Nike to launch bid for Umbro

Leading sportswear manufacturer Nike is poised to launch a takeover bid for fellow football boot brand Umbro.

The US sportswear giant is currently in talks with the Cheshire based football boot brand which could lead to a £220 million offer to buy the England football kit supplier.

Shares in Umbro soared nearly 28 percent after it revealed that it had received a takeover approach, just 24 hours after Sports Direct and Newcastle United owner Mike Ashley raised his Umbro stake to 15 per cent.

In a statement, the football boot supplier to Michael Owen said: “In response to recent speculation, the board of Umbro confirms that it has received an approach which may or may not lead to an offer being made for the entire issued share capital of Umbro.”

Umbro last month issued a stark profit warning following poor sales of England football shirts, with analysts indicating Umbro’s profits could fall by 40 per cent next year if England ultimately fail to qualify for the Euro 2008 tournament. It therefore seems strange that news of the bid came less than 24 hours after England’s 2-1 loss to Russia which leaves them relying on other results going their way in order to qualify for Euro 2008. Perhaps potential suitors realise that with profits falling, now may be the time for Umbro to sell.

John Stevenson, analyst at Shore Capital, said that any bidder would have to renegotiate Umbro’s current deal with the England team. However, he added: “On the positive front Umbro offers strong medium and long term earnings growth potential from its growing international presence.”

An acquisiton of Umbro would fit in with Nike’s aim of becoming the leading global football brand by the time of the 2010 World Cup. Nike announced “an aggressive growth strategy” for football last November, having developed its football sales from virtually zero a decade ago to $1.5bn.

Since Adidas’ purchase of Reebok in 2005, the football boot and sportswear market has consolidated. Adidas is currently the subject of takeover speculation itself, and Steven Gerrard and Frank Lampard’s football boot sponsors are understood to have decided against a bid for Umbro, concentrating on improving the operating performance of its main Adidas and Reebok brands. French retailer PPR, meanwhile, has built up a large stake in German football boot brand Puma.

A successful takeover by Nike would give the football boot brand a huge presence in the Premiership, where it already supplies football shirts to Arsenal and Manchester United among others. Umbro supplies six Premiership teams including Birmingham and West Ham. Furthermore, it would bring together the likes of Barcelona duo Ronaldinho (Nike R10 Tiempo) and Deco (Umbro Ultra SX), as well as England striking partners Michael Owen (Umbro X Boot III) and Wayne Rooney (Nike Total 90 Laser).