According to reports in German news outlet Der Spiegel, Adidas has extended its relationship with the La Liga club and will pay around £840m (€1bn) over a 10-year period.
Under the terms of the agreement Real Madrid will receive a fixed annual sum of around £59m (€70m) in addition to 22.5% of all Adidas’ Real Madrid branded merchandise, worth roughly £25m (€30n) per year.
Performance-based incentives for the 32-time La Liga winners could see the Adidas pay the club £2.1m (€2.5m) for each domestic league title, a figure which will rise to £3m (€3.5m) after 2020.
If the reigning European champions secure another Champions League title Adidas would pay out £4.2 (€5m), rising to £5.9m (€7m) after 2020.
Adidas is also believed to have included a clause in the deal which grants it the rights to organise Real Madrid’s traditional title celebrations at the Cibeles fountain in central Madrid, ensuring its branding would feature prominently during the parades and celebrations.
The German brand have been Real Madrid’s kit sponsor since 1998 and the last contract renewal, signed in 2011, is understood to have stretched the relationship until 2020.
However since then Real Madrid's rivals in Manchester United and FC Barcelona have agreed more lucrative deals with Adidas and Nike respectively. Competition among top global clubs for more and more lucrative kit deals has resulted in Nike and Adidas paying huge sums to secure ties with them.
Ealier this year Under Armour had been linked as a potential kit replacement for Real Madrid after the club held talks with the US brand over a £127m (€107m) a year kit deal.
Manchester United’s 10-year deal with Adidas is worth £750m (€165) per year and has helped the Premier League club reclaim the top spot in the Deloitte Money League for the first time in a decade. Real Madrid’s rivals FC Barcelona meanwhile announced a new kit deal with Nike last year worth £140m (€155) a season from 2018, handing the Catalan club the most expensive kit deal in the history of the sport.