Nike wins Ashley backing for 285m bid for Umbro

Sports Direct threw its backing behind Nike's 285m bid for the football shirt maker Umbro yesterday as it sold a 19.9 per cent stake in the kit maker to the US sportswear giant.

The unexpected move came after Umbro, the official supplier of England football kits, warned yesterday that its stand-off with Sports Direct, the company behind Lillywhites and the Sports World retail chain, over the supply of England jerseys would have "a material effect on its revenues" this year.

Sports Direct, which is majority-owned by Newcastle United's owner Mike Ashley, has a contract to sell 65 per cent of Umbro's stock of official England jerseys, but after England's failure to qualify for next year's European Championship, has said it will not take the full allocation. Umbro said it had already agreed changes to its commercial agreement with Sports Direct but added: "No final resolution has been achieved and these discussions are continuing".

Sports Direct is believed to have collected only half of the shirts it is meant to accept under the contract. An Umbro spokesman said that although the contract is legally enforceable, the company wanted to resolve the dispute amicably as Sports Direct was a "key customer". The spokesman added that Umbro, which supports Nike's takeover offer, was "very pleased" that Sports Direct had sold its shares in support of the proposed acquisition, and added: "We hope we can bring other shareholders to accept the terms of the scheme as well. This does not affect our negotiation with Sports Direct, which is separate."

Sports Direct sold 19.9 per cent of its 29.9 per cent stake in Umbro to Nike yesterday for 56m and agreed to use the remainder of its holding to vote in favour of the acquisition in January, when Umbro shareholders are due to vote on the takeover. Nike bought the shares at its previously declared offer price of 193.06p per Umbro share.

Umbro also warned investors about problems with other customers. The company painted a dismal outlook for 2008, citing "slow sell through" of England products. Nike said it was "not discouraged" by Umbro's statement.