Adidas Wants To End Athletics Sponsorship

Adidas (Other OTC: ADDDF - news) is attempting to end its sponsorship deal with athletics' world governing body four years early, Sky (LSE: BSY.L - news) sources have confirmed.

The German sportswear and equipment company signed an 11-year contract with the International Association of Athletics Federations (IAAF) in November 2008 estimated to be worth around £5.6m a year.

However, Adidas now wants to end the deal and its lawyers have contacted the IAAF claiming the recent doping revelations constitute a breach of contract.

It (Other OTC: ITGL - news) is understood the IAAF will resist the claim and negotiations between the body and Adidas are ongoing.

If Adidas does terminate the contract now, Sky News understands there will be no direct financial implications for the IAAF as it is part of a wider marketing arrangement with Japanese company Dentsu (Other OTC: DNTUF - news) .

The IAAF has sold all its marketing and sponsorship rights to Denstu, which then sells them on to sponsors and commercial partners.

Although Dentsu will bear the cost, the reputational damage of a blue-chip company walking away from athletics in Olympic year will remain, however.

In a statement Adidas confirmed it is in talks with the IAAF.

"Adidas has a clear anti-doping policy in place. Therefore, we are in close contact with the IAAF to learn more about their reform process," it said.

An IAAF statement said: "We are in close contact with all our sponsors and partners as we embark on our reform process."

The IAAF has been engulfed by doping and corruption scandals in the past 12 months.

Last November an independent commission of the World Anti-Doping Agency (WADA) made claims of widespread, state-sponsored doping in Russia.

In a second report this month the commission accused the IAAF of having "embedded corruption" at the very top of the organisation under former president Lamine Diack.

The report claimed Diack and his son, Papa Massata Diack, who was employed as a marketing consultant, were complicit in covering up doping cases.

Both men deny any wrongdoing.

As marketing consultant Diack Junior was responsible for the IAAF’s commercial relations including those with Adidas and Dentsu.

Lord Coe has replaced Diack as IAAF president and has unveiled a "reform roadmap" with a 10-point plan to rebuild the IAAF and the sport itself.

Adidas, meanwhile, has faced intense investor pressure in Germany amid slowing profits and declining market share in the face of competition from rivals Nike (Sao Paolo: NIKE34F.SA - news) and Under Armour (Xetra: U9R.DE - news) .