Fanatics Expanding to China in Joint Venture With Private Equity Firm

Eben Novy-Williams
·3 min read

Sports ecommerce giant Fanatics is partnering with private equity firm Hillhouse Capital on a 50-50 joint venture to expand its presence in China.

Fanatics China will handle both brick-and-mortar stores and ecommerce across the world’s most populous country. It will also provide an expanded opportunity for the company’s 300+ partners—including the NFL, NBA and some of the world’s biggest soccer clubs—to increase their presence in China, a business priority for nearly everyone in global sports.

Owned by billionaire Michael Rubin, Fanatics has grown into the dominant force in licensed sports merchandise, with more than $3 billion in annual sales. Though the company currently ships to China, the joint venture will give it local offices, manufacturing and design capabilities, with the ability to make new product specifically for the local market.

Hillhouse, which was founded by Chinese billionaire Zhang Lei and invests primarily in Asia, will provide much of the operational and market expertise. The firm’s portfolio includes some of China’s most prominent retail companies, including Tencent and JD.com. It was also a strategic investor in Topsports, which operates more than 20,000 Nike and Adidas stores in China.

The appeal of the Chinese market is clear—the country’s scale and emerging middle class make it a growth opportunity for businesses of all sorts, including leagues and teams, many of which are reaching saturation in their own markets and are relying on international expansion to sustain long-term growth. The NBA has played more than two dozen preseason games in China; the NHL played exhibitions there in 2017 and 2018.

The U.S. has spent decades as the world’s largest retail economy, but that changed in 2020, according to market research firm eMarketer. The COVID-19 pandemic had a far more dramatic impact on the U.S. economy, which saw its retail sales projection fall to $4.89 trillion. China’s sales were projected at $5.07 trillion. The U.S. is expected to inch back ahead in 2021 and 2022, but China should ultimately retake the lead and hold onto it for at least the next “several decades,” per eMarketer’s analysis.

The deal is just a part of Fanatics’s recent international expansion. In 2016 the company acquired U.K.-based ecommerce company KitBag, which spearheaded its growth in Europe. It has a tech hub in India, a recent 10-year wholesale partnership with Rebel in Australia and an office in Tokyo.

Last year Fanatics raised $350 million at a $6.2 billion valuation and has used that money to fund recent acquisitions in headwear and hardgoods. It is expected to be the company’s last private raise before going public.

Hillhouse’s experience in China’s retail market includes sports expertise. In 2017, the firm was part of a group that privatized Belle International Holdings, the parent of Topsports, in a deal worth roughly $6.8 billion. Two years later, Topsports went public on the Hong Kong Stock Exchange and now has a market cap of roughly $9.3 billion.

It’s unclear exactly how Fanatics China will approach its brick-and-mortar strategy. It could include Fanatics-branded stores, or it could involve the inclusion of another retail partner.

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