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The Xtep Deal
The Blues Trust today gave its second update after the fans forum it hosted on February 2 with some further information on the controversial Xtep deal.
As I’ve mentioned before, I have been working alongside the Trust Board in their current investigations and I have seen the same documents that they have. As they said, I can’t link the documents myself either due to confidentiality issues but I can share a little bit of my own thoughts on it here.
A lot of the controversy surrounded the so-called “counter-deal” with Xtep that saw BIH pay HK$10million per annum for advertising support within the People’s Republic of China. To quote the statement within the YE 2012 BCFC accounts
However a so-called unannounced and undeclared counter sponsorship arrangement was made where by an annual figure of HKD 10M was to be repaid to Xtep, purportedly to support advertisements and promotion of BIHL/BCFC in China
which in my opinion insinuates that the deal was secret.
However, this is not true. In the original announcement made to the Hong Kong Stock Exchange, reference is clearly made to an advertising agreement set up with Xtep although no details are given save that
Pursuant to the Advertising Agreement, Birmingham HK has agreed to jointly promote the “BCFC-Xtep” branded sportswear in the Territory with Xtep HK during the 5 years’ match seasons from August 2010 to May 2015
which in my opinion makes it hardly unannounced. Furthermore, I have seen a document that confirms both agreements were signed off by a meeting of the BIHL board, which had Carson Yeung in attendance and that all directors were aware of the deal.
The biggest issue was that no money from the deal came to Birmingham City FC. Instead, it was set up between a subsidiary of BIH called Birmingham (Hong Kong) Ltd. As I’ve mentioned before, that company doesn’t appear either on the UK or HK company register. I’ve been advised that BHK is a 100% owned subsidiary of a company called Birmingham Investment Holdings Ltd, a British Virgin Islands company which is itself a subsidiary of BIH.
What happened appears to have been a breakdown of communication and a loss of control. I understand that BHK was supposed to have paid Birmingham City a fee to licence the “intellectual property” – ie for usage of the name and the badge and that fee was never negotiated, never mind paid. Furthermore, BHK was to have approval over items of “Xtep-BCFC” branding clothing released by Xtep (which never was exercised) and was to receive a fee of 7% on all sales of “Xtep-BCFC” branded clothing (which I’ve seen no evidence of BCFC or BIH receiving).
I have also been made aware that BHK was to source additional revenue streams with the BCFC brand in China but again this never happened. The reason for this is up for debate but again it’s my understanding that various ideas were declined by Carson Yeung himself as unfavourable.
What I would like to see is if any money is booked in or out in the soon-to-be-released Birmingham International Holdings accounts relating to this deal. As BHK is a British Virgin Islands company it’s next to impossible to get the accounts for that firm to see what money has come in so we’re reliant on the group accounts.
The Trust and myself have been advised that there are still outstanding legal issues with respect to the Xtep deal and as such I have to be careful what comment I pass on it myself. The one thing I do believe is that the whole deal at best shows a level of incompetence that the club and the holding company should not have suffered – it could have been a good deal but there appears to have been no effort to have made that so.
BCFC ended the deal with Xtep by mutual consent on June 29 2012.