Manchester City signs shirt deal with Puma worth up to £600m

Manchester City has signed the biggest commercial deal in its history, securing a shirt sponsorship deal with Puma worth up to £600m, as the two groups challenge more storied rivals in their respective industries.

The German sportswear group will on Thursday announce a “long-term strategic partnership” with City Football Group, the owner of Manchester City, to supply kits for the English Premier League champions and its sister clubs in four other countries.

The deal is the largest of its kind for Puma and is a marked increase from Manchester City’s current six-year deal with Nike, worth roughly £20m a year according to people familiar with its terms.

Puma will pay “up to” £600m over 10 years, according to people with knowledge of the transaction.

One person close to the sportswear brand’s leadership added that it does not expect to pay the full amount. The final sum will be affected by performance-related factors, such as if Manchester City repeatedly wins the Champions League, Europe’s most prestigious club football competition — a tournament it is yet to triumph in.

The companies declined to comment on the terms of the deal, but Puma chief executive Bjorn Gulden said: “The more we pay, the better the deal is.” 

In the Premier League, CFG’s deal is behind only Manchester United’s £75m a year contract with Adidas, while broadly matching Chelsea’s £60m a year deal with Nike.

Puma is spending big as it seeks to break the dominance of Nike and Adidas in the global sportswear market.

It already has shirt supply agreements with some major European clubs such as England’s Arsenal, Germany’s Borussia Dortmund and Italy’s AC Milan, but has also signed endorsement deals with influential celebrities such as singer Rihanna and rapper Jay-Z.

The strategy has helped to lead a turnround at the German company, which was spun out of French luxury group Kering in May. Throughout 2018, Puma repeatedly raised its sales outlook, leading to its share price climbing more than a third over the past 12 months. It has a market capitalisation of more than €7bn.

“We have turned the company around from not being good at all, to being decent, but there is a long way to go,” said Mr Gulden. “City is another step in becoming even better than we were last year.”

Football club deals are valuable because sportswear brands typically keep the lion’s share of retail sales.

“Traditionally, Nike and Adidas had the top teams sewn up,” said Nigel Currie, founder of NC Partnership, a sports consultancy. “This is what the likes of Puma have to do . . . the top teams deliver massive results in global sales.”

The contract, which begins next season, covers Manchester City as well as CFG-controlled clubs in Australia, Spain, Uruguay and China. It does not include New York City FC, with US Major League Soccer having negotiated a kit deal with Adidas that covers all American top-tier clubs.

CFG’s model of collective ownership is, in part, designed to generate bigger revenues from global sponsors paying to be associated across all the partner clubs. CFG chief executive Ferran Soriano said the Puma sponsorship “will reset the model for sports partnerships on a truly global scale”. 

Critics argue the strategy is intended to bypass Europe’s so-called Financial Fair Play rules which prevent clubs from spending beyond their means on players. 

Uefa, European football’s governing body, has said is looking at reopening past FFP investigations into Manchester City after leaked club communications suggested it artificially inflated the value of sponsorship deals with undeclared additional funding from owner Sheikh Mansour bin Zayed al-Nahyan, the billionaire businessman and member of the Abu Dhabi royal family. 

Manchester City has declined to comment on the allegations, saying: “The attempt to damage the club’s reputation is organised and clear.”