If the deal goes ahead it will be the first time that one of Britain's four big national arts companies - the Royal Opera House, RSC, National Theatre and English National Opera - has an individual's name on the outside of its building.
The unprecedented nature of the idea is sure to throw the already troubled institution back into controversy. Devised by the ROH's new American chief executive, Michael Kaiser, the plan would allow the donor's name to precede that of the Floral Hall, which is the public foyer and showpiece of the ROH development.
The move was attacked yesterday by the classical music promoter Raymond Gubbay, who has mounted a co- production with the Royal Opera House in the past. "This sounds like a rather tacky American idea," he said. "It's not very nice to see a state- run company doing this. Great national institutions must have their own integrity. I wouldn't want to see a `Jeffrey Archer Victoria and Albert Museum' or a `Richard Branson Royal Albert Hall'.
"If you were to tell me that by doing this the Royal Opera House would bring seat prices down to pounds 20 top price then I might have to say it's OK, but somehow I suspect this will not happen."
The restored 19th-century iron and glass Floral Hall is next to the ROH entrance, and visible to audiences and passers-by in Covent Garden. The sponsor's name would get pride of place on the new building, which will be the main entrance during the day.
Just under pounds 79m of National Lottery money went towards the ROH redevelopment. The opera house also receives a grant from the Arts Council of pounds 16m a year, which will rise to pounds 20m by April 2000.
Mr Gubbay said yesterday: "If there has to be a name on the outside of the building then perhaps it should be `The People's Lottery Floral Hall'."
Mr Kaiser is understood to have had to convince the ROH chairman, Sir Colin Southgate, who was unhappy with the idea and feared it would alarm the arts community. Mr Kaiser seems to have won the battle.
A spokeswoman said yesterday there was no rift between Mr Kaiser and Sir Colin. She said the ROH was negotiating with a number of American donors and charitable trusts, but no commercial sponsors. She said other parts of the building, including the ballet studio that looked out over the Covent garden piazza, could yet have names attached to them.
This latest controversy at the opera house follows a decision by its management to engage a commercial promoter to stage a season by The Royal Ballet in the lottery-funded House, meaning that hundreds of thousands of pounds from ticket sales are likely to go to the promoter. Geoffrey O'Connell, a consultant who helps to monitor lottery money spending, said : "It's outrageous. The lottery was not set up to fund venture capitalism. It was meant to go to good causes."