May 24, 2018 / 11:40 AM / 3 months ago

Premier League hopefuls Villa could crown season of Asian investment success

MANCHESTER, England (Reuters) - Chinese-owned Aston Villa hope to join Malaysian-controlled Cardiff City and Chinese-backed Wolverhampton Wanderers in winning promotion to the Premier League as Asian investors reap the rewards of investments in English second-tier clubs.

Soccer Football - Championship Play Off Semi Final Second Leg - Aston Villa v Middlesbrough - Villa Park, Birmingham, Britain - May 15, 2018 Aston Villa's John Terry celebrates after the match Action Images via Reuters/Ed Sykes

Midlands club Villa face west London side Fulham, owned by Pakistani-American Shahid Khan, in Saturday’s Championship promotion playoff final at Wembley in what has been dubbed the most lucrative match in world football.

Promotion to the top flight for either club will see an increase in revenue of at least 160 million pounds, rising to more than 280 million if they avoid relegation in their first season in the Premier League.

For former European champions Villa it would mark a return on the investment made by Chinese entrepreneur Tony Xia, of the Recon Holding Group, who took over the club in 2016 following their relegation from the top flight.

Xia paid a reported 76 million pounds to purchase the Birmingham-based outfit from American Randy Lerner and if Villa can win the playoff at Wembley they will be back in the elite after a two-year absence.

Cardiff’s Malaysian owner Vincent Tan took control of the club in 2010 and they were promoted to the Premier League as second-tier champions in 2013 but the South Wales side lasted just one season in the top flight.

Cardiff have won automatic promotion again this term along with Championship title winners Wolves, owned by the Fosun Group, who are themselves back in the Premier League after a six-year absence.

Fosun paid a reported 46 million pounds to purchase west Midlands club Wolves from their previous, English, owner Steve Morgan in 2016.

While getting to the Premier League involves additional investment in transfer fees and the wages of players and coaching staff, the rewards are huge.

This year Southampton, owned by Chinese businessman Gao Jisheng, narrowly avoided relegation but finishing in 17th place was enough for them to pick up over 107 million pounds in annual shared television and other revenues from the Premier League.

INTENSE COMPETITION

However, it is not just a case of simply buying a Championship club, investing some money and getting to the promised land. The competition to get out of the second tier is intense with several big city clubs fighting to do the same.

Simon Chadwick, Professor of Sports Enterprise at Salford University, who has closely followed Asian investment in English football, believes this season’s successes highlights the need for intelligent choices of club.

“Each of these clubs has history and heritage, whilst the organisational architecture of them is oriented around being in the Premier League.

“Investors need to combine stealth, strategy and support. Stealth is needed as promotion may not be immediate; strategy is required to ensure a club is moving in the right direction; and support, especially financially and specifically in the transfer market, is crucial,” he said.

Chadwick notes that foreign investors have also been smart to choose executives and managers with knowledge and track records in England, such as Steve Bruce at Villa and Neil Warnock at Cardiff.

Rob Wilson of Sheffield Hallam University’s Sport Industry Research Centre, says newly relegated teams have some advantages for investors, particularly the ‘parachute’ payments given to such clubs by the Premier League.

“Relegation from the Premier League to the Championship can actually increase the interest in new ownership – the lower revenues on offer make the clubs better value and, with the promise of parachute payments and therefore a statistically significant competitive advantage of being promoted, the possible returns are large,” he said.

ASIAN INTEREST

There certainly seems to be no let-up in interest in English clubs from Asian financiers.

Wigan Athletic, relegated from the Premier League in 2013, fell into the third-tier but are back in the Championship and this week confirmed a proposed sale of their entire shareholding to International Entertainment Corporation of Hong Kong, subject to Hong Kong Stock Exchange and Football League approval.

As well as the chance of a decent return on investment, Chadwick believes there other, less tangible, gains to be made for those trying their luck in the English game.

“English football is a good place to learn, notably how to create revenue-generating assets that can deliver sustainable revenue flows.

“As such one wonders if we will see the likes of Saudi Arabian investors spending in England as the country seeks to build its own clubs,” he said.

Arab owners celebrated winning the Premier League title this year with Abu-Dhabi-owned Manchester City lifting the trophy, although Chinese-owned West Bromwich Albion were relegated.

But the surge of interest from China may not necessarily see continued purchases of clubs from that country given the changing business atmosphere.

"It's important to remember that most of the Chinese companies bought into European football clubs at a time when the investment landscape in China was very different, says Mark Dreyer editor of the China Sports Insider website chinasportsinsider.com.

“There was active encouragement from the government a year or two ago to invest in the sports industry in general - and that included buying teams overseas.

“That said, promotion to the Premier League is like reaching the promised land with untold riches just 90 minutes away so, from that perspective, the Chinese are just like everyone else.

“Why wouldn’t they want to achieve that goal?”

($1 = 0.7464 pounds)

Reporting by Simon Evans; additional reporting by Michael Church in Hong Kong; Editing by Ken Ferris

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