After Hong Kong businessman Yang Jiacheng took control of the British football club Birmingham, it was followed by Xtep International (1368.HK), headquartered in Quanzhou, Fujian. This is the first time that Chinese sports brands have entered the top five football leagues in Europe as the official supplier - the English Premier League (hereinafter referred to as "The Premier League").
Xtep International deviated from its usual main line of entertainment and returned to the sports industry. Ding Shuibo, chairman of the company, revealed that the sponsorship of the Birmingham Club is just a beginning. In the future, special names will be seen in running and Yubane sports.
However, it is far from being a toast to celebrate. It is not known whether this huge investment can bring profits to it.
75% of pain
On January 18, Xtep International signed an agreement with Hong Kong Jifeng International Holdings. The former will replace UK-based UM-BRO football apparel manufacturer and become a sponsor of the Birmingham Club. In the next few years, people will see the British boys in Birmingham dressed in white and blue jerseys. The cost of this scenario is calculated in tens of millions of dollars.
In the next five years, Xtep International will sponsor Birmingham’s full range of sports equipment; the two parties will also jointly develop the "BCFC-Xtep" series of branded apparel - the combined apparel brand of Xtep and Birmingham; Xtep branding will reach the Premier League; the Premier League will be operational during the offseason. Birmingham Club's related activities in China will ensure that during the cooperation period, CCTV will broadcast the Premier League and Birmingham related games each year.
In addition, in the content of the contract, the most intriguing thing is that the Birmingham Club will cooperate to arrange Chinese mainland players to play in the Premier League, at least one.
Although Xtep International declined to say how much it would cost for this sponsorship, people in the sports industry told reporters that it is quite possible to spend tens of millions of dollars each year. According to the 2009 interim report, Xtep International spent 11.6% of its revenue on advertising and marketing. In the first half of last year, Xtep’s revenue was RMB 1.68 billion.
In Ding Shuibo's opinion, although the Birmingham Club is controlled by Yang Jiacheng, if this team does not have a Chinese player, it is still difficult to call it "Chinese Premier League." Ding Shuibo tried to please consumers through Chinese players and leveraged the Premiership to shake the Chinese market remotely, thereby realizing expansion from China to Europe to the world.
Now, for the Chinese market that urgently needs to start, only this team has enough Chinese elements and expensive spending is valuable. The most important Chinese element is Chinese players.
Although the wish is good, there are many obstacles. Fan Zhiyi, the General Counsel of the Chinese Football Federation of Birmingham, told reporters that this summer, the Birmingham Club will choose potential Chinese athletes to go home to St Andrews. However, the introduction of players is not easy. To enter the Premier League club, in addition to the players have potential and other factors, the key is to obtain the British "Labor license." The English Premier League stipulates that non-EU players need to represent the national team in the A-class event in the past two years to reach more than 75% of the time, in order to obtain an employment permit. Only this painful "75%" standard can minimize the range of optional players. Fan Zhiyi himself was once trapped by the labor card.
The risk of huge sponsorship is not only due to the successful introduction of Chinese players.
Although the Premier League is regarded as the most popular football league, China is also the TV market with the largest number of potential viewers. It is also the consumer market that Xtep is trying to please. However, as of now, the Premier League TV copyright and the mainland China TV market It is difficult to find a satisfactory bridge between the two sides. Whether the Premier League can obtain a centralized open channel in China is still unknown. Birmingham needs a free broadcast of the Premier League in mainland China. In the English Premier League's copyright competition, it is still a high-priced leader in paid TV Tiansheng.
Carlyle behind the scenes
In September 2009, Yang Jiacheng became a major shareholder of the Birmingham Club with 94% of its shares through Hong Kong Fengfeng International Holdings. Fan Zhiyi was invited to become the general football advisor of Birmingham China. However, “General Fan Da†is not a hack between Yang Jiacheng and Ding Shuibo.
Yang Jiacheng went to London to study English at the age of 16. After returning to Hong Kong, he became a hair stylist and later moved into real estate and gaming. Xtep International was formerly a sports shoe foundry company founded in 1999 by Ding Shuibo. In 2002, it began producing sports shoes, clothing and accessories for the Xtep brand. Until Yang Jiacheng held the Birmingham Club, Ding and Yang never had any contact.
The behind-the-scenes promoter of this international marriage is actually the private equity fund Carlyle Group.
In June 2007, two of Carlyle’s investment funds took a stake of approximately US$30 million in the form of a convertible loan agreement and held 9.6% of its shares. At that time, Carlyle’s share price was HK$1.55. In June 2008, after Xtep International landed on the Hong Kong Stock Exchange, the shares were diluted to 7.21% and Xtep International's issue price was HK$4.05. Carlyle's earnings here are evident.
According to Xtep International’s prospectus disclosure, Carlyle’s holdings have a lock-up period of only six months, which means that in December 2008, Carlyle Investments had the right to sell stocks for cash.
However, the ambitious Carlyle did not rush out of the market with the special guidance. Carlyle, on the other hand, has been helping Xtep to identify international acquisition targets and try to seize market share from larger competitors such as Anta and Li Ning.
In June 2008, as the Chinese Olympic Games approached, Carlyle increased its holding of Xtep twice, and its shareholding ratio rose from 7.21% to 9.7%. However, how to obtain the maximum value-added assets at the time of investment withdrawal also requires special operations for special steps.
In fact, when Ding Shuibo started to use Xtep in 2002, he encountered the problems that rivals Anta, Peak, and Li Ning had already led the game. In order to avoid direct competition with tough opponents, Xtep invented a differentiated route of “make sports differentâ€. Xtep is the first to launch differentiated marketing models such as "entertainment marketing" and "recreation + sports dual-track marketing" in the sporting goods industry.
Although this has led to a 100-fold increase in assets, in the more potential sporting goods market, Xtep appears to be seeing huge markets divided up by rivals in the same city. Li Ning, Anta and Peak are closely integrated with sports events. The passers-by are well-known; while the special steps are different, their spokespersons are entertainment stars. The success of differentiated marketing seems to have deviated from its original track: comprehensive development, production and sales of sports shoes, clothing, bags, hats, socks, and other major sporting goods companies.
This prompted PE Carey, who is close to 10% of the shares, to take the initiative to find a breakthrough path.
At this time, Yang Jiacheng succeeded in the Premier League club and was considered as an opportunity not to be missed by Carlyle. "Yang Jiacheng and a senior Carlyle acquaintance, after the two met, quickly persuaded Ding Shuibo to sponsor this team." Xtep International insiders told reporters.
On January 2, 2010, through the sponsorship of the 2010 Xiamen International Marathon, Xtep began to convey to the outside world the slogan "love running, love Xtep," which has obvious meaning. Xtep is no longer content with "making the sport different".