Manchester United secured a record-breaking $1.3 billion sponsorship deal with Adidas on Monday, signalling the club's enduring global appeal despite its worst Premier League campaign and strengthening its financial muscle for player transfers.
The 10-year kit deal, worth at least 75 million pounds ($128 million) a year from July 2015 for an overall 750 million pounds ($1.3 billion), was negotiated after Nike decided that trebling the cost of its existing 13-year contract for having its name on United shirts was not good value for the company.
United finished seventh in the league last season at the start of the post-Alex Ferguson era. But the eagerness of Adidas to make United kits and sell replicas is an indicator of the expected durability of the Red Devils' brand â€” and a worldwide following which the club claims to be around 660 million supporters.
The German sportswear firm said it expects to generate 1.5 billion pounds ($2.5 billion) in sales during the decade-long deal with United. Adidas currently pays around $50 million a year to Chelsea and Real Madrid, and United could generate far more over the decade from football's biggest kit sponsorship, describing the headline figure of 750 million pounds as a "minimum guarantee."
In 2005 the Glazer family paid 790 million pounds â€” just 40 million pounds more than the Adidas windfall â€” for the entire club. Ten per cent of the Old Trafford-based team is now listed on the New York Stock Exchange and shares rose two per cent to $18.14 in morning trading on Monday.
Adidas, which also makes the kit of newly-crowned World Cup winner Germany, saw shares rise by 2.85 per cent in Frankfurt to close at 73.57 euros ($100) on Monday.
"Our new partnership with Manchester United clearly underlines our leadership in football and will help us to further strengthen our position in key markets around the world," Adidas chief executive Herbert Hainer said in a statement. "At the same time, this collaboration marks a milestone for us when it comes to merchandising potential."
Nike has one more season as kit maker, recently unveiling jerseys featuring a gold Chevrolet logo for the start of the American automaker's $559 million, seven-year jersey sponsorship deal with the team.
Adidas last held the United contract between 1980 and 1992 just before the club ended its 26-year wait for an English title in 1993, ushering in a period of dominance under Ferguson.
But United is now in a period of rebuilding again after going from winning a 20th English title before Ferguson retired in 2013 to a sudden slump with David Moyes in charge.
Moyes was fired before the end of the season, and Louis van Gaal now has the task of returning United to the Champions League in 2015, fresh from leading the Netherlands at the World Cup. The Dutch secured a third-place finish by beating host Brazil 3-0 on Saturday.
Despite the grueling campaign in South America, Van Gaal is taking just two days off before formally taking charge at United this week and beginning the tour of the United States on Friday.
"I don't need a holiday," the 62-year-old former Bayern Munich, Barcelona and Ajax coach said on United's website. "It's great to have such an exciting challenge. To work daily with young people is something that I don't need time off to rest for."
Van Gaal's first match in charge of United will be on July 23 in a friendly against the Los Angeles Galaxy at the Rose Bowl. While the new manager has been in Brazil, United has signed midfielder Ander Herrera and defender Luke Shaw.
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