Sports Direct, the sports retailing giant run by the maverick chief executive Mike Ashley, has thrown Nike's takeover of Umbro into doubt after building a 29.9 per cent blocking stake in the maker of England's national football team kit.
The share raid, conducted yesterday through the Icelandic bank Kaupthing, nearly doubled the 15 per cent stake Sports Direct had built up in the business to bring its holding to just shy of the 30 per cent threshold at which a full takeover would be triggered. The move is understood to have been carried out at a price above the 195p per share offered by Nike, further stoking speculation that Mr Ashley could be readying a bid.
Speculation has simmered about Mr Ashley's intentions since Nike unveiled a £285m recommended offer for Umbro last week. The company declined to comment on its motivations yesterday, leaving analysts to guess at what Mr Ashley's next move would be. One possibility could be that, by building a blocking stake, he could force Nike into paying a higher price. He may also be looking to increase his leverage to ensure that supply terms do not worsen once the American giant takes Umbro into the fold.
JJB Sports, Sports Direct's main rival and the UK's No 2 sports retailer, holds another 10 per cent of Umbro, which it bought after the company revealed this month that it was in takeover talks. JJB explained the move, saying that it wanted a "seat at the table" when it came to supplier terms.
Yet most City analysts were betting Mr Ashley would launch a full bid for Umbro. Andrew Wade, an analyst at Seymour Pierce, said: "You look at his history, and he has bought brands for what didn't look like the cheapest deals at the time. But he's been able to make them perform."
If he does so, a key element that would have to be worked out would be Umbro's contract with the Football Association to be the official supplier of England kit to 2014. After talks with Nike, the FA assured the American giant it would waive its rights to put the contract out to tender under a change-of-control clause. Sports Direct would want the same assurance before any bid is launched.
Ramona Tipnis, an analyst at Numis Securities, said: "For any acquisition to be successful, the buyer must get Umbro with the England contract intact. Without that, it is not worth anything like what Nike have agreed to offer."
Nike structured the acquisition as a scheme of arrangement, meaning it requires 75 per cent shareholder approval. It can change this so that a simple majority is required.
The acquisition of Umbro would make Nike the global leader in football apparel, a sector in which 10 years ago it had a minute presence.
For Umbro, the deal would bring the support of Nike's global marketing and distribution muscle, providing an antidote to its struggles as a niche player subsisting on the sale of replica football shirts.
Its prospects have worsened recently with the poor form of England's national football team. Analysts have predicted that failure to qualify for the final stages of the Euro 2008 tournament would significantly weaken Umbro's profits.
If Mr Ashley does launch an offer, he would head off a possible toughening of supply terms for England shirts, but he would also anger the world's largest sports apparel maker. Ms Tipnis said: "Nike, Adidas, and other brands are not entirely happy with Sports Direct using their brands to attract footfall to then sell its own brands at higher margins."