Nike buys Umbro

Nike has all but completed their $565m all-cash acquisition of England football kit supplier Umbro. At the end of January, all Umbro shareholders agreed to the sale, following a unanimous recommendation from the board that they accept the Nike offer of 193.06 pence per share – significantly higher than the 120 pence per share before the bid.

Umbro’s profits for fiscal year 2006 was £19.8-m ($39.34-m).

All obstacles to the takeover seem to be cleared and pending regulatory approval, Nike expects the deal to be finalised by March. They say they will run Umbro as a separate division, similar to Converse and their other brands.

Recently JJB Sports agreed to sell their 10.12% stake in Umbro to Nike. End of last year their retail rival Sports Direct and Sports Direct International had agreed to sell their 29.9% stake in Umbro to Nike.

Shortly before the JJB announcement the UK Office of Fair Trading ruled that the acquisition may go ahead as they believed the merger will not harm competition at any level of the sportswear supply chain.

Umbro has had a very strong relationship with England ’s Football Association for the past 20 years, and also sells products directly or through licensees in more than 90 countries, including South Africa. They sponsor top football players like Michael Owen and Deco, European teams like England, Sweden and Ireland and locally PSL teams Free State Stars and Black Leopards, as well as leagues like the FA Cup.

Nike has been steadily growing their football market share over the past 15 years from $40-m to the current value of about $1.5-bn. They have a long association with South American teams like Brazil and Paraguay and also Mexico, but have begun encroaching on adidas and Puma territory in Europe with teams like Portugal and England Nemesis Croatia.

In 2006 adidas reported football revenues of $1.71-bn – which would have included a stiff booster from the FIFA World Cup in Germany.

Last year Nike’s bid of EUR500m failed to persuade the German national team to switch loyalties from adidas.

It is believed that Nike’s funding will give Umbro the means to regain some of the teams and players lost to higher bidders, while Nike will benefit from Umbro’s long and strong football heritage.