Fanatics, the world’s biggest licensed sports merchandise retailer is expanding into China via a joint venture with private equity firm Hillhouse Capital Group, as the e-commerce platform considers a possible public listing.

Fanatics, the Softbank-backed firm with annual revenue exceeding $3 billion, is betting on what it sees as untapped demand in China for sports equipment and clothing.

“China has been a market we followed for a while, and we’ve been meeting with multiple partners in China trying to figure out how we approach it in the best way,” Zohar Ravid, Fanatics’ head of international corporate development, told Reuters.

“The interest overall in the country around European football, and American sports, is growing.”

Florida-based Fanatics operates online stores and sells products for more than 300 teams, brands and leagues from Chelsea, Manchester United, PSG and Nike to America’s National Football League.

The 50-50 joint venture with Hillhouse, Asia’s largest private equity firm, will be based in Shanghai.

It aims to localise operations including product design, sourcing and licensing to serve what Fanatics expects will be a multi-billion dollar market.

The plan includes leveraging Hillhouse’s expertise to build partnerships with e-commerce channels operated by Chinese tech giants Alibaba and Tencent, as well as selling in physical stores.

Fanatics now generates 10 per cent of sales from outside the US. The global licensed sports merchandise market is estimated to be worth $25 billion a year.

Ravid said the Chinese market was “grossly underserved” and could be worth $3 bilion-$5 billion a year.

The company, which has seen strong online sales growth during the pandemic, raised $350 million at a $6.2 billion valuation in August.

Asked about a possible initial public offering (IPO), Fanatics said in an emailed statement: “While an IPO is clearly an available path to us, there is no update on any timeline.”

Founded by Chinese billionaire Zhang Lei in 2005, Hillhouse invests in healthcare, consumer, technology and services firms, with a focus on Asia. It made early investments in Chinese tech giants Tencent, JD and Baidu.

“The local expertise is really, really why we’re relying on Hillhouse,” said Ravid.

• Reporting by Richa Naidu in Chicago and Krystal Hu in New York; Editing by Josh Franklin, Christopher Cushing and Edmund Blair, of Reuters.