July 8 (Bloomberg) -- English soccer club Manchester City will earn more than 300 million pounds ($480 million) in a 10-year sponsorship agreement with Etihad Airways, according to a person familiar with the situation.
The contract with Abu Dhabi’s government-owned airline calls for the English Premier League team’s playing facility to be renamed Etihad Stadium, and the airline will also back City’s plans to develop land around the site. Other sponsorships, including an extension of the team jersey contract will push the value past 300 million pounds, said the person, who asked not to be identified because the terms haven’t been made public.
Garry Cook, City’s chief executive officer, and Etihad CEO John Hogan declined to reveal the price of the contract at a press conference in Manchester.
City bought about 80 acres around its east Manchester stadium for development. It’s hoping to relocate its training ground there and build facilities including a sports-science campus. Etihad will put its name on the new development, increasing the revenue the team can use to reduce its losses to meet new European soccer rules on fiscal responsibility, the person said.
The amount dwarfs agreements made by other soccer clubs. Arsenal’s shirt and stadium contract with Etihad’s rival airline, Dubai-based Emirates, is worth 100 million pounds over 15 years. City’s contract is also worth 10 million pounds a season more than the 80-million pound, four-season contracts Manchester United and Liverpool have with AON Corp. and Standard Chartered Plc.
“There’s no surprises the backdrop of course is UEFA’s financial fair play this helps to continue to make significant progress in that area,” Cook said.
European soccer’s governing body UEFA has told clubs they face being banned from its Champions League and Europa League competitions from 2014 if costs consistently exceed revenue.
General Secretary Gianni Infantino said the Nyon, Switzerland-based organization will monitor sponsorship deals to ensure agreements are based on fair value and not used by clubs with wealthy backers to circumvent its rules. Manchester City, which last won the English championship in 1968, was bought by billion Sheikh Mansour bin Zayed Al Nahyan in 2008. He’s a member of the Abu Dhabi ruling family.
“There’s real value in that partnership,” Cook said. “It would be very fair to say this is a real deal. Financial fair play isn’t the driver, commercial growth is the driver.”
Mansour has spent almost $1 billion since acquiring City in September 2008. He’s bought international players including Carlos Tevez and David Silva in an effort to win trophies and outpace rival cross-town rival Manchester United, which last season won a record 19th English championship. City qualified for the Champions League and won the F.A. Cup last season, its first major trophy since 1976.
City’s accounts for the year ended May 31, 2010, show it lost 121.3 million pounds, 31 percent more than a year earlier.
City has been acquiring land around its stadium through a subsidiary created by its owners. Once the developments are finished Etihad-branded facilities may be visible from the sky, said the person with knowledge of the accord.
City is leaving this weekend for a tour of the U.S. It will arrive on a club-branded Airbus plane, which is part of Etihad’s fleet.
The team, which finished third in the Premier League last season, said revenue from sponsors and partners increased to 32.4 million pounds after contracts with Abu Dhabi-based companies including telecommunication company Etisalat, Aaabar Investments PJSC, the Abu Dhabi Tourism Authority and Etihad. Cook conceded most of the deals are with companies from there.
Hogan said the sponsorship would be funded directly by Etihad and not a cash infusion from its wealthy owner.
“We’re a standalone business, owned by the Emirate,” said the executive, whose company also sponsors a stadium in Melbourne, Australia. “But we are responsible for our own commercial activities. So the funding of this deal is by Etihad. It’s a long-term deal, a 10-year deal, the structure is totally different to the types of deals we’ve done in the past.”
Etihad doesn’t disclose its sponsorship spending in its financial reports.
City moved to the City of Manchester stadium from its Maine Road ground in 2003. It recently re-negotiated with Manchester City Council to allow it to sell naming rights.
Council leader Richard Leese said today that his organization will receive about 20 million pounds over the next five years.
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