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A different kind of diamond for Global Sports
Global Sports Inc., which has built its business on providing outsourcing for sporting goods web sites, has acquired luxury retailer Ashford.com.
In a surprise move that breaks away from its sporting goods base, King of Prussia, PA-based Global Sports Inc., a leading outsource solution provider for e-commerce, has agreed to buy Houston-based luxury goods retailer Ashford.com. Global Sports CEO Michael Rubin says the deal represents a way for the company to expand into new categories without building a start-up.
“The real benefit to taking on a luxury goods and corporate gifts retailer, such as Ashford.com, is that we now have the infrastructure and product inventory in place to expand our solution into another category,” says Rubin. “Rather than looking at Ashford.com solely as an online retailer, we are looking at this acquisition as a platform for expansion. We hope to bring our solution to the luxury goods and corporate gifts categories in much the same way we have done for sporting goods, while still maintaining the Ashford.com site and loyal customer base.”
Global Sports will acquire all outstanding shares of Ashford.com in a stock and cash transaction valued at $14.2 million. Ashford says that at the end of June, it had a value of $27.9 million, including $8.6 million in cash, cash equivalents and accounts receivable and $18.4 million in inventory. “From a financial standpoint, it’s clearly a slam dunk,” says Shawn Milne, vice president of research at Wit Soundview Group, a San Francisco-based investment banking firm. “Companies left standing are benefiting from these cheap acquisition prices.”
Global Sports expects the merger to have a positive impact on sales and pro forma earnings in 2002 and expects to exceed analysts’ projections. Net revenue is now expected to exceed $200 million, up from $185 million. Pro forma operating profit is now expected to exceed $11 million, up from $10 million.
Once the merger is complete late this year or early next year, Global Sports intends to extend its outsource e-commerce solution to retailers in the luxury goods category and expand Ashford.com’s e-commerce outsource solution in the corporate gifts category. Ashford.com already manages e-commerce corporate gifts programs for several Fortune 500 companies.
So far, Global Sports is mum about its future endeavors. “We do not have specific acquisition plans but we are always reviewing the opportunities that exist,” says Rubin. Under the agreements, all Ashford.com employees are guaranteed employment until February. Ashford.com will become the 24th web site to run on Global Sports’ e-commerce platform. Global Sports operates web sites for several NFL teams and major sporting goods retailers such as The Athlete’s Foot and The Sports Authority.