NKE: Umbro Shareholders Made Out Like Bandits

Takeaway: Nike’s headache is finally gone by ditching this mistake.

Nearly 5-years to the day after it acquired Umbro, Nike is selling it to Iconix. The move was widely expected, and very well communicated by the company – both strategically and financially. Consideration for the company is $225mm, which turns out to be just under 1.0x sales by our math. The reality is that anything over a dollar is fine by us, as the division is a perennial money-loser.

We’d be remiss not to mention, however, that in October 2008 Nike acquired Umbro (named after the founders – the Humphrey Brothers) for 285mm pounds sterling, which was about $582mm in dollars at the time. Add the net income losses and working capital commitments, and this acquisition ranks up there in one of the poorest we’ve seen in this space.

But in fairness, the only thing worse than making a terrible decision is sticking with it. Credit to Parker and the team for moving the company past this mistake. The fate of Cole Haan remains undecided. Though an announcement on that one is likely not too far behind. Note that TPG is one of the top bidders there, and Matt Rubel – who used to run Cole Haan at Nike – is a strategic advisor to TPG. It is not difficult to put 2 and 2 together on that one. He ran it once. Why not run it again? We think there are major obstacles there – not the least of which is the (in)ability to leverage Nike technology in the future.  But this would presumably be ironed out in the deal.

Here’s a look back at what the company said on the date of the acquisition…

“Umbro is a brand with a powerful heritage and deep experience in the world's most popular sport and the world's biggest football market," said Nike, Inc. President and CEO Mark Parker. "With its close links to The Football Association and the England team, Umbro's future is even stronger than its past. This dynamic alignment of Umbro and Nike, with our complementary strengths and numerous ways to segment and grow the market, will lead the game at every level throughout the world. We are fully committed to helping Umbro reach its full potential, and we are delighted that Umbro's board is unanimous in its support of our offer."

…versus what they’re saying today


“It is a difficult decision to divest any business but this action will enable us to focus on our highest-potential growth opportunities,” said NIKE, Inc. President and CEO Mark Parker. “Umbro has a great heritage, but ultimately, as our category strategy has evolved, we believe Nike Football can serve the needs of footballers both on and off the pitch.”

“Umbro is a true, authentic football brand with a global loyal consumer fan base and we are thrilled to be adding it to our portfolio of iconic brands,” stated, Neil Cole, CEO Iconix Brand Group. “Umbro is an exciting acquisition with more than 30 licensees in over 100 countries with a devout following. We look forward to working with our international partners to maintain and expand upon the rich heritage of Umbro,” Cole added. (Note: does this sound familiar?)