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Chelsea - Vitesse partnership growing stronger: Vitesse negotiating sponsorship deal with Roman Abramovich's company, Truphone

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Clive Mason

Last week, the Dutch media began running stories that Vitesse is working with Roman Abramovich's company Truphone on a sponsorshop deal.  Truphone is a London-based mobile communications company, and in February 2013, Abramovich bought a 23.3% stake for £70m.

As WAGNH recently reported, the ties between the two clubs are growing stronger despite the outlandish claims made by former caretaker owner Merab Jordania (who has since been widely discredited) that Chelsea forced Vitesse to lose matches this season.

Chelsea board member Marina Granovskaia, the primary liaison between the two clubs, was at the Gelredome last week for Vitesse's final home regular-season match and watched the game with owner Alexander Chigirinsky and CEO Joost de Wit. The fact that Granovskaia (and by extension, Chelsea itself) continues to maintain a visible presence in Arnhem is a good sign that the relationship between the clubs is here to stay.

With regards to the rumoured sponsorship deal, there are a few issues that are worth mentioning.

First, If the sponsorship deal goes through, it will most likely be for a shirt sponsorship.

Ironically, this deal would replace the similarly-named current shirt sponsor, Youfone. Vitesse actually went without a shirt sponsor for much of this season and picked up Youfone just a few months ago for the remainder of the season on a short-term deal.

Peter Gansler, Vitesse's commercial director and chief marketing officer, attended the University of Notre Dame as an undergraduate, received his MBA from the University of Chicago (both excellent schools), and worked for adidas in international marketing before being hired by Vitesse in November 2012. This is all to say that he has the education and experience necessary to go out and land a lucrative long-term shirt sponsorship deal.

I strongly believe that Gansler and the other decision-makers at the club intentionally held off on signing a long-term deal with anyone because there was some homogenisation with Marina Granovskaia and Chelsea's sponsors in the works (and I speculated as much a while back).  I had originally thought Vitesse might have landed Samsung or one of Chelsea's other primary sponsors, but the Truphone deal certainly makes sense as well.

Second, the Truphone sponsorship may be classified as a related-party transaction (RPT) under UEFA's financial fair play regulations.

Essentially, a related-party transaction is a deal between parties that have a prior relationship.  It is an international accounting term, and the financial fair play regulations dealing with RPT's is copied almost verbatim from the International Accounting Standards Board.

As relates to FFP and the Truphone deal, Annex X(E)(3)(b) likely controls here -

Entities will be considered related parties where,

One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member)

Here, one entity (Abramovich and Truphone) will be engaged in a joint venture -- Chigirinsky and Abramovich both own large shares (sixty and sixteen percent, respectively) of a Russian property development company called Snegiri -- with another entity (Chigirinsky and Vitesse).

With regards to financial fair play, there is absolutely nothing wrong with RPTs in and of itself. The issue is with ensuring that each related-party transaction is for fair value, and this is why PSG and to a lesser extent, Manchester City, currently find themselves in trouble.

Article 58.4 states that "relevant income and expenses from related parties must be adjusted to reflect the fair value of any such transactions." This means that if an owner overpays for sponsorships, tickets, etc., the value of the transaction will be adjusted down to fair market value when UEFA starts reviewing the financials of each club.

As UEFA's Club Financial Control Body deals with the RPT's involved in Manchester City's and PSG's accounts over the next few days, we'll get a clearer picture on the issue, but it is very likely that all parties involved in negotiating the Truphone deal are proceeding as if the deal will be classified as an RPT just to be safe.

For some perspective on what "fair value" might entail, Ajax received between £8-10 million per year from Dutch insurance company Aegon for a shirt sponsorship deal (the deal concludes at the end of this season). Given that Ajax is a much bigger club than Vitesse, it's reasonable to conclude that this would be the absolute ceiling for the Vitesse - Truphone deal in terms of annual revenue.

£8 million would be a huge windfall for Vitesse, especially when considering that the club earned a mere £9.5m in 2012-13 (however, that number will more than triple in 2013-14 just on the strength of the Marco van Ginkel and Wilfried Bony sales) and lost over £20m.

This deal is very likely Roman Abramovich's way of helping Vitesse's financial fair play situation (the club certainly doesn't need the money, as Alexander Chigirinsky extremely wealthy in his own right, but Vitesse could certainly use the profit on the balance sheet - note the distinction).  While the deal may be considered a related-party transaction, the deal will fully comply with UEFA's financial fair play regulations as long as the deal reflects the fair market value for a shirt sponsorship.

This deal should also put to rest any lingering notion that Chelsea does not want Vitesse in the Champions League. Roman Abramovich and Chelsea already loan Vitesse some of their very best prospects, and are now handing Vitesse a lucrative sponsorship deal to ensure that they remain eligible when they do eventually earn their Champions League spot.

Finally, the Truphone deal cements the already-solid relationship between Chelsea and Vitesse.  If there are any Chelsea supporters that haven't been paying attention to the Arnhem club, it's time to start.