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Iconix Builds Its Portfolio With Starter

Iconix Brands Group said that it will acquire the Starter label from Nike Inc. for $60 million in cash.

NEW YORK — Making acquisition news for the second time this month, Iconix Brands Group said last week that it will acquire the Starter label from Nike Inc. for $60 million in cash.

The deal is expected to close next month. Iconix said it predicts royalty revenue from the Starter brand of roughly $18 million globally in 2008. The news follows last week’s announcement that Iconix and Shawn “Jay-Z” Carter, through the joint venture Scion LLC, purchased the streetwear brand Artful Dodger for $15 million.

Starter was founded in 1971 and became a hot brand in the 1980s as it entered into licensing agreements with the National Basketball Association, the National Football League, the Canadian Football League and the National Hockey League, and, later, Major League Baseball. It became known for its flashy team jackets and flair for fashion. The company grew quickly, but began to falter in the mid 1990s as the licensed apparel market, which had become saturated, slumped.

Presently, the company sells mostly through Wal-Mart stores, a retailer at which Iconix is becoming very familiar. The company also owns Danskin and OP, which are also licensed to Wal-Mart.

But unlike OP and Danskin, for which Iconix had to create international licensing deals, Starter is already distributed internationally, in retailers including Carrefour (second-largest global retailer) and Metro (second-largest European retailer behind Carrefour), providing Iconix with potential future distribution points in Europe, Brazil, Argentina, Colombia, North Africa and Asia.

Neil Cole, chairman and CEO of Iconix, called Starter “an iconic brand” in a statement. “It is a brand with a great deal of growth potential, both in the United States and around the world, and one [to] which I am confident that Iconix can quickly add a lot of value.”

Todd Slater, managing director and specialty retail, apparel and footwear analyst at Lazard Capital Markets, called Iconix’s acquisition “a steal of a deal,” as its purchase price is just 3.3 times its projected 2008 revenue. Meanwhile, Nike, which acquired Starter in August 2004 for approximately $43 million, is making a tidy return. Nike said earlier this year that its Exeter Brands Group, which operates the Starter brand, had reasserted Starter’s leadership in the value channel as well as steadily expanded the line of Starter of performance apparel and repositioned its athletic footwear.However, Exeter is smaller than Nike’s other subsidiary brands, which include Converse, Hurley, Cole Haan and Nike Golf. Starter is Exeter’s main business.

Nike has been making changes in its business this year after announcing strategies for global growth and market leadership across its core categories in February. Nike recently said it will acquire U.K.-based soccer apparel and footwear company Umbro for approximately $582 million and it’s looking for a buyer for its Nike Bauer Hockey business because it doesn’t fit in with Nike’s long-term growth priorities.

The Starter deal is unlikely to be Iconix’s last this year, according to Lazard’s Slater. “Iconix appears to be in a favorable position given the growing supply of deals, combined with contracting demand, as the tightening credit markets seem to be eliminating a lot of potential buyers. With a robust pipeline and less competition from private equity players, the visibility for more transactions in the next year is very high.”