Umbro plc is poised to grow its global soccer business following Nike Inc.'s all-cash offer of $582 million, or $4 per share.
The bid is more than a 60 percent premium on Umbro's closing price last week, and the stock rose 15 percent on the London Stock Exchange Tuesday on the news of the Umbro board's unanimous recommendation to accept the offer.
Umbro's 2006 annual revenues were approximately 149.5 million pounds, or $276 million. With licensed sales added, the number goes up to 409.4 million pounds, or $755 million. An exclusive brand for Dick's Sporting Goods in the U.S. and Sports Direct in the U.K., Umbro sells apparel, footwear and equipment in more than 90 countries, and has soccer marketing relationships, including with the England national team.
The acquisition furthers Nike's soccer business, a key growth category for the firm, which has sales of $1.5 billion, up from just $40 million in the early Nineties.
"Umbro is a brand with a powerful heritage and deep experience in the world's most popular sport and the world's biggest football [soccer] market," Mark Parker, Nike Inc. president and chief executive officer, said in a statement.
If shareholders accept the offer, the 70-year-old-plus Umbro will join Nike's portfolio of affiliate brands, which includes Converse, Cole Haan and Hurley International. The division has been a fast-growing one for the Beaverton, Ore.-based active giant. Nike's portfolio of other businesses represents more than $2 billion in sales, and is targeted to contribute a quarter of group revenue growth by fiscal 2011.
"Umbro is a very strong brand name in football [soccer], which is a key growth category for Nike," according to a Citigroup report, headed by analyst Kate McShane. "We think Nike will be able to leverage its financial strength, sourcing, product development knowledge, distribution and marketing to significantly increase growth of the Umbro brand beyond Europe and generate further market share gains in the global footwear market.
About three-fourths of Umbro's revenues are generated in Europe, and more than a third of sales come from the U.K. Citigroup predicts Nike will significantly expand Umbro's Asian business, which accounts for 15 percent of sales. Apparel represents 70 percent of sales, compared with only 20 percent from footwear.
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