What’s behind Manchester City’s multimillion pound deal with Chinese investors?

The owners of English Premier League leaders Manchester City have announced a multimillion pound partnership with a consortium of Chinese investors.

China Media Group acquired a 13% in City Football Group, the parent company of the Manchester team, for $400 million.

The sale means Sheikh Mansour’s Abu Dhabi United Group, which remains majority owner, will have effectively recouped its initial investment in the team despite spending big on players and facility since it took over in 2008.

The club is the sixth-richest in the world, with revenues of €414 million ($440 million) in the 2013-14 season.

City Football Group, which also owns are New York City FC and Melbourne City FC, has long looked to expand its reach beyond the English league. No intentions to invest in a Chinese team have been revealed yet however.

So what’s behind the deal?

Who are City Football Group’s new partners?

The consortium of Chinese investors is headed by media mogul Li Ruigang, whose China Media Capital, a state-backed private equity and venture capital firm based in Shanghai, has previously partnered with Warner Bros andLegoland-owner Merlin Entertainments.

Li made headlines in October by paying Rmb 8bn for the five-year broadcasting rights for China’s Super League football competition.

The other Chinese investor, Citic Capital, is a subsidiary under China state-owned conglomerate Citic Group, whose investing arm is currently under government investigation for alleged insider trading.

What do they get from the deal?

China has long been seen as a glittering prize for those who seek to internationalize football, with a billion potential fans, many of whom have not pledged their allegiance to any particular team, international or otherwise. City’s owners are hoping to capitalize on its successes by growing a lasting fanbase overseas.

“Football is the most loved, played and watched sport in the world and in China, the exponential growth pathway for the game is both unique and hugely exciting. We have therefore worked hard to find the right partners and to create the right deal structure to leverage the incredible potential that exists in China, both for CFG and for football at large,” says City chairman Khaldoon al Mubarak.

The capital from the share acquisition will be used by CFG to “fund its China growth, further CFG international business expansion opportunities and further develop CFG infrastructure assets,” the group said in a statement.

What does this mean for the future of Man City?

The wealth — and value — gap between City and their crosstown rivals Manchester United is narrowed with this deal, which values City Football Group at $3 billion, roughly the same as their uber-successful neighbors.

Their neighbors have a fantastic global reach, and are able to broker lucrative sponsorship deals with companies across the globe for a huge array of products, including “official partners” in products as diverse as wine, paint and noodles.

Headline deals like CFG’s partnership seek to redress this imbalance. The club will be looking to cement its position at home and overseas after a long climb to the top table of English football.

Read: Financial Fair Play: Manchester City and PSG punished

Reaction in the UK, China and around the world

This is the first investment in English football by a Chinese entity, and may be in part due to efforts at the highest level.

In October, British Prime Minister David Cameron invitedChinese President Xi Jinping to Manchester City’s training ground, where he met al Mubarak and other executives, along some of the club’s star players, including mercurial Argentinian striker Sergio Aguero.

In China there are hopes that the deal will raise the profile and popularity of the sport. In 2011, Xi, reportedly a football fan himself, set out his three-part ambition for the sport in China: “To qualify for the World Cup, to host the World Cup and to win the World Cup.”

However, China has struggled to realize its leaders sporting ambitions. The team looks unlikely to qualify for the 2018 World Cup in Russia after losing to Qatar and being held to successive draws by Hong Kong, a side ranked 70 places lower.


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