Nike Acquiring Irvine Marketer of Athletic Caps

IRVINE — Nike Inc. said Thursday that it has signed a letter of intent to acquire fast-growing Sports Specialties Corp., the world’s largest distributor of licensed athletic caps, for more than $50 million.

The purchase price, subject to various factors, will be determined when the deal is closed in about two months.

Sports Specialties, based in Irvine, will be operated as a Nike subsidiary. Its management and employees will remain. Two weeks ago, the cap company signed a lease for a new office and warehouse in the Irvine Spectrum that will double its space to 135,000 square feet.

“We’re looking forward to this,” said James H. Warsaw, president of Sports Specialties. “We see an exciting future for our company and our employees. Nike has tremendous leadership roles in footwear, clothing and accessories, and we have a definite leadership role in licensed products.”

Sports Specialties is licensed to sell authentic caps--the same ones the pros wear--from all four major league sports, as well as from the National Collegiate Athletic Assn. and 200 colleges and universities.

Since 1989, it also has marketed caps of U.S. professional and collegiate teams in 80 countries and has licenses to make caps for teams in 44 countries, as well as the International Baseball Assn., the Olympic oversight group.

“The licensed product business is such a booming business,” said Liz Dolan, a Nike spokeswoman. “Sports Specialties has a lot of licenses and is a particularly good-quality company.”

Spurred by demand in foreign countries, as well as by an expanding market for high-end caps, Sports Specialties has been growing at a rate of 40% to 50% annually for the past three years and expects to increase revenue 44% this year to $70 million.

Nike figures that with its own distribution channel--especially overseas--it can greatly increase the market for Pro brand caps.

Nike should be able to help. Industry analysts predict that it will post earnings of as much as $340 million on as much as $3.4 billion in revenue for its latest fiscal year, which ended May 31. Results will be released early next month, Falcone said.

The Nike deal represents the second time that Warsaw and his brother, Robert, Sports Specialty’s chairman, have helped to sell the company to a major sporting conglomerate.

In 1986, they and their father, David, sold it to MacGregor Sporting Goods in New Jersey for $17 million and about 8% of MacGregor’s stock. But after an acrimonious year with MacGregor, the brothers sued to nullify the acquisition.

During litigation, they persuaded the Oppenheimer-Palmieri Fund L.P. in New York to put up $19 million to acquire Sports Specialties, and they took over as the company’s managers again. They also held an undisclosed minority stake in the fund.