Le Sports valued at $3.3b after white-hot raise

LeEco's sports arm exceeds expectations with its Rmb8 billion ($1.23 billion) Series-B round of funding, more than septupling its valuation in just 10 months.

Le Sports has raised a further Rmb8 billion ($1.23 billion) in private funding, valuing the sports arm of the Chinese online entertainment and technology group LeEco (formerly known as LeTV) at Rmb21.5 billion, the company said on Sunday.

Some 30 investors participated in the Series-B round of funding, among them HNA Capital, a private equity unit of the Chinese conglomerate HNA Group, beating expectations in one of the biggest ever capital raises seen so far in the country's sports industry.

“We didn’t plan to raise this much," Liu Hong, LeEco’s co-founder and vice chairman, told FinanceAsia in an interview on the sidelines of the Boao Forum. "We initially aimed for only Rmb3 billion. The market enthusiasm was too high and pushed up the scale to Rmb5 billion. But even that couldn’t stop [investor demand].”

With interest in sport, not least football, seen taking off in China with the overt backing of the government, HNA Capital teamed up with two other HNA Group’s subsidiaries, Shenzhen-listed Caissa Travel and HNA Capital Investment (Beijing), to invest Rmb1.2 billion in Le Sports.
Caissa said in a March 16 stock filing that the fund created by the three HNA units would hold a 5.85% stake once the transaction is completed.
Liu said a number of big institutions and individual investors continued to contact Le Sports, which has the exclusive rights to broadcast English football's historic FA Cup in China, even after the passing of the Series-B funding deadline on March 11. “I even received a phone call [from an investor] last night [when in Boao], saying he wants to invest,” he told FinanceAsia.

“We are under a lot of pressure because it’s about relationships. Many of them are strategic investors [of the whole LeEco group], not just financial investors,” Liu added.

Liu Hong, vice chairman of LeEco, speaks at a panel discussion during the Boao Forum
(Photo credit: LeEco)

According to one person with direct knowledge of the matter, other investors in the Series-B round of funding include a wholly owned subsidiary of Aviation Industry Corporation of China, Citic Guoan Group, which is part of the state-owned Citic Group and owner of Beijing Guoan football club, and Ti’ao Power, a little-known Chinese firm backed by China Media Capital.

The person denied some Chinese media reports that Dalian Wanda Group, a lead investor in Le Sports’s maiden fundraising round, also participated in the Series-B round.

The full list of investors will be announced by the company in mid April, Le Sports said in the statement.

China's coming sports boom

The latest fundraising round comes as capital flocks to tap China’s underdeveloped sports industry, which accounted for just 0.64% of Chinese GDP in 2014 and is seen ripe for massive development.

“I personally think more and more capital will be pouring into the industry as it just starts to release the potential. Many investors are still studying the true value of the industry,” Li Ruigang, chairman of state-backed CMC, said during a panel discussion on the industry at the Boao Forum on Wednesday.

Le Sports’s valuation has grown more than sevenfold compared with its Rmb2.8 billion valuation in May 2015, when the company raised Rmb800 million ($123 million) from its Series-A financing round, with China’s two richest men Wang Jianlin and Jack Ma among the investors.

“During the Series-A round, Le Sports’s business was more conceptual…But over the past year we have grown fast in terms of business, talent recruitments, and users. All these have impressed our investors,” LeEco's Liu said.

The burgeoning company has hit the headlines with a series of big moves. Earlier this year, it bought sports video streaming platform Octopus TV for Rmb300 million and purchased two-year broadcasting rights to Chinese Super League football from CMC for Rmb2.7 billion. (CMC paid the league a record-breaking Rmb8 billion last year to own the exclusive rights for five years).

Le Sports has also acquired rights to stream US Major League Baseball, Wimbledon tennis, and English Premier League football.

Liu told FinanceAsia that its latest capital raise will be used to acquire further media rights to national and international sporting events and to buy stakes in Beijing Guoan F.C., develop new smart products, and renovate its sports centre in Beijing.

He also revealed that Le Sports is likely to become the first subsidiary of LeEco to go public in the next three to five years, but he declined to elaborate further about where a listing might take place and how big it might be.

Set up in March 2014 on the back of predecessor sports.letv.com, Le Sports aims to cover the entire value chain of sports business, including events, content platforms, smart devices, and value-added services.

The company says it has media rights to 310 sports events, including US NBA basketball and Formula 1 racing. According to consulting firm iRearch, Le Sports had 14 million unique visitors each day, representing 3% of China’s online video users, as of October 2015.

The company posted unaudited income of Rmb417 million for the financial year ended December 2015.

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