China Anger at Dalai Lama Visit Complicates AC Milan Buyout

  • Chinese officials said to block cash needed to buy soccer team
  • Deal was supposed to close in December; now moved to March

GIUSEPPE MEAZZA STADIUM, MILAN, ITALY - 2016/05/23: Dressing room of AC Milan at Giuseppe Meazza Stadium. This dressing room will be used by Atletico Madrid during the 2016 Champions League Final. (Photo by Nicol Campo/Pacific Press/LightRocket via Getty Images)

During a European tour in October, the Dalai Lama paid a visit to Milan, where the mayor presented him with a key to the city and made him an honorary Milanese citizen.

The Chinese embassy in Rome disapproved of the warm welcome for the Tibetan leader, whom Beijing considers a separatist, saying the visit "seriously wounded the feelings of the Chinese people" and would have a "negative impact."

Those hard feelings have created problems for the Chinese investor group trying to buy the AC Milan soccer team from former Italian Prime Minister Silvio Berlusconi, according to several people familiar with the situation.

Eager in general to keep Chinese investment in the country and particularly unhappy to see it land in Milan, Chinese authorities are blocking Sino-Europe Sports Investment Management Changxing from transferring funds from China to complete the 740-million-euro ($785 million) deal, the people said.

Advisers representing both SES and Berlusconi asked Chinese authorities in Italy to clear the funds, according to the people, who asked not to be identified because the matter is confidential. They made the case that the transaction had nothing to do with the reception of the Dalai Lama and that Berlusconi never supported Milan’s mayor anyway.

The Chinese weren’t persuaded. The country has also redoubled its efforts to encourage domestic investment and prop up the yuan, which has hobbled other planned international deals as well.

SES declined to comment, as did a spokesman for Fininvest, Berlusconi’s investment company. China’s Ministry of Foreign Affairs and its embassy in Italy didn’t respond to a request for comment.

Announced in August, the AC Milan deal is one of the most-high profile soccer acquisitions by Chinese businesses. It’s also been the most troubled and protracted. The investment group has had several changes of members, and in October Bloomberg News reported it filed a false bank report during initial deal negotiations.

Unable to transfer its money out of China, the consortium had to draw on accounts based in the British Virgin Islands to make a second, 100-million-euro deposit on the team in December. The deadline to close the deal has been pushed back from December to March, and SES plans to pay the remaining 320 million euros from overseas accounts to bypass Chinese controls. AC Milan called its shareholders meeting for March 1 and 3 to complete the sale.

SES has committed to spending millions of euros to return Milan to the summit of European soccer. As part of its pitch to potential investors, the consortium has been telling potential partners they could earn outsized returns if AC Milan eventually lists on a Chinese stock exchange, where companies trade at a premium to Western markets.

Since winning its most recent title in 2011, the team has struggled on the field as Berlusconi has pared back his spending on a club that loses about 100 million euros per year. AC Milan is 7th in Italy’s Serie A league after 24 matches this season. The other soccer team in the city, Inter Milan, also has a Chinese owner -- a unit of retail company Suning Holdings Group Co. bought a 70 percent stake last year, before the Dalai Lama’s visit.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE