Fanatics’ Pursuit of Global Dominance

Softbank Group Corp. (SFBTY) recently made a $1 billion investment in Fanatics and the apparel manufacturing giant plans on using the capital to pursue global expansion. Fanatics, which currently generates just $200 million (of the $2 billion it will generate in 2017) in international sales, is looking to grow global revenue to $10 billion within 5 years; with half of the business originating outside of the U.S. The company will start by opening manufacturing facilities in Germany and China in 2018, before establishing residence in Japan and Australia in 2019. Concerns do exist, pertaining to varying cultural norms and the company’s ability to penetrate a complex Chinese market, but a global sports merchandise market worth an estimated $25.3 billion is worth pursuing.

Howie Long-Short: CEO Michael Rubin believes he’s built a moat around the business, saying competitors “can’t be a significant player without the rights (NFL, NBA, MLB, 500 Colleges/Universities etc.) that we possess.” NPD Analyst Matt Powell disagrees, arguing “what they’re doing is replicable.” Fanatics has exclusivity agreements with the leagues that span 13-17 years. That’s too far down the road for me to be concerned about competition. Look at the 1995 Fortune 500 list and compare it with the 2016 edition. A lot can and will change in 10 years. Just 3 of 2006’s Top 10 companies (by market cap) remained on the list in 2016.

Fan Marino: Fanatics announced earlier this week that it has extended its NHL deal through the 2034 season. The new deal gives the company rights to produce the league’s premier “Center Ice” collection, replica jerseys (on-ice jersey rights are held by Adidas) and championship apparel. Fanatics also picked up exclusive rights to sell NHL headwear within sporting goods retail channels.

Two Billionaires Bet They Can Sell Sports Swag to the World

For the balance of today’s newsletter, sign-up here!

Fanatics Acquires the Rights to Manufacture Official MLS Merchandise, MLS Invests in Fanatics

Major League Soccer has signed a long-term deal with Fanatics, scheduled to begin domestically in 2019 (‘18 in Canada), that provides the fast-growing sports apparel manufacturer with the rights to produce official MLS merchandise, not just sell it. The company will be able to make everything but official MLS jerseys, as Adidas (ADDYY) owns those rights as the league’s official on-field apparel provider; though the company is able to sell ADDYY game jerseys on the e-commerce platform. In an unrelated transaction, MLS has made an investment in Fanatics. Financial terms were not disclosed.

Howie Long-Short: The NFL bought 3% of Fanatics in May 2017 for $95 million, at a $3.17 billion valuation. By August of 2017, the company had a $4.5 billion valuation; closing on a $1 billion investment from Softbank (SFTBY). Remarkable growth for a company that was purchased for just $277 million back in 2011. It’s worth noting that both MLB and the NFLPA are also invested in the company.

Fan Marino: In 2019, Fanatics will become the manufacturer of MLB’s official Under Armour (UAA) game jerseys. However, April’s $225 million acquisition of Majestic Athletic means they could be putting their product on the field, as early as next season. Majestic and Nike (NKE) currently own the on-field uniform rights to MLB.

Major League Soccer invests in Fanatics, signs long-term merchandise deal

Editor Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

For the balance of today’s newsletter, sign-up here!

IMG COLLEGE, LEARFIELD TO MERGE; WILL CONTROL MULTI-MEDIA/SPONSORSHIP RIGHTS TO 90% OF P5 SCHOOLS

IMG College, which holds multi-media and sponsorship rights to more than 90 schools, has agreed to a blockbuster merger with Learfield, which holds rights to 130 other collegiate athletic programs; meaning together they will control the marketing and media rights for 70% of D1 programs and 90% of P5 conference schools. Industry experts speculate the new company could be worth more than $2 billion. Learfield CEO Greg Brown is expected to lead the new entity. Terms of the deal are expected to be finalized in the coming days.

Howie Long-Short: WME-IMG is a privately held company, but you invest in it through Japanese internet/telecom giant, Softbank (OTC: SFTBY). Softbank invested $250 million into the company at a $5.5 billion valuation in 2016. That investment has done well. WME-IMG recently closed on a $1.1 billion investment round with the company valued at $6.3 billion.

Fan Marino: College Presidents looking to shake up their athletic department should place their first call to IMG President, Tim Pernetti and offer him a blank check. Prior to being made the “fall guy” in the Mike Rice scandal; he oversaw a successful Rutgers football program, set fundraising records at the school and negotiated the deal that brought the University into the Big10. I don’t believe you can hire a better A.D. than Tim Pernetti.

IMG College Negotiating Merger With Learfield To Create Media Rights Juggernaut

JAPANESE GIANT SOFTBANK GROUP INVESTS $1 BILLION INTO FANATICS AT $4.5 BILLION VALUATION

Japanese telecom giant Softbank Group Corp (TYO: 9984) has made a $1 billion investment into Fanatics Inc, a leading sports merchandise licensor that handles e-commerce sales for a variety of teams & leagues, including the NFL and MLB. The deal places a $4.5 billion private market valuation on the company. Fanatics sells everything from t-shirts to lawn chairs and has built a burgeoning memorabilia business with the likes of Steph Curry, Ronda Rousey, and Peyton Manning, signed to exclusive contracts. Softbank is looking to compete with the likes of Nike, Adidas, and Under Armour within the licensed sports apparel space.

FanaticsBanner.png

SoftBank to invest $1 billion in sports retailer Fanatics amid aggressive spending spree

Howie Long-Short: Want to invest in Fanatics, but not interested in Softbank? Alibaba (BABA) contributed to a $170 million round in June 2013, at a $3 billion valuation.

Fan Marino: Fanatics is the ONLY place I shop for licensed sports apparel. Just make sure you don’t pay full retail; they are always running 20-30% off sales!