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NIKE, Inc. (NKE), K Swiss Inc (KSWS): No Longer In Style And Going Private

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Struggling shoemaker K Swiss Inc (NASDAQ:KSWS) received a much-needed boost from the mid-January announcement that it would be acquired by South Korea’s E.Land conglomerate for around $170 million. K Swiss Inc (NASDAQ:KSWS) had been dealing with major structural issues and had suffered losses of more than $160 million since the onset of the recent recession. In addition to cost-control problems, K Swiss Inc (NASDAQ:KSWS) had struggled with declining sales of its tennis shoes and other branded products.

In theory, this deal will ensure that K Swiss Inc (NASDAQ:KSWS) survives as a recognizable brand for the foreseeable future. However, the buyout is by no means assured. Specifically, it faces additional regulatory scrutiny due to E.Land’s foreign ownership status and has been confronted with a rash of legal investigations. In fact, a lawsuit filed in late January may serve as the basis for a class-action assault on the buyout offer. Depending upon the outcome of this case, the deal could fall through or be delayed by several months. On the other hand, a rapid dismissal of the lawsuit could lead to the deal’s completion by the middle of 2013.

About K-Swiss Inc (NASDAQ:KSWS)

Westlake Village, California-based K-Swiss is an apparel manufacturer that focuses primarily on various types of casual and sport footwear. Its principal products include tennis shoes, trail running shoes, cross-trainers, comfortable sneakers and flat tops. K Swiss Inc (NASDAQ:KSWS)’s Palladium brand caters to professional athletes and others who demand high-quality fitness footwear. Its other apparel offerings include polo shirts, fleeces, tank tops, track jackets, sweat clothes and various warm-up apparel. K Swiss Inc (NASDAQ:KSWS) also manufactures sporting accessories like bags. In 2012, the company lost $34.8 million on gross revenues of $228.9 million.

Competitors

Naturally, K-Swiss has a number of competitors with which it tussles for a share of the dynamic and ever-changing casual footwear market. Of course, the two biggest competitors that come to mind are also two of the biggest footwear companies in the world: NIKE, Inc. (NYSE:NKE) and adidas AG (ADR) (NASDAQOTH: ADDYY).

Portland-based NIKE, Inc. (NYSE:NKE) is a global apparel manufacturer that deals in a variety of segments and enjoys tremendous brand visibility and cachet. Indeed, it seems unfair to compare K-Swiss directly to NIKE, Inc. (NYSE:NKE). However, K-Swiss does manufacture many of the same types of apparel and accessories as NIKE, Inc. (NYSE:NKE). What’s more, both companies market a global brand and enjoy name recognition among athletes. Of course, NIKE, Inc. (NYSE:NKE)’s stature has grown in recent years thanks to high-quality products and a successful celebrity endorsement strategy. Indeed, NIKE, Inc. (NYSE:NKE) now employs more than 40,000 people and earned around $2.3 billion on revenues of more than $25 billion in 2012.

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