China’s state-owned Everbright Securities agreed to pay 2.64 billion yuan ($361 million) to settle lawsuits in connection with its failed 2016 investment in a now bankrupt U.K. sports media company. Everbright will pay out the funds to its two senior partners in the deal – state-owned China Merchants Bank and Shanghai HuaRui Bank. The partners sued Everbright Capital Investment, a wholly owned subsidiary of Everbright Securities, under an agreement Everbright made to cover their losses if the deal went south.
Everbright Capital Investment and its overseas investment vehicle Jinxin acquired a 65% stake in MP & Silva (MPS) for $550 million in 2016. MPS was a leading sports media rights distributor that held the rights to broadcast major sports events such as the English Premier League, the FIFA World Cup, and the NBA. However, MPS collapsed in 2018 after failing to pay its creditors and was declared bankrupt by a U.K. court.
Everbright sues former MPS owners for fraud and breach of contract
Everbright Securities claimed that it was misled by the two Italian former owners of MPS, Riccardo Silva and Andrea Radrizzani, who allegedly inflated the company’s value and concealed its financial troubles. Everbright also accused them of breaching their tax commitments and failing to provide adequate support for MPS’s business operations after the deal.
In June 2021, Everbright Securities sued Silva and Radrizzani in London’s High Court of England and Wales, seeking $661 million (4.2 billion yuan) in damages. The lawsuit is still ongoing and has not been resolved yet.
Everbright faces huge losses and regulatory scrutiny over MPS deal
The MPS deal was one of the most prominent examples of China’s overseas investment spree in the sports industry in the mid-2010s, which was driven by the government’s ambition to boost the country’s soft power and cultural influence. However, many of these deals turned out to be risky and unprofitable, as some Chinese investors overpaid for assets that were not worth their price or faced regulatory hurdles and political backlash in their host countries.
Everbright Securities suffered huge losses from the MPS deal, which wiped out its profits in 2018 and 2019. The company set aside bad loan provisions of $725 million in connection with the MPS investment. Everbright Securities also faced regulatory scrutiny from China’s securities watchdog, which fined it 30.4 million yuan ($4.4 million) in 2019 for violating rules on information disclosure, internal control, and risk management related to the MPS deal.
The MPS fiasco has tarnished Everbright Securities’ reputation and performance, as well as exposed the pitfalls of China’s overseas sports investments.
