Japanese technology giant Softbank Corp has agreed to take a 30% interest in Global Sports Inc, a Pennsylvania-based sporting goods company that is moving to an internet-only business model. Softbank will purchase 6.15 million shares at $13 each, representing a 31% discount to Thursday’s closing price of $18.875. Global Sports says that it will now focus exclusively on its e-commerce business and that it has engaged Deutsche Banc Alex Brown to divest all of its non-internet assets.
The company will spend the proceeds of the Softbank investment building up its Global Sports Interactive unit through increased marketing efforts, an aggressive content acquisition plan and the rollout of international operations. The company claims that GSI, formed only last month, has secured long-term exclusive agreements to operate the e-commerce businesses for several leading sporting goods retailers with combined annual sales of more than $3.0bn.
Softbank, for its part, says it has a great deal of faith in GSI’s business model and envisions the company profiting from the estimated $150bn worldwide market for sporting goods, in which e- commerce is considered to have enormous untapped potential. GSI says it intends to announce a new name and corporate identity before it launches its initial six web sites in the fourth quarter.
Excluding the results of its non-internet businesses, GSI reckons that its investment spending will result in operating losses for the foreseeable future. Global Sports posted first-quarter earnings of $425,000, or $0.03 per share, including the effect of a start-up charge of $0.05 for the internet business, on sales of $33.7m.
