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Fanatics: Building A $10 Billion Company
Despite the sports apparel business seeing COVID-19 related setbacks, Fanatics has continue to expand — but what's next?
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Friends,
Fanatics, the leading sports merchandise company led by Philadelphia 76ers partner Michael Rubin, has acquired WinCraft, a licensed sports manufacturer of hard goods and non-apparel related items.
While an acquisition price is unknown, WinCraft chairman and industry icon Dick Pope is retiring at year-end and appears to have picked Fanatics to lead the company going forward — despite their being other acquisition offers.
Here are the details:
WinCraft was founded in 1961
Headquartered in Minnesota with offices in Iowa & Florida
Currently does about $100 million in annual revenue
Products include coolers, decals, lamps, clocks, welcome mats, and more.
The interesting part?
While an additional $100 million in annual revenue is certainly nice, Fanatics also gets access to WinCraft’s exclusive licensing agreements — which span more than 700 colleges, all major North American professional sports leagues, select European and Premier League soccer teams, the Olympics, Nascar, Disney, and more (Source).
In a merchandise world dominated by exclusivity, that’s what Fanatics is really paying for.
For those who aren’t familiar with the Fanatics story, here’s what I wrote earlier this year:
In 2011, Fanatics was purchased by Michael Rubin’s company GSI Commerce, for $277M through a combination of cash and GSI stock. Shortly after the transaction closed, GSI Commerce was subsequently purchased by Ebay for ~$2.4 billion (Source).
The kicker?
In an effort to compete with Amazon, Ebay was only interested in GSI’s long-standing relationships with their current commerce customer list of retailers and brands. Ebay decided to divest the businesses that were not considered “core to it’s long-term growth strategy”.
The undervalued assets - Fanatics, ShopRunner and Rue La La, were sold back to GSI’s Michael Rubin through a newly formed holding company. To close out the deal, Ebay loaned the newly formed holding company $467M while Rubin put in an additional $31M in cash (Source).
Since the 2011 re-purchase of Fanatics, Michael Rubin has been on a tear.
Rubin has raised about $1.5 billion in funding and secured exclusive merchandise contracts with all the major US professional sports league (Source).
After closing a significantly oversubscribed Series E funding round in August, which saw them raise $350 million, Fanatics has seen their valuation jump from $4.5 billion to $6.2 billion (Source).
What have they been up to since?
Expanding.
In the last three months alone, Fanatics has acquired leading US college sports headwear manufacturer Top of the World— which has exclusive rights to more than 600 universities—and now, WinCraft.
In total, Fanatics has added thousands of exclusive licensing agreements to their portfolio through acquisition and now has a stranglehold on college & professional apparel — as well as a tangible expansion plan into hard-goods like coolers, decals, and lamps.
The best part?
With major professional sports leagues like the NFL and MLB being equity investors in Fanatics—their previous $150M investment is now valued at ~$250M—those exclusive agreements aren’t going anywhere (Source).
Point being, incentives have been aligned.
As we look into the future, Fanatics will only continue to expand their dominate market position in licensed sports apparel and merchandise.
Why?
V-commerce.
Despite the v-commerce model being used by category leading companies like Lululemon, Bonobos, and Fanatics, it’s still a relatively unknown term.
Here’s how Michael Rubin defines it (Source):
V-commerce means selling unique, specialized and differentiated merchandise that cannot be commoditized by the Internet. It allows online retailers to control their destiny by owning their merchandise, marketing it and selling it directly to consumers.
The model allows for incredible speed to market, benefiting not only customers but the fans that shop with the company’s retailers and partners. It also provides the opportunity for Fanatics to continue to establish strategic partnerships and deals that drive industry growth.
My definition?
Much simpler…
The power of v-commerce is in the ability for a company to own, produce, and control their own merchandise through an in-house and end-to-end structured model.
Interestingly enough, through various acquisitions and an improved execution model, Fanatics mentioned in August their sales are up more than 30% year-over-year — despite the sports merchandise world experiencing difficulties with fans being unable to attend games.
Next up?
The market assumes an IPO, but it’s anyones guess when that will come.
Have a great day and we’ll talk tomorrow.
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