United must qualify for Champions League or face €29m Adidas kit penalty
Details of £75m-a-year Adidas deal highlight changing nature of United's sponsorship agreements, with 10-year tie-up linked to performance on pitch.
Published 31/07/2014 | 18:09
Manchester United must return to the Champions League before the end of the 2016-17 season or face the prospect of a 30pc reduction in their £75m kit deal with Adidas.
United, who announced the world's biggest kit manufacturing agreement with the German sportswear giants earlier this month, disclosed details of their deal with Adidas within the prospectus for the proposed sale of eight million shares on the New York Stock Exchange.
United's owners, the Glazer family, are expected to raise approximately £80m from the share sale, which will not affect the ownership or day-to-day running of the club.
Details of the Adidas deal highlight, however, the changing nature of United's sponsorship agreements, with the 10-year tie-up linked to performance on the pitch unlike previous partnership deals.
United will see the £75m-a-year payment drop to £52.5m if they fail to qualify for the Champions League for two successive seasons.
But although United will not compete in Europe during the 2014-15 campaign, the penalty clause only applies from the start of the Adidas deal from the beginning of the 2015-16 season, so this season's absence of Champions League football will not be taken into account.
Also within the Adidas deal is a clause which states the company can reduce by half their payments to United for every season they spend outside the Premier League should they be relegated.
United stand to gain a £4m bonus, however, on any occasion that they win the Premier League, FA Cup or Champions League.
Potential investors have been warned within the prospectus that the competitive nature of sport could affect United's ability to achieve success.
"Our success and many achievements over the last 20 years does not necessarily mean that we will continue to be successful in the future, whether as a result of changes in player personnel, coaching staff or otherwise," United said in the share prospectus.
"A downturn in the performance of our first team could adversely affect our ability to attract and retain coaches and players."
United face Real Madrid in Ann Arbor, Michigan, on Saturday in the fourth game of the club's pre-season tour of the United States. The fixture is a 109,000 sell-out.