http://reuters.com/newsArticle.jhtml?type=businessNews&storyID=3064362 Nike to Buy Sneaker Rival Converse Wed July 9, 2003 07:33 PM ET NEW YORK (Reuters) - Nike Inc. NKE.N , the world's No. 1 athletic footwear company, said on Wednesday it agreed to buy Converse Inc., maker of the legendary Chuck Taylor All Star sneaker, for about $305 million. For privately held Converse the sale represents the end of a two-year rebuilding process after its name and trademark were bought in a bankruptcy auction in 2001. For Beaverton, Oregon-based Nike, Converse represents a key market -- mass merchandising -- where it does not have a presence, analysts said. "Because they were never going to enter the channel with the swoosh or Nike, they would want to enter the market with a brand that has a lower price point that they could leverage their manufacturing and sourcing capabilities with," said Raymond Jones, an analyst at Delafield Hambrecht Inc. The Converse brand -- well known for its star logo -- will not be replaced by the Nike swoosh, as it will operate as a wholly owned subsidiary of Nike, a spokeswoman said. The Converse management team, including Chief Executive Jack Boys, have agreed to stay with the company, she said. The Nike spokeswoman declined to say if the deal would increase earnings. Nike said it would also assume working capital liabilities at the time of the deal's consummation. "Our strategy for growing through non-Nike brands is to identify strong brands with superior management teams where Nike can directly assist in the company's growth," Tom Clarke, Nike's president of business ventures, said in a statement. RETRO In December, Foot Locker Inc. FL.N , one of Nike's major retail customers, said it would no longer be the main distributor of high-end Nike shoes and would fill shelf space with other brands. At the time, analysts attributed Foot Locker's decision to the fact that the shoe retailer was facing much lower profit margins on Nike shoes compared to other brands, especially compared to retro-style shoes. Retro-styled athletic shoes like those made by Puma PUMG.DE and Adidas ADSG.DE have surged in popularity and generally cost less than Nike's "marquee" shoes like its Air Jordan brand. "Converse can be leveraged as not just an athletic brand but also as a leisure brand," Jones said, adding he thinks Nike is paying "a lot for it." Nike did not say if the deal would be accretive to earnings and a company spokeswoman was not immediately available. North Andover, Massachusetts-based Converse, which filed for an initial public offering in December, booked $205 million in revenue last year. Besides making the ubiquitous canvas All-Stars, Converse was also once the sneaker of choice for basketball stars Larry Bird and Magic Johnson and tennis star Jimmy Connors. The company fell from popularity with the rise of Nike, which wooed phenoms like Michael Jordan and Tiger Woods to its stable. Shares of Nike, which said the deal's completion is subject to regulatory review, closed off 71 cents, or 1.3 percent, at $53.00 in trading on the New York Stock Exchange. (Additional reporting by Anupama Chandrasekaran and Anna Driver)
The price of Converse All-Stars had already been jacked up. Now you'll probably have to pay 50 bucks for a pair.
Really. I hate to see the Converse go, but their market share has gone the way of the passenger pigeon as of late. Guess Sprewell did drag down something with him when he choked P.J.
That's exactly what I was thinking..."what is the goth crowd going to do if their Chucks now have a swoosh on them?....days of running mascara..."
