Newell Brands to Unload Official Ball Manufacturer of MLB, Sell Half of Factory/Warehouse Footprint


Rawlings Sporting Goods, the official ball manufacturer of Major League Baseball, is going to be sold for a 4th time since 2002; this time by Newell Brands (NWL). Newell is “exploring strategic options” for several subsidiaries that don’t align with their renewed focus on household products (9 core consumer divisions). The company, which has doubled in size since its 2016 acquisition of Jarden Corp., announced it will also look to cut its factory and warehouse footprint in half as part of the reorganization.

Howie Long-Short: Deutsch Bank (DB) analysts aren’t high on Rawlings’ business, considered the least valuable the 8 brands NWL wants to sell; worth an estimated $360 million (8x EBITDA, lowest multiple among the 8 brands). While NWL is going to end up selling some of the brands it bought from Jarden at multiples lower than they acquired them for, a company spokesperson was quick to note the company will remain far bigger than it was prior to the acquisition ($11 billion in revenue over 1st 9 mo. of ’17 vs. $6 billion prior). NWL shares are down 16% ($26.12 at Monday’s close) since news of the restructuring and 41% over the last 12 months.

Fan Marino: Rawlings, which also produces basketballs and footballs, has a well established reputation (121 years) and “good market share”; but, operates in a category (sporting goods) that simply isn’t growing. According to the National Retail Foundation, it was the only sector that failed to grow YOY (-.5%) during the holiday season. That likely limits potential buyers to companies that already operate within the space.

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Georgia Tech University has announced a 6-year deal that will make Adidas (ADDYY) the official apparel provider for 17 GT varsity sports. The partnership, which goes into effect on July 1, 2018, will replace the school’s existing deal with Russell Athletic (BRK.A). The mutually beneficial agreement provides Adidas with a presence in the Atlanta market, while providing GT with a boost in revenue and a significant improvement in apparel quality.

Georgia Tech to exchange Russell Athletic gear for Adidas starting in 2018

Howie Long-Short: When GT first signed on with Russell Athletic in 1992, sporting goods companies like Russell (BRK.A), Rawlings (NWL), Wilson (HEL: AMEAS) controlled the uniform market. 25 years later fashion and apparel retailers (NKE, ADDYY, UAA) dominate the space. Times have changed!

Fan Marino: You hear a lot of talk that GT’s relationship with Russell Athletic has damaged their recruiting efforts. I’m not buying that. Football struggles to recruit because they run a version of the wishbone offense that hasn’t been popular since the 1980s. Basketball can recruit. Josh Pastner has a 5 star, Nassir Little, on campus this weekend.