Milan: Yonghong, “Delays from the Chinese authorities. The deal will go through”
The President of SES said, “We will contribute to the prize fund should we win the Supercoppa Italiana”
Yonghong Li, President of SES, had hoped to be in Doha, where AC Milan will play the final of the Supercoppa Italiana against Juventus FC. However, the famous ‘closing’ – a term supporters have become familiar with over the last few months – is subject to a delay. “I am sorry for the supporters, who would prefer to see the deal finalised soon,” he said in an interview released to the Italian press agency ANSA, “but, ultimately, this is as it should be. This final was secured by the current management, and it is only fair that they should be the ones to compete in the Supercoppa and, we hope, to celebrate victory. For our part, we have decided to play our part by giving the go-ahead to Milan’s proposal to award a prize in the event of victory, which would serve as a further incentive for SES to maintain the highest standards of performance. Indeed, our ambition is to continue AC Milan’s successful history. We hope that Silvio Berlusconi – as Honorary Chairman – will be able to lift trophies in the future as well.”
Q: Why has the closing not yet taken place? Which authorisations are still outstanding, and when are they expected to be announced?
A: Any outbound investment in China is subject to the completion of the Chinese regulatory process. Recently, the regulator announced new risk control measures for the review of outbound investment, which also apply to transactions signed prior to that announcement (i.e. the SES/AC Milan deal).The new criteria focus heavily on outbound investment involving the conversion of Chinese RMB into foreign currencies, as this will have an impact on China’s foreign exchange reserves.The SES team is currently working through the regulatory process in accordance with the new criteria; however, more broadly speaking, every pending application – ours is not the only one – is subject to significant delays.
Q: Why – whilst awaiting authorisation – did you not purchase a stake in AC Milan worth the anticipated EUR 200 million?
A: Any acquisition of a stake in an overseas company is subject to the regulatory process in China, regardless of the size of the stake. To comply with the regulators, SES is not permitted to hold any stake in AC Milan at this stage.
Q: Why did so many other Chinese companies succeed in investing in the UK football industry without encountering those difficulties?
A: These transactions were completed before the recent announcement by the Chinese regulator.
Q: Can you confirm that all the capital required for the company’s acquisition has already been raised and is available to the Chinese consortium?
A: In fact, SES has attracted Chinese investment exceeding the value of the investment; the availability of these funds to SES is subject to the completion of the regulatory process.
SES is also continuously reassessing and optimising its investor base in line with the new guidelines issued by the Chinese regulators.
Q: What would happen if authorisations were refused?
A: SES is working on an alternative investment structure that would overcome the regulatory hurdle.
Q: Is the ‘Plan B’ relating to European capital and investments actually being implemented? How would it work? Would it be carried out by ‘bridge shareholders’, who would then be replaced by Chinese shareholders once the authorisations have been announced? Would the expected timing for the closing (i.e. 3 March) be subject to change?
A: At this stage, we are confident that authorisation will be granted in time to allow the transaction to be completed by the date agreed with Fininvest; we would therefore prefer not to go into the details of Plan B, which, in any case, will comply fully with the existing regulatory frameworks of the relevant authorities.
Q: In that case, would you remain a shareholder?
A: I am personally fully committed to the future of AC Milan, as was recently demonstrated once again through the 2nd payment to Fininvest.
Q: Who paid the EUR100 million deposit? Do these funds belong to the future AC Milan shareholders?
A: Yes, the second instalment was paid directly by me and […], through a company wholly owned by SES.
Q: Can you confirm that SES will cover the losses AC Milan has incurred since July?
A: Yes, in accordance with the terms agreed with Fininvest, any losses incurred by AC Milan since July will be borne by SES: this is one of the main reasons behind the joint decision-making process regarding the club’s costs.
Q: Is it plausible to split the remaining EUR320 million into instalments (perhaps through periodic deposits of EUR100 million)?
A: The agreement with Fininvest does not provide for such a possibility, and it is not currently envisaged by the parties.
Q: Why has the list of investors not yet been disclosed? Can you confirm the names of the investors that have been reported by the media over the past few days?
A: Unfortunately, we are unable to provide further details on this matter prior to the closing. This is because any premature disclosure could jeopardise our ability to obtain the authorisations required to finalise the transaction.
Furthermore, SES has entered into confidentiality agreements with many investors, and the commitment of some of them is conditional upon the government granting the necessary authorisations. For all these reasons, we are obliged to disclose the list of investors after the closing. In any case, under the terms of the agreement, we have provided Fininvest with the list of investors on a confidential basis and we are keeping them continuously updated on the progress of the authorisation process.
Q: The consortium appears to consist of financial institutions which do not, as a rule, purchase football clubs. Who are the real buyers of AC Milan?
A: We do not comment on speculation in the press regarding specific names. As a general point, Chinese financial institutions actively support Chinese outbound investment. It is also worth noting that SES is an investment fund. All investors assess the economic fundamentals and are aware of the value of the investment from all relevant perspectives.
Q: SES is a holding company controlled by various entities. How will the capital be distributed amongst the shareholders? How will the governance structure be defined to ensure the club is managed efficiently?
A: As mentioned, SES is a fund and, as such, is professionally managed by the fund management company. AC Milan’s Board of Directors will comprise investors and independent members, with the sole aim of supporting the best possible management of AC Milan to achieve a win-win outcome for both the investors and the club.
Q: What is your professional background? Have you ever been involved in the management of companies in the sports industry? What are your areas of expertise in this sector?
A: My skills in the sports industry are not particularly relevant. The company will be managed by the board of directors and by AC Milan’s management team, which has been and will continue to be selected from amongst the best professionals in the market.
Q: According to some rumours, SES’s capital is said to belong to Silvio Berlusconi.
A: This is completely baseless speculation. Money laundering is a criminal offence prosecuted in Italy, as well as in China. AC Milan’s transaction is being carried out with Chinese capital (otherwise we would not be facing all these authorisation issues that are holding us back) and is fully compliant with both international and local regulators. SES has the utmost respect for Mr Berlusconi as a counterparty to this transaction.
Q: Let’s talk about the transfer market. How will the future transfer market be managed from a financial perspective?
A: The January transfer window will be managed on a break-even basis. This is the joint decision of SES and Fininvest.
Q: How will the future transfer market be managed from a governance perspective? Who will be making the decisions?
A: Adriano Galliani will oversee the transfer market, in accordance with the agreement, and, consequently, all transactions will require SES’s approval.
Q: Why will the market not be entirely controlled by Fininvest?
A: The costs associated with the management of the company will be borne by SES following the closing; we are therefore unable to have a say on all cost items.
In addition to the above-mentioned issue, which is an important one, every transaction carried out during the interim period between the signing of the preliminary contract and the closing will effectively have an impact on the future owners of the club, both in terms of future costs and in terms of strategies. It is standard practice in any company acquisition for contractual clauses to guarantee the purchaser a degree of control over transactions carried out by the seller between the signing and the closing.
