Sports retailer Fanatics enters China via JV with Hillhouse Capital

CHICAGO/NEW YORK: Fanatics Inc, the world's biggest licensed sports merchandise retailer, said on Thursday it is expanding into China through a joint venture with local private equity firm Hillhouse Capital Group, as the SoftBank-backed e-commerce platform mulls a potential public listing later this year.

The move by Jacksonville, Florida-based Fanatics, whose annual revenue tops $3 billion, is a bet on what the company sees as untapped demand in China for sports equipment and apparel.

"China has been a market we followed for a while, and we've been meeting with multiple partners in China trying to figure out how we approach it in the best way," Zohar Ravid, Fanatics' head of international corporate development, told Reuters. "The interest overall in the country around European football, and American sports is growing."

Fanatics operates online stores and sells products for over 300 teams, brands and leagues from Manchester United and Nike to America's National Football League.

The 50-50 joint venture with Hillhouse, Asia's largest private equity firm, will be based in Shanghai. It aims to localize operations including product design, sourcing and licensing to serve what Fanatics believes will be a multi-billion dollar market.

The plan includes leveraging Hillhouse's expertise to build partnerships with e-commerce channels operated by Chinese tech giants Alibaba and Tencent, as well as selling in physical stores.

Currently, one tenth of Fanatics' sales comes from outside the United States. The global licensed sports merchandise market is estimated to be worth $25 billion. Fanatics believes the Chinese market is "grossly underserved" and could be worth $3-5 billion, Ravid said.

The company, which has seen strong online sales growth during the pandemic, raised $350 million at a $6.2 billion valuation last August. When asked about a possible initial public offering (IPO), the company said "an IPO is clearly an available path to us" but declined to elaborate further.

Founded by Chinese billionaire Zhang Lei in 2005, Hillhouse has stakes globally in the healthcare, consumer, technology and services sectors, with a focus on Asia. It is known for early investments in Chinese tech giants Tencent, JD.com and Baidu.

"The local expertise is really, really why we're relying on Hillhouse," said Ravid.