Swiss takeover Chinese Giant Enters Europe's Big Leagues

The Chinese property and entertainment firm Dalian Wanda has bought Infront, a Swiss sports marketing firm that owns the TV rights to German soccer, in a major European expansion.
Infront owns the TV rights of matches played by Germany's national soccer team.

Dalian Wanda, one of China's biggest conglomerates, has announced it is buying a majority share in the Swiss sports-licensing firm Infront, which manages multiple soccer broadcast rights in Europe and Asia.

The group, which has interests in property, entertainment and media, will gain a 68.5 percent share and Bridgepoint, Infront’s owner, will receive a total of €1.05 billion ($1.2 billion) from the deal. Bridgepoint paid €550 million for the firm just four years ago.

Dalian Wanda fought off stiff competition from another Chinese investor to secure the purchase, and intends to use it as a platform to develop its interests in Europe and beyond.

“We are determined to continue to expand,” the billionaire founder and owner of the Wanda Group, Wang Jianlin, said.

The company is thought to be planning at least two more high-level acquisitions, possibly also in Europe. Mr. Wang sees enormous growth possibilities worldwide, particularly in the business of movie theaters, amusement parks and digital content and entertainment.

The TV rights for sports have become increasingly valuable in the battle for ratings.

Infront was founded in 2002 by Nicole Junkermann and Robert Louis-Dreyfus, the late owner of Adidas. In 2011 it was awarded the contract to market the TV rights for the 2018 and 2022 FIFA World Cups, having originally held the global rights.

It also markets the German national team’s friendly and qualifying matches, as well as the countries cup competition. More than half of Germany’s top-flight teams also have TV deals with the firm.

Infront is primarily known through its boss, Philippe Blatter, the nephew of the controversial head of FIFA, Sepp Blatter. It is believed that Mr. Blatter will continue to run the company.

The company, based in Zug, Switzerland, has stated that it has sales amounting to around €800 million (there are no figures on earnings). With this in mind, a price of €1 billion seems steep. But high prices are the rule of thumb in the industry.

The French company Lagardère paid €865 million for the sports rights marketing agency Sportfive in 2006. At the time, Sportfive had sales of €526 million and €85 million in earnings before taxes, depreciation and amortization.

Quelle: dpa
Shaking on it: Wang Jianlin and Philippe Blatter seal the deal in Beijing.
(Source: dpa)

 

The TV rights for sports have become increasingly valuable in the battle for ratings.

According to a study by the professional services firm Deloitte, the value of the most important TV rights, such as those for the UEFA Champions League, Germany's Bundesliga or the American football leagues, rose by 14 percent in 2014 alone, to $4.2 billion. As only top quality sports rights are still able to guarantee high ratings for media service providers, the price rise is likely to continue.

With the new owners behind him, Mr. Blatter now wants to attack. “Together we will tackle diverse expansion projects with the goal of further developing our leading position in the global sports market.” He wants Infront to become the number one in sports marketing worldwide, and has agreed a five-year strategy with Wanda to make it happen.

Mr. Wang has plenty of money to do this and more. Dalian Wanda is one of China’s most successful companies. Its core business was once real estate, but it has now diversified into services and entertainment and is, for example, the biggest operator of cinemas not only in China but in the United States as well.

We want to be counted among the top six global providers in the field of mass culture. Wang Jianlin, Founder and owner, Wanda Group

Wanda’s revenues already exceed €75 billion and, according to the company, last year’s earnings were an astounding €35 billion. Despite falling real estate prices, this has brought Wanda’s margin up to 45 percent. Its success has been down to its portfolio of tourist hotels and cinemas, which have tapped into the wants of China’s growing middle class.

Analysts rate the company as positive despite its roots in the real estate business. Deutsche Bank sees the potential for continued growth.

Its international expansion plans are ambitious. As part of a phased plan, it has earmarked €6 billion for foreign investment by 2016, Mr. Wang revealed this week. Another €9 billion is planned for the following four years.

“We want to be counted among the top six global providers in the field of mass culture,” he said, a position that would see Wanda in the same league as Disney and Universal. Mr. Wang is having a film city constructed in the city of Qingdao, as well as a large amusement park in Shanghai.

Video: Why Infront does what it does

The Chinese sports market is now also a target. Infront has already enjoyed some success in the marketing of the Chinese basketball league, whose sponsors now include well-known companies such as the Chinese subsidiary of Volkswagen and the U.S. oil giant Exxon Mobil. Just seven years ago, games were still being played in old military gymnasiums.

Mr. Wang’s activities have not only made him the third richest man in China, but they are also perfectly aligned with the strategy of the government in Beijing. According to a directive, companies are supposed to look abroad for investment opportunities to help to reduce dependency on the domestic market and increase China’s influence.

The acquisitions also make economic sense. “Chinese companies are using the strong value of the yuan to go on the offensive abroad,” says Qu Hongbin of HSBC bank. “Time to go shopping!” is how he sums up the mood, given the cheap euro.

In the past year Chinese firms have already spent $140 billion on acquisitions globally, and in the current year it will probably be considerably more. Mr. Qu expects an increase of around 20 percent per year.

 

 

Finn Mayer-Kuckuk is Handelsblatt's China correspondent, Holger Alich is the paper's Switzerland correspondent. To contact the authors: [email protected], [email protected]