Takeover rumours swirl round Valley

Rumours that Roland Duchatelet may sell Charlton have been circulating from multiple sources including Richard Cawley of the SLP and VOTV editor Rick Everitt. The Rickster printed a picture of white smoke yesterday.

He emphasised that the rumours had nothing to do with Katrien Meire's absence from The Valley yesterday. Richard Cawley noted that the price asked for by Roland had always been a problem.

Nothing is known about the identity of the prospective owners, but I thought it would be opportune to reproduce below an article I wrote for Voice of the Valley recently.

Charlton fans have understandably given little thought to what might follow the current Belgian regime at The Valley. They just want to get rid of Roland Duchâtelet and his failed experiment, along with his unpopular chief executive Katrien Meire. They want someone with a better understanding of the demands of English football who is prepared to engage in a constructive dialogue with fans.

Whoever eventually takes over is going to face a big reconstruction task. Not all the fans who have given up their season tickets are going to come back. They have broken the habits of a lifetime and have found other things to do with their Saturday afternoons. For example, the husband of an old playmate from my cul-de-sac in Plumstead Common has exchanged his Charlton season ticket for one at Maidstone United where they now live.

There is no indication that Roland Duchâtelet is going to sell up any time soon. The reputational damage that has been inflicted on him has not deterred him from his chosen course. Indeed, it may have made him more obdurate. That is not to criticise the efforts of CARD who have run a sophisticated and energetic campaign.

There are also indications that any asking price may be unrealistic, given that the amount of debt that has been accumulated by a company under the owner’s control. Nevertheless, a bid may arrive that is too good to refuse. It is very likely to come from abroad and most likely from China. Wealthy British individuals are well aware of the adage that if you want to make a small fortune, start with a large one and invest in a football club. Overseas owners may consider that any financial losses will be offset by the profile and prestige associated with owning a football club.

The most active investors in football clubs at the present time are from China. In the Premier League, China Media Capital owns a 13 per cent stake in Manchester City, acquired for $400m. It is hoped that they will help City to raise their profile in the key Chinese market. On his visit to Britain, China’s President Xi Jinping visited Manchester City and had a selfie with Sergio Aguerio.

Lai Guochan bought West Bromwich Albion for £150m-£200m. Fosun International bought a majority stake in Wolverhampton Wanderers for £45m. Tony Xia bought a majority stake in Aston Villa for £75m. Midlands football has been in a bad way and has been eclipsed by the London and Manchester clubs. It will be interesting to see whether Chinese investment can revive their fortunes.

In Spain Dalian Wanda bought a 20 per cent stake in Athletico Madrid for $52m. Rastar Group spent $56m on a 56 per cent stake in the No.2 Barcelona club, Espanyol. The two leading Milan clubs are now under Chinese control. Suning Holdings bought a 70 per cent stake in Internazionale for $307m. Haxia Capital bought AC Milan for $835m from the Berlusconi family. [This deal subsequently ran into problems and is yet to be completed]. The controversial former Italian prime minister Silvio Berlusconi used his ownership of AC Milan as one of the stepping stones to political power.

In France IDG Capital Partners bought 20 per cent of Ligue 1 club Olympique Lyonnais for $112m and OGN Nice is majority owned by Zheng Nanyan and Chien Lee. ORG Packaging thought it was worth paying an admittedly small $7m for a 60 per cent stake in Ligue 2’s AJ Auxerre.

Much of this activity is politically driven. The 21st century has been earmarked as the Chinese century. China is building its military power, not least through contested actions in the South China Sea. Its economic power is evident, even if its growth rate has slowed and there are concerns that domestic financial arrangements have elements of a house of cards.

Under the Cameron Government, George Osborne as Chancellor seemed willing to go a long way to please China. Brexit would seem to make Britain more reliant on Chinese goodwill. However, Theresa May is more sceptical about the value of a dependant relationship and called in the Hinkley Power nuclear plant plan for review, to Beijing’s evident displeasure. The real prize here is China’s ability to construct a nuclear plant on the site of the decommissioned Magnox plant at Bradwell in Essex.

One constant that is unlikely to change in China is the existence of a party state regime. There is a plurality of ownership structures and ambiguity in the status of business. This is not accidental. A successful economy is a key requirement for continuing effective party rule, but business also needs to be kept in check in case it develops as an alternative power centre to the ruling party.

Business is profit seeking as it would be in a market economy, but it is also taking political orders or at least seeing the way in which the political wind is blowing, as with football. To some extent there is competition to extract favours from the state. This may involve seeing the mapping of bureaucratic rivalry on to business competition which may create risks of corrupt behaviour.

Although China is in part a market economy, no one should underestimate the power of the Communist Party. This was demonstrated to me by an environmental conference I attended in Kunming in the south-west of China. A bitter dispute broke out between the pro-bamboo and anti-bamboo factions, not helped by the projection system breaking down and depicting rolling pictures of pandas who are big consumers of bamboo. It seemed as if the factions were going to come to blows. Suddenly the provincial governor arrived and everyone fell silent.

President Xi Jinping is a football fan and is determined to make China a leading soccer nation which will stage the World Cup and eventually win it. Considerable investment is being made in football training in primary schools. Chinese companies know that investment in football clubs abroad will be viewed favourably by the party.

As clubs looking for buyers and investors welcome the new wave of Chinese investors, it is as well to remember that not all of them may be of high quality. The tale of Birmingham City is a cautionary one. Acquired in 2009 by Carson Yeung, a former hair salon proprietor, the team was relegated to the Championship and remains there for now. Yeung was jailed in Hong Kong in 2014 for money laundering and the club remains barely known in China.

The fact of the matter is that there are A list Chinese investors like Wanda and Fosun which have plenty of funds at their disposal and a strategic plan to develop their sports and media businesses and B or even C list investors. The latter group have less money to spend and the source and extent of their money is difficult to trace.

They often offer fewer synergies than the A list conglomerates. For example, Lai Guochuan, the new owner of West Bromwich Albion, previously built a company he described as 'the IBM of landscape gardening.' In the case of the Baggies, as many as a dozen Chinese investors looked at the club, but only four had the financial capability and a good rationale to proceed with the deal.

Many smaller Chinese companies have no experience of football and appear to be acting on a whim. They may think that they will win favour with Communist Party bosses by signing up to President Xi's ambitious plan to make China a leading football nation. Guanxi or connections are everything in China, not least connections with the ruling party that can grant entrepreneurs the space to operate or decide to make life difficult for them.

Feng Tao, chief executive of Chinese sports marketing company Shankai, a Chinese sports marketing company, told the Financial Timesthat some entrepreneurs believe they can make quick profits by buying underperforming European clubs with a large fan base and turning them round, eventually capitalising on a higher valuation by injecting them into Chinese listed companies.

Blogger Mark Dreyer from China Sports Insider says 'the idea that clubs will be big in China just because they have a Chinese owner is nonsense. Some of these purchases are going to end in tears.'

However, it should be noted that Chinese owners do tend to favour a consensual approach and like to build bridges with fans. Any prospective Chinese owner is going to note that the team already plays in red. Whether a Chinese company makes a bid, and whether the current owner engages seriously with them, remains to be seen.