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SBD Global/July 17, 2014/Finance

Wall Street Says Manchester United World's Most Valuable Team After Adidas Deal

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Shares of ManU "surged almost 5%" after the club announced its new, $130M a year kit deal with adidas, according to Mike Ozanian of FORBES. Wall Street "now affords" ManU an enterprise value of $3.6B. Math: market value ($3.05B) + long term debt ($613M) – cash ($57M). In April, Forbes "valued Real Madrid as the world’s most valuable team," worth $3.44B, with Barcelona second at $3.22B, and ManU third at $2.81B. The team "now commands both the richest uniform and shirt deals in the world." It "may be tough" for Real Madrid to catch ManU. Spain "is looking to have La Liga teams negotiate their next television deal collectively." This "will likely eliminate the huge television revenue advantage" Real Madrid and Barcelona ($182M each, with number two Atletico Madrid pulling in just $61M) currently enjoy over their rivals (FORBES, 7/15). In Toronto, Morgan Campbell wrote the sponsorship deal "is worth a lot of money to both sides in the long term" -- adidas pays $1.28B to provide ManU’s uniforms for a decade. But the agreement, which takes effect for the '15-16 EPL season, "also offered an immediate payoff both parties." Adidas will not sell a ManU jersey for at least another year, but news of the deal "boosted their stock price" by $1.95 to $73.48 per share by Monday’s close. And on Tuesday, ManU’s stock price rose to $18.60. So while deals like these are about marketing, merchandise and branding, experts point out that they are also "about strengthening franchise value." Valuation firm Dartmouth Partners Managing Partner Drew Dorweiler said, "These are sophisticated purchasers. This transaction goes straight to the bottom line. It’s fair market value" (TORONTO STAR, 7/15).
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