Wednesday, July 1, 2015

Online sports gear: Kynetic pays $158M for Dreams

After the Florida firm poached Comcast, Modell

Online sports gear: Kynetic pays $158M for Dreams

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A unit of Kynetic, the West Conshohocken-based online-retail company formed by Michael Rubin (to run the businesses he didn't sell with his GSI Commerce Inc. to eBay in last spring's $2.4 billion deal), has agreed to pay $158 million, or $3.45 a share, in cash, and assume $25 million in debt, to acquire its Florida-based rival Dreams Inc. Company statement here.

Dreams, under chief executive Ross Tannenbaum and Chairman Sam Battistone, has lately wrested clients like Comcast SportsNet and Modell from Kynetic's own Fanatics division, says Michael Devlin, a broker at Long Island-based Henley & Co. Kynetic officials said Comcast SportsNet generated little in the way of gear sales; Devlin hopes it could lead to bigger deals now that Comcast owns NBC Sports.

Fanatics team-licensed gear sales totalled $600 million last year, more than at Target or Wal-Mart, according to Rubin. Dreams reported sales of $142 million last year, up from $111 million in 2010 and $86 million in 2009 - but with a sales/aftertax profit margin of less than 1 percent in the most recent period.

Fanatics chief Alan Trager said the merger joins "two of the most passionate management teamed in licensed sports products" to sell college and pro gear through mobile and e-commerce systems and regional distribution centers. Fanatics clients have included Disney-ABC's ESPN sports network, which has a marketing deal with Fanatics to sell NFL, NCAA, MLB, NBA and NHL gear, and sites owned by Fox, CBS, Rivals.com, and others. 

The sale price, a five-year high for Dreams shares, represents 'meaningful value" for Dreams owners, Dr. Phillip Frost, board chairman of Teva Pharmaceuticals, the Israeli drugmaker whose US headquarters is in suburban Philadelphia, said in a statement. Frost is the third largest Dreams shareholder after Tannenbaum and Battistone.

Venture investor Insight Venture Partners of New York helped finance the deal; Morgan Lewis & Bockius LLP of Philadelphia served as Fanatics' lawyers.

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PhillyDeals posts drafts, transcripts and updates of Joseph N. DiStefano's columns and stories about Philly-area business, which he's been writing since 1989.

DiStefano studied economics, history and a little engineering at Penn and taught writing at St. Joseph's. He has written thousands of columns and articles for the Inquirer, Bloomberg and other media, wrote the book Comcasted, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, distefano251@gmail.com, 215.854.5194 or 302.652.2004.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

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