LONDON (Reuters Breakingviews) - Neymar da Silva Santos Junior achieved several milestones this week. The Brazilian forward became the world’s most expensive footballer following his 222 million euro ($263 million) move from Barcelona to Paris Saint-Germain. He also entered the mergers and acquisitions league tables. His transfer ranks among the 30 largest ever purchases of a Brazilian asset by a French buyer, according to Thomson Reuters data. Both feats are a sign soccer M&A has reached a new peak.
The deal defies conventional financial analysis. It values the 25-year-old at almost four times the price that the Spanish club paid for him four years ago. At the time, the payment required to release him from his contract was considered so rich that no buyer would match it. Neymar will also collect a salary worth around 30 million euros a year, according to Sky News. That takes the total cost to almost 75 million euros for each of the five years of his contract.
As in most transactions, the French club can point to some synergies. Fielding one of the world’s most famous players will boost sales of replica shirts and other memorabilia, allowing it to demand more from sponsors. Ticket prices may rise. And if Neymar can lead the team to victory, the club will earn more from prize money and television rights.
Even so, the club and its Qatari owners will have to make some heroic assumptions. Paris Saint-Germain reported revenue of 515 million euros in the 2015-16 season, according to Deloitte. Assume that half of any Neymar-related boost drops straight to its bottom line. The club would need to boost revenue by almost 150 million euros – or close to 30 percent – to justify the outlay, over three times its last reported growth rate.
That seems a stretch. The deal may also breach UEFA rules requiring clubs to live within their means, forcing Paris Saint-German to consider non-core disposals – in this case, selling players – to bring in cash. For Qatar, the cost of signing Neymar is trivial compared with the billions it is spending to host soccer’s World Cup in 2022. As long as the sport keeps attracting irrational buyers, their targets will be the real winners.
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