Dick’s Sporting Goods goes global with $2.4 billion Foot Locker purchase

Dick's Sporting Goods has struck a deal to acquire Foot Locker, a "sneakerhead" favorite, for $2.4 billion. This will give the giant domestic sports specialty retailer a global portfolio of more than 3,000 stores.

Pittsburgh-based Dick's, with 856 brick-and-mortar locations under several different brands in the United States, on Thursday said it had entered into a definitive merger agreement with Foot Locker, which is headquartered in New York. The deal with Foot Locker, a footwear-and-apparel seller with roughly 2,400 stores in 20 countries, will give Dick's a worldwide platform in the fast-growing sports retail industry, according to both companies.

The merger is expected to increase Dick's market share, give it more clout and bargaining power with vendors and landlords, create $100 million to $125 million in cost synergies in the medium-term, and expand the company's customer base because of Foot Locker's appeal to "sneakerheads," the devoted fans of that footwear. Dick's and Foot Locker also share a commitment to immersive store experiences, where shoppers are encouraged to actually swing a bat or club onsite before they buy it, at Dick's House of Sport and Foot Locker's reimagined-concept stores. Dick's will also be using its operational expertise to help Foot Locker grow, according to company officials.

"By combining with Foot Locker, Dick's will be poised to serve consumers not only in new locations in the U.S. through Foot Locker's complementary real estate portfolio, but also internationally for the first time," Dick's said in a statement. "With strong long-term industry tailwinds, the combined company is well positioned for long-term growth."

Retailers, and the sneaker industry in particular, have been reeling because of the new tariffs that President Donald Trump has put on imported goods. However, those concerns have been temporarily eased as the president has delayed imposing those fees, particularly with China.

Dick's stores are often part of shopping centers. By contrast, Foot Locker has traditionally been in enclosed malls, although it has been moving away from locating in such retail properties.

Several retail analysts raised questions about how easy or difficult it may be for Dick's to integrate Foot Locker, which has had a bumpy path and closed stores, and what the benefits will really prove to be.

Dick's expects to operate Foot Locker as a standalone business unit and maintain the Foot Locker brands, Dick's President and CEO Lauren Hobart said on a call about the acquisition on Thursday morning.

"There are no plans for Dick's to go international," she also told Wall Street analysts.

There have been several deals involving sports footwear and apparel retailers. Just last week, global footwear retailer Skechers agreed to be taken private by 3G Capital for roughly $9.4 billion. And the proposed Dick's-Foot Locker deal isn't the first consolidation or merger in the sector. A year ago, JD Sports said it was acquiring Alabama-based Hibbett, which has nearly 1,200 American stores, for $1.1 billion as it looks to expand in the United States. A British athletic apparel retailer, JD Sports is Foot Locker's rival on the international level, with over 4,500 stores across 36 countries.

Foot Locker's stores are in North America, Europe, Asia, Australia and New Zealand, and it has a licensed store presence in Europe, the Middle East and Asia. The chain has 82 stores in Canada and about 50 in the United Kingdom, with most of them in England. Its brands include not only Foot Locker, but also Kids Foot Locker, Champs Sports, WSS and Atmos.

Dick's' portfolio includes its namesake stores, Golf Galaxy, Public Lands and Going Going Gone! It also owns and operates Dick's House of Sport and Golf Galaxy Performance Center.

Several retail analysts agreed that the Foot Locker acquisition can help Dick's, but also expressed reservations about the deal.

"Dick’s reported bid for Foot Locker is a bold move to consolidate the chain’s power in the sporting goods arena and to provide it with a steeper growth trajectory," Neil Saunders, managing director at analytics firm GlobalData, said in a note. "At present, Dick’s is the largest specialist player in the US sporting goods market with an 11.1% share. Since 2019, Dick’s has increased its share by an impressive 1.6 percentage points. While there is scope for further growth — especially with the rollout of larger stores — the headroom is becoming more limited. The addition of Foot Locker, with its 4.3% share of the sporting goods market, would produce an immediate boost."

However, "Dick’s would be inheriting a business that remains on the back foot ... and the comeback is not yet fully in play," according to Saunders.

In its report, UBS offered a similar take.

"While we see clear strategic and financial rationales for a transaction from the standpoint of [Dick's] shareholders, there are also considerable risks, in our view," UBS said. "Retail integrations tend to be challenging: There's a far longer list of retail mergers that were not successful than those that were. Common parallels are likely to be drawn to Family Dollar and Dollar Tree, General Parts and Advance Auto; Albertson's and Safeway; and even Sears and Kmart. Simply put, it's difficult to bring together disparate systems, cultures, models, infrastructures and teams."

Dick's and Foot Locker didn't immediately respond to an email from CoStar News seeking comment on Saunders' and UBS' remarks.

Dick's intends to finance the acquisition through a combination of cash-on-hand and new debt. The transaction is subject to regulatory approvals and is expected to close in the second half of the year. The acquisition, earlier reported by The Wall Street Journal, implies an equity value of around $2.4 billion and an enterprise value of roughly $2.5 billion.

Under the terms of the deal, Foot Locker shareholders will elect to receive either $24 in cash or 0.1168 shares of Dick's common stock for each share of Foot Locker common stock. Based on the closing price of Foot Locker stock on Wednesday, the $24 per-share consideration represents a premium of roughly 66% to Foot Locker's 60-trading-day volume-weighted average price.

Goldman Sachs is serving as financial adviser to Dick's and provided fully committed bridge financing. Wachtell, Lipton, Rosen & Katz is serving as Dick's legal adviser. Evercore is serving as financial adviser to Foot Locker, and Skadden, Arps, Slate, Meagher & Flom is serving as legal adviser.