NEW YORK (Reuters) - MasterCard Inc. said on Thursday it will drop a legal fight to get sponsorship rights for the next two World Cup tournaments, paving the way for a deal with rival Visa International for the world’s most watched sports event.
MasterCard, the credit card issuer that had sponsored the tournament for 16 years, reached a $90 million settlement with soccer’s governing body, the Federation Internationale de Football Association (FIFA).
The clears the way for FIFA to proceed with a sponsorship deal with Visa, MasterCard’s larger rival, for the 2010 and 2014 World Cup tournaments. FIFA said in a statement it is set to implement a contract with Visa.
FIFA “has, first of all, resolved a problem, and, secondly — much more importantly — has paved the way to a good, new partner that will support it and its manifold activities efficiently all around the world,” FIFA President Joseph Blatter said.
MasterCard said it decided to settle the case for business reasons, and that it no longer wanted to work with FIFA.
The company decided that “substantial financial compensation to MasterCard along with severing the relationship between our two companies at the end of the day was in the best interests of MasterCard’s customers and shareholders,” the card issuer’s general counsel, Noah Hanft, said on a conference call.
MasterCard, based in Purchase, New York, had sued FIFA in April 2006 after the soccer group awarded the coveted sponsorship for the next two World cups to Visa. MasterCard claimed it had right of first refusal on future sponsorships of the tournament.
U.S. District Judge Loretta Preska in New York sided with MasterCard, ruling in December that FIFA breached its contract. But an appeals court last month ordered a review of that ruling. Zurich-based FIFA wanted an arbitration panel in Switzerland to decide the matter.
A Visa spokesman, Michael Sherman, said, “Visa has followed this case with great interest, and we are pleased to see that FIFA has worked with MasterCard to resolve this issue. We look forward to full resolution of this matter in the near future.”
The settlement “is clearly a significant win for Visa, as World Cup sponsorship is a major worldwide marketing opportunity,” Calyon Securities stock analyst Craig Maurer said in a research note to clients.
But Maurer said that MasterCard’s prior World Cup sponsorships already had helped the company build up its brands in Europe, and that it still has other significant sports sponsorship deals in place. He said the deal also frees up marketing dollars at MasterCard.
Visa was not a defendant in the lawsuit, but had tried unsuccessfully to intervene.
As part of the settlement, both FIFA and MasterCard agreed to terminate legal proceedings in the United States and Switzerland.
Hanft said the $90 million settlement reflected one-half of the sponsorship amount that was entered into in the original negotiations with FIFA.
Under the pact, $87.5 million is being paid to MasterCard in the second quarter of this year, and $2.5 million will be paid in the third quarter.
The 2010 World Cup will be held in South Africa, while the venue for the 2014 tournament has not been decided.
MasterCard shares rose $1.23 to $164.69 on the New York Stock Exchange Thursday.