June 12 (Bloomberg) -- Real Madrid’s $228 million bet on Cristiano Ronaldo and Kaka may bring risks for the Spanish soccer club as well as its European competitors.

Real yesterday agreed to pay Manchester United 80 million pounds ($132 million) for the 2008 World Player of the Year, two days after signing the 2007 winner, Brazil’s Kaka, for about 68 million euros ($96 million) from AC Milan.

That may be just the start for Real’s new President Florentino Perez, who came up with the record nine-time European champion’s plan earlier this decade to sign “galacticos” such as David Beckham and Zinedine Zidane. Perez’s program may lead to transfer-fee inflation, putting clubs deeper in debt during the worst economic downturn since World War II, analysts said.

“Real Madrid is effectively injecting inflation into the transfer market,” Simon Chadwick, a professor at England’s Coventry University, said in an interview. “What we’re going to see is transfer-fee inflation over the next few months up to the start of the season. That’s a serious issue, because it’s something that (soccer) really can’t afford when many clubs have major financial concerns.”

The world-record fee for 24-year-old Portuguese winger Ronaldo would exceed the amount Perez paid in his previous term when he signed Zinedine Zidane for 75.1 million euros in 2001. Perez, trying to rebuild a team overshadowed by archrival Barcelona last season, still needs Ronaldo to sign a contract.

Champions League

Ronaldo scored 42 goals to lift Manchester United to the 2008 Champions League and Premier League titles. He added another 26 goals last season as United retained the English title and reached the Champions League final. He’s scored 118 times in more than 290 appearances for United since 2003.

He’ll earn almost 10 million euros a season for six years, according to Spain’s El Mundo newspaper. Neither Madrid nor Milan disclosed financial terms of 27-year-old Kaka’s six-year contract.

The European market’s already been moving upward. In England, gross transfer spending by the 92 top professional soccer clubs rose 35 percent to 779 million pounds in 2007-08, according to accountant Deloitte LLP.

“It’s a high-risk strategy,” said Michael Stirling, managing director of London-based Global Sponsors Ltd. “Revenues are not going to come through instantly. (Real Madrid) has a history of iconic, global players, although that star quality has been lacking for some years. Corporate sponsors and fans see the value in heritage, and that is what Ronaldo and Kaka bring to the club.”

Between 2000 and 2006, Perez oversaw the signings of Beckham and other big names that drove marketing income and turned Real Madrid into the biggest in the world by sales, according to Deloitte. However, the team failed to win a trophy in three straight seasons through 2006, when Perez left.

Replica Shirts

The signings of Kaka and Ronaldo may bring in about $175 million a year from the sale of replica shirts and merchandise, sponsorship revenue and increased ticket sales, according to Chadwick, a professor of sports business strategy and marketing.

The purchase of the players will also flag to other clubs how much money is available for transfers, undermining United and Milan’s ability to strike good deals, former player Tony Gale said on Sky Sports yesterday.

“You’re letting everyone know you’ve got 80 million pounds in the bank,” he said. “We thought United were bigger than this. It just shows you that everyone needs the money at the moment.”

Barcelona Dominance

Perez, 62-year-old president of Spain’s biggest builder Actividades de Construccion y Servicios SA, became Real Madrid president for a second time June 1 and aims to overturn the dominance of Barcelona.

The Catalan team won last season’s Champions League, Spanish title and Spanish Cup, while Real Madrid failed to reach the Champions League quarterfinals in the past five seasons. Perez named Villarreal’s Manuel Pellegrini coach on June 2.

The highlight of his first term was winning the 2002 Champions League. At that time, he bankrolled player trades by selling the club’s training ground for 500 million euros. Last month, he said Real Madrid would need to borrow to finance purchases this time. Madrid had debt of 563 million euros in June 2008, according to its latest published accounts, and sales of 365.8 million euros for fiscal 2008.

Officials at Banco Santander SA, Spain’s biggest bank, declined to comment on reports it is providing Real Madrid with a loan to acquire Ronaldo. Spain’s Cadena Ser radio station first reported in February the bank would lend Madrid 70 million euros repayable over four years to sign him.

Manchester United, controlled by the Glazer family of the U.S., is also in debt. The club’s parent company had net borrowings of 649.4 million pounds at the end of June 2008.

Debt Concerns

After winning the English Premier League three years in a row and the Champions League in 2008, United was criticized by European soccer officials such as UEFA President Michel Platini as spending too much money and going too deep into debt.

That may convince the owners to use the income from a sale of Ronaldo to pay down debt without worrying about supporters’ complaints, according to Stefan Szymanski, an economics professor at the Cass Business School in London.

“It’s a wonderful situation for the owners because they can say, ‘We’re keeping the money for the good of football,’” Szymanski said. “They can sit back and ignore their supporters.”

Platini, commenting yesterday, said the spate of record signings was “very puzzling at a time when football faces some of its worst ever challenges.”

“These transfers are a serious challenge to the idea of fair play and the concept of financial balance in our competitions,” Platini was quoted as saying on the BBC.

For Real Madrid, there’s a form of insurance in its “high- risk” strategy, according to Szymanski.

“Real’s really too big to disappear, whatever debt they can incur,” he said. “No bank would ever be allowed to be the bank that sank Real Madrid.”

To contact the reporter on this story: Christopher Elser in London at celser@bloomberg.net.

Last Updated: June 12, 2009 08:28 EDT