June 11, 2012, 3:38 PM

Reaching $1 billion in sales is not the impossible dream for Fanatics

With the acquisition of Dreams, Fanatics now carries an inventory of 1 million SKUs.

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Licensed sports products retailer Fanatics closed a $183 million deal to acquire Dreams Inc.

Now that the deal for Dreams Inc. is complete Fanatics Inc. can dream of becoming a $1 billion e-commerce company. And the dream is only a year away from becoming reality, says Fanatics president Jamie Davis.

Last week Fanatics, No. 46 in the 2012 Internet Retailer Top 500 closed a $183 million deal to acquire Dreams Inc. (No. 154). Fanatics announced in April plans to buy Dreams, which operates FansEdge.com and multiple other branded sports merchandise e-commerce sites. Fanatics is an online licensed sports products retailer owned and operated by Kynetic LLC. Kynetic was founded as a new online retail and e-commerce technology services company by former GSI Commerce CEO Michael Rubin.

With a deal in hand and business and systems integration projects under way, Fanatics is on track to generate total sales, which includes online retail sales and e-commerce technology services, of about $800 million in 2012 and $1 billion in 2013, says Davis. While Fanatics didn’t provide an exact breakout, the vast majority of sales will come from the company’s own portfolio of web stores, including Fanatics.com and FansEdge.com.

The new e-commerce operation will carry at least 1 million SKUs in all, including at least 500,000 SKUs in-stock at any time, the company says. “It’s very expensive to maintain that level of inventory, but it’s how we are going to serve a licensed sports apparel market where only about 10% of all sales are online,” says Davis.

The combined businesses make Fanatics a company that operates more than 200 licensed sports apparel sites directly or on behalf of other retailers, charging fees for its services. The company’s retailer clients includes such professional sports leagues as Major League Baseball, National Basketball Association, National Football League and National Hockey League. “We did the deal with Dreams because our businesses are very similarly aligned,” Davis says. “They will help us do what we do even better.”

To help finance the acquisition and future development, Fanatics has lined up about $225 million in new working capital, including $150 million from investment banker Insight Venture Partners and a $75 million line of credit. The funds will be used to support growth, Fanatics says. Fanatics now operates two fulfillment hubs, in Chicago and Jacksonville, FL, but is looking to add both a West Coast and East Coast distribution center, Davis says.

“We are well positioned for the future,” Davis says.

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