Sports Direct International (SDI) has agreed to sell its rights to the Dunlop brand and the related wholesale and licensing business to Sumitomo Rubber Industries (SRI) of Japan for $137.5 million in cash, as adjusted for net debt and working capital on completion.
The British retailer and wholesaler said that the Dunlop brand had sales of £42.6 million (€49.2m-$52.6m) for the year to April 24, 2016, with gross assets of £41.8 million (€48.3m-$51.7m) and pre-tax profit of £4.1 million (€4.7m-$5.1m). The Dunlop business owned by SDI currently operates in the U.K., Europe, North America and Asia, other than Japan, Korea and Taiwan, where Sumitomo already has the rights to the Dunlop brand.
Among the oldest in the industry, the Dunlop brand has been endorsed by tennis players such as John McEnroe and Steffi Graf, and is famous for the Dunlop Green Flash shoe. It has been used by Sports Direct for racquet sports and golf as well as an array of other products, ranging from umbrellas to trolley suitcases.
The Dunlop brand was bought by SDI as part of the former Dunlop Slazenger group in 2004 for an estimated £40 million (€46.2m-$49.4m). The brand makes up a sizeable chunk of the wholesale business at SDI. The U.K.-based retailer owns a raft of other brands, from Donnay to Everlast, Lonsdale, Karrimor and others, which it also uses on many different products for its private label collections.
As a result of the transaction with SDI, Sumitomo Rubber said in a statement that its position will shift from licensee to license owner in 86 countries, including those where it currently has a presence, such as Thailand, Indonesia, Brazil and South Africa.
Sumitomo said the acquisition will be formally carried out through Dunlop International Co., a company that will be jointly established by Sumitomo and its sports business subsidiary, Dunlop Sports. In its latest financial statement, Dunlop Sports, which also owns Srixon, reported a net loss of 245 million yen (€2.01m-$2.16m) on sales of 55.0 billion yen (€450.3m-$484.0m) for the nine months to last Sept. 30.
The entire Dunlop business will be managed by Dunlop International, which is provisionally scheduled to be established in the Japanese city of Kobe in the first half of 2017. It will be controlled by Sumitomo Rubber, which is a subsidiary of Sumitomo Corporation, a Japanese conglomerate with activities ranging from construction to food, retail, finance and more.
SDI said the deal was in line with its strategy to focus again on its retail business in the U.K. and to become the “Selfridges of sports retailing,” a process that would entail upgrades of its store concept and stronger partnerships with leading sports brands. The retailer has stated that it would use the proceeds from the sale to tighten its relationship with such brands.
SDI lost market share in the U.K. last year to the JD Sports Fashion group, which has been thriving on athleisure and its relationship with Nike and Adidas, among other assets. SDI reported last month that its sales were up by 14.2 percent to £1,638 million (€1,89.4m-$2,025.1m) for the six months to Oct. 23, but its underlying Ebitda shrank by 57.0 percent to £71.6 million (€82.8m-$88.5m).
As part of the transaction over Dunlop, it was agreed that Sumitomo will grant SDI a royalty-free license to continue using the Dunlop name for its own retail purposes in the categories of premium workwear and safety wear. Sumitomo has the option to acquire these rights at a later stage, subject to unspecified mechanical conditions, at an agreed price of $12.5 million. Subject to clearance by antitrust authorities in Germany and the Philippines, the transaction is expected to be completed before the end of May 2017.
Dunlop started off as a manufacturer of rubber products in the U.K in 1889. It started to make golf balls in 1910. The company merged with Slazenger in 1984 to form Dunlop Slazenger, which went through several changes of ownership until its sale to SDI.
