LONDON (Reuters) - Adidas AG will pay a record 750 million pounds ($1.3 billion) to supply Manchester United with shirts and kit, underlining the enduring pulling power of the former English soccer champions despite a dismal last season.
The 10-year agreement announced on Monday is a world record for a soccer club and more than double the previous biggest, a 31 million pounds-a-year deal the German sportswear company is reported to have with Spanish side Real Madrid.
Its total value is also just 40 million pounds less than United’s owners the Glazer family paid for the club in 2005, highlighting how it will help to underwrite the rebuilding of the team under new manager Louis van Gaal.
The Dutchman takes charge of the Old Trafford club on Wednesday just days after leading the Netherlands to third place at the World Cup.
Nike, the world’s largest sportswear group, had sponsored United since 2002 but earlier this month pulled out of a bidding war with Adidas, meaning the 2014-15 season will be the U.S. firm’s last as a partner of the 20-time English champions.
Adidas, which also has similar deals with elite European clubs including England’s Chelsea, Germany’s Bayern Munich and Italy’s AC Milan, takes over the contract from 2015/16.
The deal with arguably the world’s most popular team is a coup for the German firm, protecting its leading position in a soccer market in which Nike has made strong inroads over the last 20 years.
“This collaboration marks a milestone for us when it comes to merchandising potential. We expect total sales to reach 1.5 billion pounds during the duration of our partnership,” Adidas chief executive Herbert Hainer said in a statement.
Its lucrative value also points to the continued prominence of the United brand despite a 2013/4 campaign - its first without influential manager Alex Ferguson who retired after 26 years in May 2013 - that saw the club finish seventh in the league and miss out on a Champions League spot for the first time in 19 years.
The allure of the club’s famous red shirts, worn by millions around the globe, had already helped persuade General Motors to put its Chevrolet brand on the team’s jerseys in a deal worth $559 million that will run until 2021.
That agreement - double the going rate for most major European teams - will see Chevrolet on the front of United shirts from this season in Nike’s swansong campaign.
Van Gaal, who replaces David Moyes as manager after the Scot parted company with the club less than 10 months into his tenure, will spend two days at United’s training complex before flying to Los Angeles with the team on Friday.
Nike was also recently replaced by United’s league rivals Arsenal, who have signed a kit supplier deal with Germany’s Puma, the third-ranked company in the market, worth a reported 30 million pounds a year.
Shares in Adidas were up 2.5 percent to 73.31 euros at 1332 GMT, with United shares flat at $17.8.
Editing by Kate Holton and John Stonestreet