SBD Global/October 11, 2013/Finance

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  • Leaders In Sport: WPP CEO Says Company 'Can't Afford' To Bid For IMG

    WPP CEO Martin Sorrell said the ad giant can't afford an IMG bidding war.

    Advertising agency WPP has ruled itself out of the running for IMG, believing its rumored $2.5B price tag is too high to justify a bid, while WPP CEO Martin Sorrell believes the sports sponsorship market is being undermined by the short shelf life of senior execs. Sorrell, speaking at Thursday’s Leaders in Football conference in Chelsea, ruled out WPP from making a bid for IMG, saying “We would love to own IMG,” but when asked if WPP was bidding, Sorrell responded "No, we can’t afford it." IMG was founded by Mark McCormack in '60. It is now up for sale by Forstmann Little following the death of owner Ted Forstmann in '11. Sorrell said, “People are talking about 2 to 2.5 (billion dollars). They are talking about 20 bidders, 10 bidders going into the second round. That’s nose-bleed territory for us.” Some observers believed WPP could be a possible bidder for IMG, as it has significant interest in sports through its businesses such as Hill & Knowlton, and has significant advertising and media partnerships in the media arena. Sorrell said he was betting on Silver Lake, the private equity company, and entertainment company William Morris Endeavour as favorites to acquire IMG. Other bidders are said to include private equity firm KKR.

    EXEC TURNOVER HURTS BUSINESS: Separately, Sorrell hit out at the high turnover of senior execs, particularly CEOs and CMOs in the U.S., arguing it was to the detriment of the sports sponsorship business. Sorrell said, “The average CEO lasts for about four, four and a half, five years. It is too short a time. The average CMO in America lasts two. That is too short a period. Decisions get made, CMOs get replaced and whole momentum changes. The single most important factor is consistency. The real key is consistency. Consistency is critically important.” While Sorrell pointed to the examples of Coca-Cola and Procter & Gamble as examples of companies that have sustained investment in sports sponsorship around big events such as the Olympics and World Cup, he said other companies were guilty of dipping in and out. Sorrell added, “It is very difficult, the short term attraction of a shirt deal or stadium deal. Is that going to be long-term? The key thing is to sit down and look at what your business is trying to do and decide that this is one of the vehicles that will get you to where you want to go, and do it long-term on a consistent basis. The problem is that people dip in and out.”
    John Reynolds is a writer in London.

    Print | Tags: Finance, United Kingdom
  • Nike India Planning To Use Running To Reach Teenage, Young Adult Market

    Nike "is now digging deeper to reach its core audience -- the teenage buyer," according to Antonita Madonna of the Indian BUSINESS STANDARD. In India it is "sharpening its use of the audience's regular digital and physical haunts" -- social networks, mobile phones and colleges. So far Nike "had associated with cricket" (as the official sponsor of the Board of Control for Cricket in India and known for its Bleed Blue campaign) and football. But "when reaching out to teenagers and young adults in their physical spaces" such as colleges, the brand is betting on running. Nike India Marketing Dir Avinash Pant said, "In India, there is an incredible revolution in terms of running. It has long legs because it is a sport that is easier to embrace. There is a huge momentum as it is becoming a community sport." The company "is attempting to grow the sport by partnering with college festivals." Nike "is exploring a possible tie up" with IIT Mumbai for its much-publicized fest, Mood Indigo, held in December. It recently partnered with NMIMS, Mumbai for "Umang," and hosted a 4,000m race. This was followed by Kaleidoscope, "the fest at Sophia's College, Mumbai." To walk the talk when its young consumers, an impatient lot, walk in, Nike "has spruced up its outlets as well." Not only has it labeled its racks with footwear for different sports, "it has opened stores that predominantly offer running gear and gait analysis to understand the kind of footwear best suited to an individual" (BUSINESS STANDARD, 10/9).

    NIKE BY THE NUMBERS: In Portland, Allan Brettman wrote Nike CEO Mark Parker's revenue forecast of $30B by FY '15 and $36B by FY '17 was the "top announcement among several key predictions made" during the company's Investor Day. Nike VP & GM of Global Basketball Craig Zanon said that with "footwear and apparel from Nike, Jordan Brand and Converse, Nike is the clear leader worldwide in basketball." He added that socks "designed specifically for basketball" earned $100M a year in revenue in the U.S. and is "expected to grow." With Nike's marketing backing, the product also is "expected to be popular globally." Meanwhile, Nike VP & GM/Women's Training & Fitness Heidi O'Neill said that the company has "introduced an array of products targeting women that has been well-received." Women's revenue is expected to grow from $4B a year to $7B. While the company "will not hit its revenue targets in the Greater China region as quickly as it forecast in a similar meeting two years ago, company executives detailed plans to reignite sales in that part of the world" (Portland OREGONIAN, 10/10). Nike's FY '13 revenue was reported at $25.3B in late June (THE DAILY). Nike VP & GM of Global Categories Jayme Martin "staked out Nike's ground in the world of soccer." He said that when the brand "entered this category it was not well-received." Martin said the popular reception was, "We didn't belong. We didn't have the heritage. We didn't know the game ... well, we lead the market now" (OREGONLIVE.com, 10/9).

    FOCUSING ON CHINA: Nike execs said that the company is "recalibrating its approach to consumers" in China, and has a plan on "how to reignite what once was double-digit growth." Nike CFO Don Blair "rejected the idea that the company had miscalculated China." He said, "We set ourselves a goal and we won't make the goal on the original timetable. But we're absolutely confident we will make that goal in time." Blair added, "In China, we have a market that's evolving, the consumers' expectations are changing and we're evolving our business. We've had a period and we will have some time on resetting our revenues. We've said this year we'll be flat but we're absolutely convinced we will grow again in China and we'll grow at an accelerated rate" (OREGONLIVE.com, 10/9). At presstime, shares of Nike were trading at $73.13 per share, up 3.2% from the close of trading yesterday (THE DAILY).

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  • Report Shows Spanish Second Division Side Deportivo La Coruña $217M In Debt

    A report about Spanish second division side Deportivo La Coruña's debt and "its active bill shows a debt" of nearly €96M ($130M) with the Spanish tax authorities, according to the EFE. Of that €96M, €34M ($46M) could "be reduced if the club can reach an agreement with bankruptcy administrators." Deportivo's total debt has reached €160M ($217M), which is €4M ($5.4M) more "than it was in the most recent report." Of the €96M that Deportivo owes to the Spanish Tax Authority, €62M ($84M) is "considered special privileged, and therefore cannot be reduced" (EFE, 10/10).

    Print | Tags: Europe, Finance
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