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Chinese Businessman Buying AC Milan Was Penalized Over Stock Sale

8 Sep 2016 11:11 am

The group buying Italian soccer club AC Milan is being led by a little-known Chinese businessman who was sanctioned by the Shanghai Stock Exchange four years ago for failing to disclose a stock sale.

Li Yonghong, chairman of the Sino-Europe Sports Investment Management Changxing Co., was fined 600,000 yuan (about $90,000) by the China Securities Regulatory Commission for failing to report selling $53.6 million in shares of Shanghai Duolun Industry Co., a real-estate and building-materials company, regulatory records show.

When the stock sale was eventually disclosed, Shanghai Duolun's shares plunged by 7%.

Mr. Li and his representatives didn't respond to requests for comment. Mr. Li has been out of the public spotlight until his recent bid to buy AC Milan from Fininvest SpA, the family investment vehicle of former Italian Prime Minister Silvio Berlusconi.

The stock-sale violation isn't expected to affect the pending sale of seven-time European champions AC Milan, according to Fininvest spokesman Simone Finotello, who said Fininvest executives questioned Mr. Li about the sanction. Mr. Li characterized the sanction as a warning, Mr. Finotello said, adding that Mr. Li said he eventually made the sale of stock public.

If all goes as planned, Mr. Li and his Sino-Europe Sports will take control of AC Milan early next year. Sino-Europe Sports agreed last month to buy AC Milan for EUR520 million ($584 million), excluding debt, with a EUR15 million initial payment. The group made a second payment of EUR85 million this week, Mr. Finotello said.

With the support of President Xi Jinping, China is moving on to the world soccer pitch in a big way, with Chinese buyers spending almost $1 billion to invest in foreign clubs, apart from the AC Milan deal.

Last year, a consortium led by China Media Capital Holdings and Citic Capital Holdings Ltd. invested $400 million for a minority stake in the parent company of England's Manchester City club. And this year, a unit of China's Suning Commerce Group Co. bought a majority stake in Inter Milan, AC Milan's rival.

Haixia Capital, a state-backed Chinese development fund, is among the investors in Sino-Europe Sports. But not much is known about the man leading the effort, in or out of China.

Public records show that Mr. Li is 46 years old, has a college degree and moved to Hong Kong from China in 1994.

In Hong Kong, Mr. Li held directorships at three companies, records show. But these three companies are no longer in business. Another three companies where Mr. Li was an executive didn't respond to calls for comment.

Most of what is known about Mr. Li comes from the records of his stock dealings that led to his being fined. Mr. Li became the largest shareholder of Shanghai Duolun in December 2011, according to regulatory filings, with 11.75% of the shares. At the time, Mr. Li pledged not to sell his stock for a year, according to the China Securities Regulatory Commission.

Five months later, he violated that agreement by selling his shares to Xian Yan, owner of Hilltop Global Group Ltd., for 340 million yuan, or $53.6 million at the time, according to an administrative penalty letter issued by the CSRC.

Mr. Li, who was listed as Shanghai Duolun's controlling shareholder in CSRC documents, also failed to make public his sale of stock, the Shanghai Stock Exchange said in a 2012 public condemnation letter to Mr. Li.

Failure by company insiders to disclose a stock sale is a significant violation, market analysts say, because many investors look at what executives are doing when determining to buy or sell shares.

"Most of the participants in China's stock market are retail investors, who rely on the company disclosure for information," said Wei Wei, an analyst with Huaxi Securities Co. in Shanghai.

On Nov. 29, 2013, China Securities Regulatory Commission slapped Mr. Li with the fine, saying Mr. Li had still not disclosed information about the sale. The CSRC declined to say whether the fine had ever been paid.

Pei Li

(END) Dow Jones Newswires

September 08, 2016 07:11 ET (11:11 GMT)

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