Football Premier League Soccer Southampton FC Sports Governance

Will the Gao family’s purchase of Southampton be the final move from Chinese investors in European football?

August 25, 2017

The Gao family — father Jisheng and daughter Nelly — are now the majority owners of Southampton FC, and the current board will continue to run the club

After a goalless draw with Swansea on the opening day of the Premier League season Katharina Liebherr, the owner of Southampton, delivered a letter to the fans of the South Coast club in which she introduced a new partner, Mr. Jisheng Gao, who is the chairman of Chinese company, Lander Sports.

In the letter, Liebherr said: “I’m pleased to confirm that talks to bring in a new partner to our club have been concluded. Today is the start of a new and exciting chapter for our club.

“Mr. Jisheng Gao and his daughter Mrs. Nelly Gao, with whom I have built close relationship, share our values and ambitions. As a team, we will strive to build upon the strong foundation that is in place towards sustainable long-term success. But, for now, it is business as usual at Southampton Football Club.”

The Gao family has acquired 80% of Southampton’s parent company, ST. MARY’S FOOTBALL GROUP LTD for a reported £210 ($269) million. The new investors are now the largest shareholders, while the board will continue to operate in its current capacity.

Southampton, also known as ‘The Saints’, was founded in 1885. The club may be riding high at present but they were relegated from the Premier League as recently as 2005. Relegation to the third tier followed in 2009 after a 10-point deduction was triggered by rule violations in regards to a management reshuffle.

But the club reached a turning point after it was acquired by Swiss businessman Markus Liebherr’s holding company, DMWSL 613 Limited, later in 2009. According to the figure provided by Chadwick Simon, professor of the University of Salford in Britain, Mr. Liebherr purchased the club for a reported fee of £14 ($17.9) million. Southampton finally returned to the Premier League ahead of the 2012–13 season.

Since their return to the top flight, Southampton’s performance has been stable. They have finished in the top eight for the past four consecutive seasons, and have also competed in the UEFA Europa League group stages.

Fans remain fiercely proud of their youth training system, from which players like Alan Shearer, Theo Walcott, Gareth Bale and Alex Oxlade-Chamberlain progressed before becoming superstars elsewhere. Southampton has also made a fortune from transfers.

The annual report of ST. MARY’S FOOTBALL GROUP LTD showed that in its second season back in the Premier League, Southampton started to make a profit, with a £30.7 ($39.3) million profit after tax.

Although the profits decreased in the following years, its operating income kept increasing at the speed of 7%-9% and reached £114 ($146) million in the season of 2015-16, with a £4.6 ($5.8) million profit after tax.

High-quality youth training programs, satisfying athletic performance and a stable financial situation have made Southampton a appealing investment target.

However, Katharina Liebherr, the owner of Southampton, seemed eager to sell the club. She inherited the ailing club from her father, and brought the Saints back to elite level. She has done an excellent job running the club, but she needed external help to strengthen the club’s profitability.

Compared to the takeover of AC Milan completed by Yonghong Li through Luxembourg-based Rossoneri Sport Investment Lux, the acquisition of Southampton seemed far less complicated – at least nominally, the transaction remained a personal move from Gao.

Deal negotiations started in October 2016 and went through a bumpy road. The public-listing company Lander Sports started to suspend its shares and domestic and overseas media quickly revealed that Lander Sports’ intention was to buy Southampton.

In January 2017, Lander released an announcement, claiming it had purchased part of Katharina Liebherr’s shares of ST. MARY’S FOOTBALL GROUP LTD. Sources told Lanxiong Sports that Lander Sports had paid a deposit of £8.2 ($10.5) million to the Southampton during the negotiations of this transaction. While some files about Southampton’s stock exchange revealed that the plan of selling club had been officially activated in January of 2016.

“It’s no news that Katharina Liebherr wanted to sell the club – this is a consensual transaction,” Chadwick told Lanxiong Sports.

But thereafter this takeover met several obstacles. Since December 2016, the Chinese government has gradually tightened up its control of foreign exchange, and therefore slowed down overseas investments. The government even publicly warned about the excessive “overseas investments in sports club”.

In April 2017, Lander Sports released a statement again, mainly to distance the company, Lander Sports, from the acquisition deal, and clarify the takeover had become a private transaction of Gao Jisheng rather than a corporate decision of Lander Sports.

According to the BBC, the deal was approved by the Premier League in July. A spokesman for the Premier League acknowledged that they had verified the funding in the transaction and received a detailed business plan about the future development of the club.

However, Mr. Gao remained silent. Even after the acquisition was closed, he has maintained a low profile.

He only made a official statement through the club, “I am honoured and humbled to become a partner of Southampton Football Club alongside Katharina Liebherr, who, together with her father, has been such a great steward of the club, its growth and success.

“Together, we have the passion and motivation to build on Southampton’s excellent progress in recent years as we look forward to an exciting next chapter for the club.”

According to the statistics from China’s Ministry of Commerce, in the first half of 2017, domestic investors’ direct investments reached £37.55 ($48.17) billion in non-financial fields in 145 countries and regions, representing a decline of 45.8% on a year-on-year basis.

The overseas merger and acquisitions in culture, sports and entertainment industry has sharply decreased by 82.5%. As for the reason for the decline in foreign investment, the Ministry of Commerce credited the continuously booming domestic economy, which made investors tend to keep their money inside, as well as the high base number in the same period of last year.

Since the end of 2006, the Ministry of Commerce, together with relevant ministries, has strengthened inspections on overseas investments, in order to restrain “irrational” investment and optimise overseas investment structures.

Southampton is the latest Premier League club with a Chinese majority shareholder but, with the changes of overseas investment policy, will the acquisition be the final move from Chinese investors in the European football world?

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Football Premier League Soccer Southampton FC Sports Governance