City seal sponsorship deal worth £400m with Etihad

Ambitious plans for vast Manchester sports campus will help meet Uefa's financial fair play rules

(Getty Images)

Manchester City have sealed one of world's most ambitious sports sponsorship deals, which is structured in a way which gives them a substantial chance of complying with Uefa's new financial fair play (FFP) rules and avoiding future expulsion from European competition.

City's extension of its sponsorship deal with Etihad Airways is worth up to £400m to the club over 10 years and saw the City of Manchester Stadium become the Etihad Stadium, as of yesterday. But the most significant part of the deal is City's proposed purchase of a vast area of east Manchester from the cash-strapped local city council, which enables the club to create a potentially huge area of facilities, all of which can accrue sponsorship revenues. City hope that the area, currently wasteland, will form part of the new "Etihad Campus" to include the club's relocated training ground, youth set-up, a sports science facility and an Etihad call centre, as well as the City Square retail space already created. This area can "grow and grow," City chief executive Garry Cook said yesterday.

The costs of infrastructure projects – including the £20m over five years which the local council are being paid for the land – are not counted when Uefa analyses a club's incomings and outgoings to ensure its losses do not exceed those stipulated by the FFP regime – so the new campus creates an abundance of sponsorship opportunities but effectively no cost to create them. It can enable the club to drag itself away from latest losses of £121m, run up during the breakneck pursuit of a Champions League place, and towards the break-even figure Uefa demands.

Cook yesterday declined to detail the breakdown of the deal, though by allowing sponsorship of the club's shirt, stadium and the campus facilities – if planning permission is secured – they have surpassed the $300m (£186m) that JP Morgan Chase has reputedly agreed to pay over 10 years to have its name on the new Madison Square Garden, which is due to open in 2013 and Citigroup's deal with the New York Mets of about $400m (£248m) over 20 years.

Uefa's head of club licensing, Andrea Traverso – the man tasked with introducing the FFP system by president Michel Platini – has pledged that he will rigorously seek out any attempts by wealthy benefactors to use sponsorship deals to inflate the balance sheets of teams they own. But though City's £40m-a-year deal dwarfs that struck by other Premier League clubs – Tottenham and Chelsea have so far failed to secure £10-15m deals; Arsenal's shirt and stadium deal with Emirates was £100m over 15 years – the Etihad Campus element will allow City to argue strongly that their deal is about far more than the club's shirt and stadium and that owner Sheikh Mansour bin Zayed bin Sultan al-Nahyan is not using Etihad as a device for investing in City.

Etihad is government-owned – in other words, owned by the Abu Dhabi royal family, but chief executive John Hogan said yesterday that the seven-year-old carrier which has been voted airline of the year for the past two years, is an independent business. "If this deal didn't add up, I would not be doing it," he said. "We are a stand-alone business owned by the Emiracy but we are responsible for out own activities." City chief executive Garry Cook said: "We have had several meetings with Uefa. They are very supportive of our plans."

Uefa's Club Financial Control Panel, under the chairmanship of former Belgian prime minister Jean-Luc Dehaene, will examine all sponsorship deals to ensure they fall within market rates. But it may be difficult for Uefa to follow the cash trail on Etihad's sponsorship deal. Bloomberg established last night that Etihad's annual accounts do not detail sponsorship spend. That means it is unclear whether the £40m going to City will be accounted for.

The perimeter advertising at City's stadium is already dominated by Abu Dhabi companies, with the telecommunication company Etisalat, Aaabar Investments PJSC, the Abu Dhabi Tourism Authority key contributors to a 400 per cent rise in revenues from sponsors and partners, to £32.4m last year. Cook said it was "clearly evident" that there was a strong Abu Dhabi bias. "If other partners from outside the Abu Dhabi want to join us we will consider that, but like all propositions they have to be the right proposition," he said.

Mr Traverso was unavailable to discuss City, though a Uefa spokesman said the organisation was "aware of the situation and our experts will make assessments of fair value of any sponsorship deals using benchmarks."