Global Sports sets eyes on the Web
In a move to focus strictly on its Web business, Global Sports says it will divest all of its non-Internet assets and that Softbank plans to take a stake in the company.
Under the investment agreement, Softbank, an information and distribution services provider for the digital industry, said it will acquire a 30 percent interest in Global Sports on a diluted basis for $80 million.
Global Sports said that it plans to focus exclusively on its e-commerce business--Global Sports Interactive (GSI), a Web site geared at sporting goods retailers. The company has engaged Deutsche Banc Alex Brown to divest its non-Internet assets, including its Branded Division that consists of Ryka and Yukon athletic footwear lines, and its Off Price & Action Sports Division.
With the proceeds from Softbank's investment, Global Sports said it intends to accelerate investment spending in GSI in an effort to push its e-commerce unit in the sporting goods space.
In addition, Global Sports said it plans to announce a new name and corporate identity before the launch of its six e-commerce Web sites in the upcoming fourth quarter.
Global Sports anticipates that it will report operating losses for the "foreseeable future" excluding the results of its non-Internet businesses and factoring in its intention to accelerate investment spending in GSI.
Last month, Global Sports unveiled GSI, which has exclusive agreements with retailers including The Athlete's Foot, Sport Chalet, MC Sports, and Sports & Recreation, in order to market their products via the Web. As reported by Bloomberg News, those companies have a combined annual sales of $1.6 billion.
GSI expects to leverage the retailers' brand names, existing marketing visibility, and established customer bases to drive consumer traffic to its Web sites, Global Sports said in statement.
"Our agreement with Global Sports, which represents one of the larger investments by Softbank in an e-commerce company, will provide financial support that will assist it to build its business and realize on its vision," Softbank's chief executive Masayoshi Son said in a statement. "We believe that the $150 billion worldwide sporting goods industry has enormous untapped potential for e-commerce and that Global Sports, through its partnerships with six leading retailers, is well positioned to lead the category."
Softbank, which has made several recent investments in Internet companies, including Yahoo and E*Trade, said its investment is for 6.2 million common shares of Global Sports. The two companies said they expect the deal to close in July, pending expiration of the waiting period under the Hart-Scott-Rodino Antitrust Act.
Michael Rubin, the chief executive of Global Sports, who owns more than 65 percent of the company's stock, has agreed to vote in favor of the transaction.