Nike to Buy Umbro

[davieG]

Nike to Buy Soccer-Shirt Maker Umbro for $580 Million (Update4)

By Loveday Morris

Oct. 23 (Bloomberg) -- Nike Inc., the world's biggest maker of athletic shoes, will pay 285 million pounds ($580 million) for Umbro Plc, the maker of England's national soccer jerseys.

The acquisition, Nike's first in three years, will increase its sales of soccer apparel by about 10 percent to $3.4 billion. Overtaking Adidas AG in sales related to the sport by the 2010 World Cup is a goal the Beaverton, Oregon-based shoemaker stated last year. Umbro has 1,820 outlets worldwide and supplies shirts and shorts to six teams in England's Premier League.

Nike offered 193.06 pence in cash for each Umbro share, according to a statement today. That's 61 percent more than Umbro's closing price Oct. 17, the day before the Cheadle, England-based shirtmaker disclosed the takeover approach.

``There is a lot of long-term potential, but Umbro wasn't fully able to develop it on its own,'' Andrew Wade, a London- based analyst at Seymour Pierce Ltd. with a ``hold'' rating on Umbro stock, said by telephone. ``Nike can provide Umbro with the capital investment to deliver growth overseas.''

Umbro shares jumped 25.5 pence, or 15 percent, to 190.5 pence in London trading. Nike rose 90 cents, or 1.4 percent, to $64.07 at 10:13 a.m. in New York Stock Exchange composite trading.

Heavenly Match

The acquisition is a ``match made in heaven'' for Nike, which will gain ``leadership'' in soccer, the U.S. company's European chief, Eunan McLaughlin, said in an interview.

Nike will retain Umbro's brand and headquarters. Including rights to a pending dividend, the offer values Umbro shares at 195 pence each.

``This is a knockout bid,'' said John Cummins, an analyst at WH Ireland Ltd. in Leeds, England, who has a ``market perform'' recommendation on Umbro.

Chief Executive Officer Mark Parker reshaped Nike to focus on six categories, including a soccer unit with sales of $3.1 billion last year. That's 35 times the level in 1994. Umbro posted sales of 149.5 million pounds for 2006, boosted by last year's World Cup in Germany.

Started in 1924, Umbro sold shares to the public in 2004 and is planning 700 outlets over two years in nations from Spain to Korea. The brand is a contraction of its original name, Humphrey Brothers Ltd. Doughty Hanson, a U.K. buyout firm, invested about $125 million in Umbro in 1999.

Rising Sales

Its sales are rising at least 10 percent a year in the U.S. and emerging markets as soccer's popularity increases. Nike will gain Umbro's 1,200 stores in China, which is a ``growing market'' ahead of the 2008 Beijing Olympics, according to Nike's McLaughlin. There are already about 3,000 Nike-brand stores not owned by the U.S. company in China.

McLaughlin said Nike agreed to a ``long-term'' contract with England's Football Association, which approves jersey rights. Umbro has an agreement to attach its diamond-shaped logo to the white shirts until 2014.

Nike unsuccessfully challenged Adidas's five-decade hold on Germany's national team contract this year and has also created Joga.com, a social networking site for soccer fans.

Umbro shares surged 28 percent, the most ever, on Oct. 18 after saying an unidentified bidder made an approach. A day earlier, England lost to Russia in a qualifying match for the 2008 European championships.

`Puzzling' Timing

The bid's ``timing is very puzzling,'' W.H. Ireland's Cummins said, referring to England's loss. He expects analysts to cut Umbro's 2008 full-year earnings estimates by as much as 25 percent if England doesn't qualify for the tournament.

Umbro has also struggled to sustain growth after the World Cup-fueled 2006 surge, with the wettest British summer on record hurting revenue at clothing retailers this year. The company said last month that 2008 profit will miss its forecasts.

``We believe this is an excellent deal for shareholders,'' Umbro Chief Executive Officer Steve Makin said on a call today. Makin expects the transaction to be completed early next year.

U.K. billionaire Mike Ashley will also profit from Nike's takeover. His Sports Direct International Plc, which sells 65 percent of the England jerseys bought in the U.K., purchased 15 percent of Umbro this year.

McLaughlin said Nike phoned Ashley today. ``We believe the offer is very convincing and would like to move quickly,'' he said, declining to comment further.

Sports Direct rival, JJB Sports Plc bought 10.1 percent of Umbro on Oct. 19 to protect its access to the white jerseys. JJB spokesman Richard Farnsworth and Sports Direct's Ben Foster declined to comment on the Nike offer.

``With Sports Direct and JJB having a 25 percent stake between them, they will certainly be able to make things awkward,'' Seymour Pierce's Wade said before today's statement. ``They'd be able to block quite a lot of decisions.''

Nike was advised by Merrill Lynch & Co., while Umbro was advised by JPMorgan Cazenove. It's Nike's first takeover since the $43 million 2004 buyout of Official Starter Properties LLC.

-- With reporting by Mark Clothier in Atlanta. Editor: Campbell (mno/psj/tlb).

To contact the reporter on this story: Loveday Morris in London at [email protected] ;

Last Updated: October 23, 2007 10:16 EDT

[Tevez]

Wow, whats key football players going to do now with sponsorship?

[Finnegan]

The Umbro brand remains, Nike claim they won't really make massive changes to it. It's money just now goes to Nike's execs. They'll probably still even run them as competitors to aid productivity.

[Tevez]

Very good bit of business for them now, Adidas haven't got a prayer to compete with them now.

[Samilktray]

Adidas pulled off probably a bigger coup last year buying Reebok. Afterall Reebok are already established as the biggest basketball brand in America.