Sports

Fanatics pairs with Hillhouse Capital to start $1 billion sports retail unit in China

Key Points
  • Fanatics China will be a joint venture with investment firm Hillhouse Capital, an Asia-focused private equity fund.
  • Specific terms of the partnership were not provided, but one of the people told CNBC that Fanatics expects the "venture alone to be over a $1 billion piece of business in China."
A detailed photo of the Fanatics apparel displayed at NFL Hospitality during the 2018 NFL Annual Meetings at the Ritz Carlton Orlando, Great Lakes on March 26, 2018 in Orlando, Florida.
Mark Brown | Getty Images

As Fanatics continues to hold off on a potential IPO, the sports merchandise company is busy expanding global operations, this time in China.

The Michael Rubin-led company is starting Fanatics China, a joint venture with investment firm Hillhouse Capital, an Asia-focused private equity fund with companies in Asia's e-commerce and retail sectors, the company told CNBC.

Sources close to the deal told CNBC Fanatics expects the "venture alone to be over a $1 billion piece of business in China." The people asked to remain anonymous as the company isn't speaking publicly about financial terms of the partnership.

With the pact, Fanatics could be getting closer to an IPO. Asked if there was any update on the move, a company spokesperson told CNBC: "While an IPO is clearly an available path to us, there is no update on any timeline."

Fanatics China will be based in Shanghai and allows the e-commerce powerhouse to open up its sports licensing market in the country for its 300-plus global partners, including company investors Major League Baseball and the National Football League, in addition to various U.S. pro teams looking to grow their businesses China.

One of the top licensed sports categories in China is soccer. Hence, this partnership allows Fanatics, which does over $3 billion in sales, to better execute e-commerce partnerships with European clubs, including Chelsea, Manchester United, Paris-Saint Germain and Bayern Munich.

Hillhouse was founded by Chinese businessman Zhang Lei and also backs sports retailer Topsports International Holdings, which raised $1 billion in 2019 as it listed its IPO in Hong Kong, according to Bloomberg.

Topsports is one of the largest sports retail businesses in China and operates more than 20,000 Nike and Adidas retail stores.

In 2018, the PE firm went through its raise of $10.6 billion and now attempting to surpass that with a $13 billion raise. It would be Asia's largest U.S. dollar-denominated fund, according to Reuters.

Quavo performs onstage at Michael Rubin's Fanatics Super Bowl Party at Loews Miami Beach Hotel on February 01, 2020 in Miami Beach, Florida.
Kevin Mazur | Getty Images

Fanatics is coming off a 2020 that saw the firm raise $350 million in a Series E (its last funding round), which increased its valuation to $6.2 billion. The Florida-based company enhanced its parent umbrella with sports licensed merchandise firms to strengthen its vertical commerce units, including acquiring licensed manufacturer WinCraft, CNBC reported in December.

Fanatics China will utilize the firm's e-commerce business model and Hillhouse's local market knowledge in efforts to grow and maximize online marketplace opportunities, build e-commerce sites for leagues and teams, design and launch new retail stores and develop and manufacture products for consumers in China.

With China's addition, Fanatics grows its global presence outside the U.S. as it's also operating in United Kingdom, Spain, Japan, Germany, Thailand, Australia and India. 

Additional Fanatics investors include SoftBank Group and e-commerce firm Alibaba Group, co-founded by National Basketball Association team owner Joe Tsai.

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