This Is a Watershed Moment for Under Armour Inc.
Heads up, all you Fighting Irish fans, because the gear used by your favorite collegiate sports teams will soon bear a new logo.
On Tuesday, after 17 years with Adidas , The University of Notre Dame announced a fresh 10-year partnership with Under Armour .
Of course, that doesn't mean Adidas and Nike rolled over without a fight; both athletic apparel giants were said to have submitted bids for the deal, which begins July 1, 2014, following the conclusion of Adidas' most recent 10-year, $60 million contract with Notre Dame.
However, Under Armour ultimately agreed to what Notre Dame director of athletics Jack Swarbrick called "the largest financial commitment ever made by a brand to a university."
And while Under Armour's founding CEO Kevin Plank admitted, "This is a pinch-me moment without question," he also insisted that Under Armour will be able to successfully take the technology it's building for consumers and implement it to the benefit of Notre Dame.
Perhaps more important for Under Armour, Plank reminded that the agreement effectively offers Under Armour the opportunity to leverage its brand with the massive community behind both Notre Dame and its athletics program. To be sure, Under Armour will not only design and supply the footwear, apparel, training equipment, and game-day uniforms for all 26 of Notre Dame's varsity athletic teams, but also looks forward to integrating the university into its global marketing efforts, social media initiatives, and in-store promotions.
Why this partnership is different
According to the folks at ESPN, anonymous sources have stated that the deal is worth around $90 million. That's huge, but not a tremendous amount more than the $82 million agreement Adidas signed with the University of Michigan in 2008. Even so, given its intangible benefits and absent the release of specific financial terms, it'll be tough to accurately measure the effectiveness of the partnership for now.
We do know, however, that the landmark deal sports one particularly unique feature: According to Swarbrick, Notre Dame has the option of taking a portion of the deal's cash component in Under Armour stock.
And this isn't the first time Under Armour has extended an equity stake as motivation, either. Back in 2010, for example, Under Armour did the same thing to compel New England Patriots QB Tom Brady to leave behind Nike.
Why? With a market cap of "just" $8.9 billion -- which makes Adidas and Nike roughly three and seven times larger, respectively -- Under Armour obviously doesn't enjoy the same financial resources as its huge competitors to finance such deals.
With this in mind, Under Armour can offer enormous growth down the road. In fact, nearly 94% of Under Armour's net revenue was derived from the U.S. last quarter, which means the company has barely scratched the surface of its global potential. As a result, it's sure hard to blame Notre Dame for its excitement to become a significant Under Armour stakeholder.
Better yet for investors, by ousting a huge global brand like Adidas from one of its well-established strongholds, Under Armour continues to make it clear that its eyes are set on nothing short of global domination.
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The article This Is a Watershed Moment for Under Armour Inc. originally appeared on Fool.com.Fool contributor Steve Symington owns shares of Under Armour. The Motley Fool recommends Under Armour. The Motley Fool owns shares of Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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