Reebok Enters Hockey Gear Market

Shoe and sports apparel maker Reebok International Ltd. is buying Hockey Co. Holdings Inc. for $329 million to extend its strategy of locking in licensing agreements with major professional sports leagues. “Reebok is buying Hockey Co. for the licensing agreement they have with the National Hockey League, but they also get an attractive equipment business,” says Mitch Kummetz, a senior analyst at D.A. Davidson & Co. He refers to Hockey Co.’s long-term licensing agreement with the National Hockey League (NHL) to supply jerseys to all 30 teams. The company also holds the rights to make and market authentic and replica NHL jerseys and produces hockey equipment under familiar brand names such as CCM, JOFA, and KOHO. Hockey Co. products are distributed in about 45 countries through diverse retail channels. It also has marketing deals with the Canadian Hockey League, the American Hockey League, and other hockey organizations. In a statement, Reebok Chairman and CEO Paul Fireman said the acquisition of Hockey Co. “represents a tremendous opportunity for Reebok to further strengthen its position” in the equipment market. Analysts and industry observers have been largely supportive of the deal. “Reebok will be able to apply the same formula it uses in its licensing agreements with the National Basketball Association and the National Football League to extend its brand into hockey,” says Robert McGee, Editor of the sporting goods trade publication Sporting Goods Intelligencer. McGee expects Reebok to easily absorb Hockey Co. operations and create new brand extensions such as replica jersey lines. He notes that this is an area that hasn’t been exploited in hockey to the extent it has been in other major sports. The sale gives Wellspring Capital Management, a specialist in turnaround investing that holds about a 25% stake in Hockey Co., a chance to cash out the $28 million investment it made in 1997 when the company was in bankruptcy. The threat of a professional hockey strike next year contributed to Wellspring’s decision to sell now, according to its management. But if a strike is avoided, Kummetz says the purchase would be accretive for Reebok next year. And even if the NHL does suffer a walkout, the acquisition still makes strategic sense because the company is also a major producer of hockey equipment used by recreational players, Kummetz notes. “The equipment part of their operations can be used as a hedge against the threat of an NHL work stoppage.” Reebok management says it was encouraged by reports that hockey is among the fastest-growing recreational sports. Kummetz adds that while Nike has had problems with its 1994 acquisition of hockey equipment manufacturer Bauer Co. he likes the fit between Reebok and Hockey Co. “It’s an extension of a lot of things they are already doing, so it shouldn’t be a difficult integration.” Copyright 2004 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com