3. MEETING MINUTES:
DECEMBER 1, 2008
The Purpose of today’s
meeting is to vote on a
proposed Acquisition of
Columbia Sportswear
Company by Nike, Inc.
Ryan Furst, Sarah Gay,
and Kenneth Adam
Snow will be taking us
through the possible
acquisition.
4. WHERE WE STAND: ANOTHER
ACQUISITION?
Nike’s acquisitions have helped diversify the company:
Converse, Umbro, Cole Haan, Hurley.
Acquisitions keep their brand strength and market presence
by continuing as wholly owned subsidiaries.
Nike has little presence in the backcountry sports space.
Nike has little experience with outdoor garment testing and
production.
It’s time to expand into the backcountry market.
5. COLUMBIA SPORTSWEAR
COMPANY
Formed in 1938 by Gert Boyle’s father, initially was a hat company.
Known for product innovation and a reputation for quality and value in all
their products.
Produces quality outerwear products, footwear, equipment, and ski
products.
Broad range of durable and functional outdoor apparel.
“‘Tough Mother’ standard”.
Owns Sorel, Mountain Hardwear, Pacific Trail, and Montrail.
Headquartered in Portland, Oregon.
8. STRATEGIC BENEFITS
Entry into a new segment of the outdoor sporting market.
Nike is looking to focus on team sports and fashion footwear.
Sorel and Montrail both have strong reputations in the footwear
industry.
Sorel and Montrail’s performance and fit expertise can be applied to
Nike footwear and vice versa.
Nike has no current representation in the backcountry sports space.
Access to Columbia’s core customers.
9. ECONOMIC BENEFITS
Cost savings from reduction of repetitive functions
Headquartered in the same city
Reductions in costs due to:
Higher order volume
Shared Facilities
Combined Transport Costs
10. CONSIDERATION: STOCK
Why
New shares issued easily
Columbia also assumes risk
Retains cash on the balance sheet
Market responds favorable
11. CONSIDERATION: STOCK
Why Not
Dilute current share value
SEC Regulations
Columbia assumes risk unnecessarily
More expenses
More time to complete
Needs shareholder approval
12. CONSIDERATION: CASH
Why
Nike has enough cash
No shareholder approval necessary - fast
No dilution of stock value
Market sees it as a vote of confidence
Earn a better return
Why Not
Nike will have to spend 42% of cash on hand
Tax reasons
Nike assumes all the risk
Might need to raise new debt
13. CONSIDERATION:
HYBRID STOCK & CASH
Best of both worlds
Maintains balance sheet integrity
Joint risk assumption
Low stock value dilution
Maximized premium for Columbia
Mitigates Negatives
14. BIDDING STRATEGY
Initial Bid: Hybrid
Retail Average Premium: 27%
Nike’s bid 32% over Columbia Market Cap
$1 Billion cash + $400 MM stock
1 share COLM = 0.2814 shares NKE
Management stays at Columbia
Breakup Provision
Increased Bid: $500 MM stock, $1B cash
1 share COLM = 0.3518 shares NKE
15. LEGAL & TAX ASPECTS
Stock swap is tax free “reorganization”
Cannot use some tax benefits of a cash deal
IE: Unused tax credits from Columbia
Golden Parachutes, poison pills
SEC regulation/approval
16. MANAGEMENT
REACTION
Very favorable from Columbia but will require a
healthy premium to be enticing
Columbia fits perfectly in the “gaps” in Nike’s
product line
Nike’s strong cash position, SG&A reductions, Nike’s
brand name
17. POTENTIAL SETBACKS
Columbia is a very attractive company for many of
our competitors.
Timberland
More likely, other clothing holding companies, such
as Liz Claiborne.
REI: backwards integration
18. BOARD VOTE
Please state whether you are in favor or against a
proposition to Columbia to acquire their company as a
subsidiary of Nike, Inc.
