NKE – Walking Away from Manchester United Deal

Takeaway: Nike almost never backs away from endorsement deals. We give the company credit for putting shareholder value ahead of ego

This is a truly unprecedented move -- Nike almost never backs away from endorsement deals. We give the company credit for putting shareholder value ahead of ego - especially after it since it was so badly embarrassed in Brazil yesterday. 

 

 

This all raises several questions. 

 

1. What kind of internal controls allowed Nike to ponder striking this deal in the first place -- taking a pre-existing contract for £23.5mm per year and nearly tripling it to £60mm?

 

2. Are there any promises initially made by ManU about Nike product opportunities or media exposure that it reneged on after terms of the deal were first reported?

 

3. Who will endorse ManU? We think we know the answer to that. Adidas CEO Herbert Hainer is on a pink cloud now after his German National team annihilated Nike's Brazilian team on their home turf. His confidence is high. Reports are that Adi is ready to ink a 10 year deal at £75mm per. Nearly a 2.5x premium to Adi’s £31mm deal with Real Madrid – which would make it the 2nd most lucrative kit deal in the world next to ManU. If the deal is finalized, Adi will own 6 of the 10 biggest European kit deals totaling ~$300mm. Or about 5% of the company’s forecasted ’14 SG&A spend.

 

4. Of course this all could have been another instance of NKE gamesmanship. Bidding up the price and then walking away at the 11th hour leaving its competition holding the bag.  

 

All in, a week before the World Cup final is hardly the time we'd expect Nike to be backing off of its football endorsements. Something's up that goes deeper than the headlines suggest. 

 

NKE – Walking Away from Manchester United Deal - manu


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