Nike Buys Umbro

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With Adidas buying Reebok for $3.8 billion, why shouldn’t Nike go ahead and buy Umbro.  I think Umbro has lost some of its luster, but that’s where Nike comes in and lifts the brand.  Nike will add the cache, or more correctly, show the cache that’s already there in a unique way, whether it’s via an ad campaign or viral video like the Ronadlinho now classic clip, hit the post, is it real or fake.

On Monday Umbro, which supplies shirts for football teams around the world, said it had agreed to be taken over by Nike for $582.2 million, or $3.94 a share – 61.0% above the closing price on Wednesday, the day before the American company revealed its bid.

Umbro fits well within that strategy, expanding the markets and broadening the range of products it offers to exploit the growing popularity of football. In addition to supplying uniforms to the national teams of England, Ireland, Sweden and Norway, and several top division – or "premier league" – teams in Britain, the company also produces official replica shirts that are sold to fans.

But there are risks…

The replica shirt business does introduce an element of risk into Umbro’s earnings. Next year’s revenues could fall by up to 19.0% if Britain fails to make it into Euro 2008, the quadrennial European soccer championship, said Targett. However he added that earnings would gradually become less vulnerable and dependent on the success of individual teams as international operations grow.

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