The group of Chinese investors seeking funds to acquire AC Milan, the soccer team owned by former Italian Silvio Berlusconi, provided a false bank report during its initial deal negotiations, according to a statement from the lender whose name appears on the report.
Berlusconi's Fininvest SpA agreed last month to sell the team to a Chinese consortium consisting of little-known investors for 740 million euros ($825 million), including debt. To prove their financial capability, the group provided documents on what appears to be Bank of Jiangsu Co. stationery, purporting to show transaction details of a consortium member's corporate account, people with knowledge of the matter told Bloomberg under the condition of anonymity.
After reviewing the letter, Bank of Jiangsu found it had not issued such a document detailing the account's transactions, the lender said in an e-mail to Bloomberg on Tuesday.
The group, known as Sino-Europe Sports Investment Management Changxing Co and led by businessman Li Yonghong, said in a statement that it "does not confirm it has ever sent such a document" and declined to share further details.
"As we have already factually demonstrated, we stay committed on the closing of the deal," the statement said.
The documents were sent to Fininvest as part of the initial deal negotiations with the Chinese consortium, according to Bloomberg's sources. Sellers typically demand to see a potential buyer's source of funds before allowing to proceed with due diligence. The final contract signed with Fininvest did not mention any of the bank letters it received during the yearlong talks, the sources said.
Fininvest conducted a background check of the buyers through contacts within Chinese financial institutions, and it continues to work to finalize the deal by the end of the year, Bloomberg said in its report. The Chinese investment group has already paid a non-refundable deposit of 100 million euros in two tranches, Fininvest said earlier in September, and on Tuesday it issued a statement saying the company "does not confirm having received the specific documentation under discussion and has no intention to comment on it."
Chinese companies have announced a record $169 billion of overseas purchases this year as they avert shift their focus from basic commodities to marquee entertainment and sports brands.
Although Chinese investors seeking to cater to the Middle Kingdom's increasingly affluent consumers have won deals through top-dollar offers, they have struggled at times to secure the financing needed to close transactions.
The Chinese consortium did not have all the financing in place when it agreed to purchase the Italian soccer team, the sources said. The group is reportedly looking for additional partners to help meet its stated goal of completing the deal by the year's end.
The purchase agreement also includes a requirement to provide an additional 350 million euros of funding to AC Milan over a period of three years.
The consortium is also considering the construction of a new stadium as part of its expansion plans, Bloomberg said. The group has been telling potential partners that they could earn outsized returns if AC Milan eventually lists on a Chinese stock exchange, where companies trade at a premium to Western markets, it added.