Nike to Gain Possession of Rebounding Rival Converse

Relax: Your Chuck Taylors won’t be getting a Nike swoosh.

Athletic shoe giant Nike Inc. said Wednesday it planned to buy Converse Inc. for about $305 million in a move industry insiders said should benefit both companies. Beaverton, Ore.-based Nike said it would assume some of privately held Converse’s “working capital liabilities,” declining to elaborate.

The acquisition would cap a two-year rebuilding period for the 95-year-old Converse, which emerged from Chapter 11 Bankruptcy Court protection in 2001 and gained traction as consumers became enamored of retro fashion -- including the company’s canvas Chuck Taylor All Star high-top sneakers with their distinctive star logo.

Nike, the world’s largest athletic shoe maker, said it intended to use its experience to help Converse expand its footwear and apparel lines.

Converse, based in North Andover, Mass., would continue to operate independently, Nike spokeswoman Joani Komlos said.

“The beloved Chuck Taylor will not have a swoosh on it,” she said.

Industry watchers said the acquisition would give Converse, with about $205 million in annual sales, instant marketing muscle, and Nike, with yearly sales of $10 billion, a way to further cash in on the past.

“Converse represents a unique situation in that there’s even a richer history, as it relates to basketball, with Converse than there is with Nike,” said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon. “It may indeed be one of [Nike’s] larger acquisitions in terms of identifiable brands and one that they used to compete with.”

Converse traces its history to a rubber firm founded by Marquis Converse in 1908. The famous canvas basketball sneaker debuted in 1917 and was named In 1923 for a traveling salesman named Chuck Taylor who promoted the shoe by organizing basketball clinics.

In December, Converse filed for an initial public stock offering to raise as much as $86 million, in part to revitalize itself after losing ground to rivals, including Nike, Adidas-Solomon and Reebok International Ltd.

The IPO was later withdrawn. But now a deal with Nike could give Converse what it had hoped to get from going public.

“I think it’s probably going to boost the sale of Chuck Taylor and the entire Converse brand,” said Robert Hollander, president of Brand Sense Marketing, a branding and licensing firm in Los Angeles.

More important, analysts say, the acquisition could eventually give Nike a way into the mass-merchandise retail channel, where it could sell the popular Converse brand in stores such as Wal-Mart and Target, without smudging its swoosh.

Converse sneakers sell for $38 to $65, while Nike’s top-line shoes cost more than $200.

“Nike has been looking for a way to go into the mass-merchandise channel for some time,” said Raymond Jones, an analyst with Delafield Hambrecht.

“I just don’t think they felt they could do it with the swoosh and the Nike name -- without potentially harming their brand.”

Nike, however, said it didn’t plan to go the mass-merchandising route. It said it intended to pump up the Converse brand where Converse already is selling, including Foot Locker Inc. stores.

Nike and Foot Locker have been involved in a long-running feud, which took a bad turn last year when the New York-based shoe retail chain decided to start selling less expensive Nike items and to scale back on stocks of shoes priced at $120 or more a pair.

In response, Nike began to hold back on shipments of such popular sneakers as its Jordan IX line.

Komlos said the dispute shouldn’t affect Foot Locker’s business with Converse.

Converse couldn’t be reached for comment.

Chief Executive Jack Boys said in a statement that the acquisition would create “significant opportunity” for Converse to expand its product lines, which include shoes and clothes.

Boys and other senior managers would remain with the firm, and there would be no layoffs at Converse, which employs about 200 people, Komlos said.

Nike’s stock closed at $53, down 71 cents, in New York Stock Exchange trading. The announcement was made after the market closed.

Komlos compared the possible Converse purchase to Nike’s acquisition last year of Costa Mesa-based Hurley International, a youth apparel company that is popular with surfers and skateboarders.

That Nike deal at first created an uproar in Orange County’s tight-knit surf and skate apparel industry, but the fuss has largely died down.

“Six months down the road, I bet Converse customers won’t even know” the company is owned by Nike, Komlos said.