Nike Inc (NKE) Bags Sportswear Deal

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In what could be termed as one of the most prized sports contracts in the United States, Nike Inc (NYSE:NKE) has bagged the award of University of Michigan sports teams. The terms of the deal have yet to be made public.

Ten-Year Period

The agreement between Nike Inc (NYSE:NKE) and the outfit University of Michigan will commence from the 2016-17 season. The deal envisages the contract to run through minimum 2027. There is also an option to extend the deal till the year 2031. Both the parties are expected to announce the details of the agreement next week.

This is not the first time that the company has won the contract from the Michigan University. The sportswear maker was the athletic gear supplier to Michigan Wolverines for over a decade until Adidas came into the picture in 2008. The University said that it selected the right partner after a careful consideration, according to its interim director of athletics, Jim Hackett.

Coincidence

The return of the company coincides with Jim Harbaugh hiring as head of the football team of Michigan University. He was formerly the coach of San Francisco 49ers and his hiring was part of the rebuilding efforts to face the school’s storied football program. For Adidas AG (ADR) (OTCMKTS:ADDYY), the Big Ten school was a crown jewel. The company also launched a five-year program this spring season highlighting the transformed focus of marketing on the American sports sector.

Therefore, it was a big setback for the German-based sportswear maker. The University has also officially notified the company that it is not going to renew its contract. Though disappointed in losing the contract, its North American President, Mark King, said that the company would focus on four or five schools.

Aggressive Marketing

For quite some time, Nike Inc (NYSE:NKE) has been aggressive in striking deals. Their focus has increased especially with the contracts being held either by Adidas or Under Armour Inc (NYSE:UA). For instance, the company has signed an eight-year agreement with the NBA in June. The contract period will start from the 2017-18 season. Most importantly, the agreement was estimated to have been worth more than $1 billion, WSJ reported quoting a person familiar with the situation. Adidas AG (ADR) (OTCMKTS:ADDYY) preferred not to focus on the renewal as it was not profitable.

Last year, Nike Inc (NYSE:NKE) renewed its contract with former NBA MVP, Kevin Durant. That contract had the potential to generate $350 million spread over the two-decade period. It was able to win the contract following  tough competition with Under Armour Inc (NYSE:UA). Adidas AG (ADR) (OTCMKTS:ADDYY) preferred to end its long-term relationship with Notre Dame last year and it was won by Under Armour for ten years.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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