Global athletic footwear retailer,
) has found the right buyer for its Cole Haan affiliate brand in
Apax Partners. The company has entered into an agreement with
Apax Partners to sell its Cole Haan brand for $570 million. Nike
expects to seal the deal by early 2013.
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Apax Partners views Cole Haan as an iconic brand with broad
consumer appeal and projects immense growth opportunities for
this brand. Apax has joined hands with Jack Boys in order to
facilitate the growth of the Cole Haan brand in the U.S. and
In an effort to cut costs and sharpen focus on its NIKE, Jordan,
Converse and Hurley brands, Nike, in May this year, revealed its
intention of offloading two of its brands - Cole Haan and Umbro.
The company's decision to sell these brands is guided by the fact
that the performances at Cole Haan and Umbro brands failed to
match up to that of its other brands. Additionally, Nike has been
facing numerous challenges such as rising labor and material
costs along with uncertainty in the European economies and
decelerating future orders in China due to poor performances by
On October 24, 2012, Nike signed an agreement with
Iconix Brand Group Inc.
) to sell its Umbro brand for $225 million. The deal is expected
to close by the end of 2012.
About Apax Partners
Apax Partners, a leading global private equity investment group,
has been in the business for more than 30 years providing
long-term equity financing to build and strengthen world-class
companies. Funds under the advice of Apax Partners aggregate over
US$35 billion around the world. Funds advised by Apax Partners
are invested in companies across its global sectors of Tech &
Telecom, Retail & Consumer, Media, Healthcare and Financial
& Business Services.
We believe Nike's decision to divest two of its underperforming
brands will boost its bottom line. Meanwhile, in an attempt to
expand its global reach and market share, Nike is capitalizing on
growth opportunities in emerging markets, especially China. The
company is focusing on other tools, such as a direct-to-consumer
business model, to expand geographically. We believe Nike's
continued investment in China and focus on the direct-to-consumer
business will not only help in expanding market share, but also
will facilitate the strengthening of its competitive position.
However, we prefer to remain on the sidelines given sluggish
discretionary spending, increase in operating costs, and the
ongoing European crisis.
We retain a long-term 'Neutral' recommendation on Nike. The
company currently has a Zacks #2 Rank, which translates into a
short-term Buy rating.