball Federation, among other properties.
It said MPS was in a “state of paralysis”, with senior management having waited five months to discover whether Baofeng and Everbright will give a green light to new business plans.
MPS’ stakeholder Baofeng, which sells televisions and virtual reality devices, has encountered cash flow difficulties itself.
Shares of the Shenzhen-listed company have plunged 40 per cent since the beginning of this year. A court in Beijing decided to freeze some of the shares owned by the firm’s biggest shareholder and its chairman Feng Xin on July 6, because of a dispute in share transfer with asset management firm Citic Capital, according to a statement by Baofeng.
Feng, who owns 21 per cent of Baofeng’s stakes, has pledged almost all of his shares to take out loans, a separate statement shows.
The MPS president is Seamus O’Brien, who more than 20 years ago in Hong Kong formed a sports marketing firm that would eventually be known as World Sports Group – which would become the commercial arm for the Asian Football Confederation. WSG is now Lagardère Sports.
The source said that MPS staff are concerned about the future.
MPS was set up about 12 years ago and most of its revenue comes from selling football rights. It also sells the French Open tennis tournament in Europe and Formula One motor racing in the Middle East.