Adidas Loses Chelsea Deal as Soccer Sponsor Battle Escalates

  • Split `leads to questions over what really happened': analyst
  • Adidas says move consistent with fewer sport sponsorship deals

Adidas AG will part ways with London’s Chelsea soccer club, getting a payoff of at least 50 million euros ($57 million) as a battle to sponsor Europe’s top sports teams intensifies.

The 10-year deal will end in June 2017, six years earlier than planned, the organizations said late Wednesday. The decision was reached by mutual agreement, they said.

Neither side gave an explanation for the split, which comes just a week after Chelsea unveiled its new Adidas kit for the 2016/17 season. The deal was reported to be worth about 30 million pounds ($43 million) a year when it was signed in 2013, less than the 75 million pounds a year that Adidas agreed to pay to replace Nike Inc. as Manchester United’s uniform supplier a year later.

The breakup “comes as a surprise and leads to questions over what really happened behind the scenes,” Zuzanna Pusz, an analyst at Berenberg Bank, said in a note. “We find the event worrying, raising concerns over the intensifying battle in the European football sponsorship rights.”

Adidas shares rose 1.1 percent to 114.5 euros at 11:55 a.m. in Frankfurt.

Once the alliance ends, Chelsea will seek a new equipment sponsor, Adidas said in a statement. According to Pusz, the London team would have been unlikely to conclude the contract and pay compensation if it didn’t already have an alternative lined up.

Abrupt Termination

Chelsea’s Premier League rivals Southampton last month signed a seven-year kit deal with Under Armour Inc., which also outfits Tottenham Hotspur. Nike has offered as much as 100 million euros a year to extend its deal with Spanish champion Barcelona beyond 2018, according to reports in the Spanish media this year.

The abrupt termination of the Chelsea partnership, which dates back a decade, comes months before Kasper Rorsted is due to succeed Adidas’s long-serving chief executive officer Herbert Hainer. The German company, whose soccer sponsorships also include Real Madrid and Bayern Munich, said the move illustrates its strategy of partnering with fewer sports teams.

“We are continuing the concentration process that is part of our sports sponsorship strategy,” Hainer said at Adidas’s annual general meeting in Furth, Germany on Thursday. “Going forward, we intend to focus on fewer teams on the European club level.”

Difficult Season

Chelsea, owned by Russian billionaire Roman Abramovich, is coming off its most difficult season in years, having failed to qualify for European competitions next term. In a statement, the team thanked Adidas for its “fantastic support and cooperation.”

Adidas will book a gain in its second-quarter results for the compensation payment, which will be in the “mid-double-digit million-euro range.” Full-year net income from continuing operations will now increase by 25 percent to about 900 million euros, the company said, having previously forecast profit of 830 million euros to 850 million euros.

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