The new high-profile Chinese owners were supposed to restore Inter Milan’s team to its former glory. It has invested heavily in proven scorers such as Romelu Lukaku and Christian Eriksen. After five years of investment, the legendary Milan soccer club was one step away from its first Italian league title in a decade.
Now the bill came – and suddenly, Inter’s future was uncertain.
The club’s main owner, electronics retailer Suning, is cash-strapped and is trying to sell its shares. The club is losing money badly. A person with close ties to the club said some of the players have agreed to defer salary payments from the club, and the person asked not to be named because this is non-public information.
Inter Milan has been in talks with at least one potential investor, but the two sides could not agree on a price, according to other people with knowledge of the negotiations.
At Home, Suning’s soccer aspirations are also breaking down. Four months after winning the Chinese Super League title, the company suddenly disbanded its domestic team. Some of the stars who chose to go there instead of Chelsea or Liverpool say they never received their salaries.
China has failed to realize its dream of entering the world’s most popular sport. A new generation of Chinese tycoons has poured billions of dollars into major clubs and star players – driven in part by the soccer Dreams of China’s top leader, Xi Jinping, a devoted fan – thus changing the way the sport is financed. Between 2015 and 2017, Chinese investors spent $1.8 billion to acquire stakes in a dozen European teams, while China’s cash-rich domestic leagues paid to pay unprecedentedly high salaries to foreign players.
But this splurge has exposed international soccer to the particular risks of the Chinese business world. Deep Communist involvement makes companies vulnerable to sharp shifts in political winds. The spendthrift tycoons usually lack international experience or maturity.
Discussions of defaults, asset divestments and hasty exits now dominate board meetings. A mining magnate lost control of AC Milan amid questions about his business empire. The owner of a company that makes soap and Food additives gave up his stake in Aston Villa. An energy group gave up its stake in Slavia Prague after the disappearance of its founder.
Ji Zhe, head of sports marketing firm Red Lantern, which works for Europe’s top soccer teams in China, said Suning’s woes reflect “the rise and fall of the whole era of soccer in China. When people talk about Chinese soccer and all the attention it got in 2016, it came and went very quickly,” he said.
Suning bought a major stake in Inter Milan in 2016 for $306 million. Suning is a household name in China for electrical appliances, with stores filled with computers, iPads and rice cookers to cater to the country’s growing middle class. Despite being hit by China’s e-commerce revolution, online shopping giant Alibaba is its main investor.
On the flamboyant stage where the Inter Milan deal was announced, Suning’s billionaire founder and chairman Zhang raised a champagne glass and talked about how the famous Italian team – which has won 18 titles since 1910, but not since 2010 – -how it will help his brand on the international stage and contribute to Chinese sports.
Zhang touted Suning’s “rich resources” and promised that the club would “attract more top stars from around the world to be a strong backing for Inter Milan to achieve further glory.
Suning chairman and founder Zhang Nearyang (right) and his son Zhang Kangyang at a match in Italy in 2017. Suning arranged for the Inter stars to help sell air conditioners and washing machines.
Under Zhang’s son, Zhang Kang Yang, 29, the club has spent more than $300 million to sign stars such as Romelu Lukaku, Christian Eriksen and Lautaro Martínez, the Argentine striker nicknamed “The Bull” for his relentless pursuit of goals.
Suning also shocked the industry by paying $700 million for the English Premier League’s broadcast rights in China starting in 2019.
Suning spent a lot of money on a domestic club it bought in 2015. It paid a $32 million transfer fee for Chelsea player and Brazilian midfielder Ramires and €50 million for young Brazilian striker Alex Teixeira. Teixeira chose the Chinese team over one of the most popular clubs, Liverpool.
The newly recruited star was given the job of selling air conditioners and washing machines. In one ad, Teixeira urges viewers to buy Chinese brand appliances. He says in Mandarin, “I am Teixeira, come to Suning, buy Haier.”
Mubarak Wakaso, a Ghanaian midfielder, said the money makes China more attractive. “I’m going to make much more money in China than in La Liga,” he said in an interview last year in Cheviot mixed with English, referring to the Spanish team he used to play for. “That’s the truth.”
Suning’s investment in soccer comes at a terrible Time. The Chinese government became concerned that large conglomerates were borrowing too much and threatening China’s financial system. A year after the deal was struck with Inter Milan, official Communist Party media criticized Suning’s “irrational” takeover.
Then the pandemic hit. Even if Inter wins on the pitch, it loses ticket revenue from the San Siro stadium, one of the largest in Europe. Some sponsors pulled out due to their own financial pressures. The club lost about $120 million last year, one of the biggest losses reported by any European soccer club.
And in China, Suning was hit by e-commerce as well as the new crown virus. Trouble intensified in the fall when it chose not to ask Evergrande real estate, China’s most indebted company, to repay a $3 billion investment.
Suning’s burden will grow heavier. This year, it must cash in $1.2 billion in bonds. The company declined to comment.
Suning is starting to take extreme measures. Last year, it dropped its broadcast deal with the English Premier League.
Jiangsu Suning players celebrate winning the Chinese Super League title last year. The team disbanded four months after the win.
It was less than four months after the team won the CSL title over a team controlled by Evergrande. A person familiar with the matter said at least one of the team’s foreign players has hired a lawyer to help reclaim unpaid salaries.
The uproar in the soccer world came after media reports that Eder, a former Suning player and Brazilian-born star, said Suning had not paid him. Eder tweeted that the comments were private chatter without his own permission. His agent did not respond to requests for comment.
The steps Suning has taken to save itself could work against Inter Milan, which sold $2.3 billion worth of shares to a subsidiary of China’s Shenzhen government on March 1. The agreement gives the Chinese Communist authorities a say in Inter’s fate.
Inter Milan will then have to face even greater financial pressure. It must repay $360 million in bonds next year. Lion Rock Capital, a Hong Kong minority shareholder that acquired a 31 percent stake in Inter in 2019, could exercise an option that would require Suning to buy its shares for as much as $215 million, said a person with close ties to the club.
Inter officials are seeking financing, a new partner, or a sale of the team, which is valued at about $1.1 billion, the person familiar with the matter said.
The club was recently in exclusive talks with British private equity firm BC Partners, but they failed to agree on a price, according to people with knowledge of the talks.
Without the new money, Inter could lose players. European soccer rules state that if it cannot pay salaries or transfer fees for departing players, it is disqualified from participating in top-level competition.
Manuel Corti, a member of the London-based Inter Milan Supporters Club, said, “The situation is one we are worried about, but not yet fearful – we can only wait for the news.”
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