Over the weekend the U.K.'s Daily Mirror reported that Manchester United (NYSE:MANU) would renew its licensing deal with Nike (NYSE:NKE) for £600 million ($1 billion) over 10 years. This would more than double the British soccer team's current deal with the athletic-apparel maker and would be the highest amount paid for an exclusive licensing agreement. Read on to find out more.
Manchester United and Nike are in the 12th year of a 13-year, £305 million ($507 million) guaranteed aggregate minimum exclusive sponsorship and licensing agreement that covers all retail, merchandising, apparel, and product licensing. The current £23.5 million ($39 million) a year deal ends at the end of the 2014/2015 Premier League season. Manchester United's deal has long since been passed in size by Real Madrid, Barcelona, Liverpool, and Arsenal. For reference, Arsenal's deal signed in January with Puma is for a reported five years and £150 million ($250 million), or £30 million ($50 million) a year.
Manchester United has been negotiating a new deal for the start of the 2015/2016 season. Assuming the Daily Mirror report is correct, the team would receive £60 million a year ($100 million) from Nike.
This adds to Manchester United's sizable sponsorship deals which will include the controversial $559 million, (£336 million) seven-year General Motors (NYSE:GM) Chevy sponsorship that starts next year. General Motors believes it overpaid for the global exposure that Manchester United provides and last summer ousted Chief Marketing Officer Joel Ewanick as a result. The deal looks even worse after GM announced in December that it would stop selling Chevys in Europe after 2015. An image that appeared online over the weekend supposedly shows the team's 2014/2015 jersey with the Chevy logo, though its authenticity has not yet been confirmed.
Both deals show that sponsors are willing to pay huge amounts of money for the exposure that the most popular teams in the world provide. While I find the business of soccer fascinating, I wouldn't touch Manchester United's stock with a 10-foot pole. The Premier League is flooded with seemingly endless money from deep-pocketed owners, but financial results can vary significantly depending on the team's performance. Manchester United has a lot of debt, and is majority controlled by the Glazer family.
Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends General Motors and Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.