Sept. 7 (Bloomberg) -- In his last gig, Jamie Salter snapped up Linens ‘n Things Inc., Polaroid Corp. and other household names. With his new acquisition, he’ll peddle cage-fighting T-shirts and “Expression of Combat” school folders.
Salter, 47, has agreed to buy three brands that cater to fans of the Ultimate Fighting Championship, the mixed martial arts network that attracts millions of viewers each year to pay-per-view bouts that take place in a cage called the “Octagon.”
Salter’s Toronto-based Authentic Brands Group LLC is betting the three labels -- TapouT, Silver Star Casting Co. and Hitman Fight Gear -- are ripe for expansion as mixed martial arts tightens its grip on the mainstream. J.C. Penney Co., Kohl’s Corp. and Macy’s Inc. already sell some of the gear, and the new owners and founders are looking to add sales both at home and overseas.
“These are some of the most exciting brands I’ve seen in years,” Salter said in a telephone interview. “The popularity of mixed martial arts and the UFC is soaring around the world. The last time I saw a sport with this much potential was 20 years ago with snowboarding.”
Salter wouldn’t say how much his firm paid for the brands.
Grand Terrace, California-based TapouT, the most widely distributed of the three, was founded in 1997 by three mixed martial arts fighters. The company sells a range of merchandise and services, from $24 logo T-Shirts to a $950 bed with its signature cage design. TapouT generated just under $200 million in sales last year, President and co-founder Dan “Punkass” Caldwell, 39, said in a Sept. 3 telephone interview.
He says he can’t count how many suitors he turned away before Salter came calling. “We love this brand so much,” Caldwell said, “I have it tattooed on the back of my neck.” He says he agreed to the deal in part because Salter knows the clothing industry and welcomes the founders’ continued involvement.
Amid signs of mixed martial arts’ growing cachet, Under Armour Inc. last year signed a multiyear endorsement deal with fighter Georges St-Pierre. In January, Flash Entertainment, a unit of Mubadala Development Co., Abu Dhabi’s investment arm, announced it had bought a 10 percent stake in Las Vegas-based Zuffa LLC, which owns the UFC and World Extreme Cagefighting.
Ultimate Fighting, which brings together combatants versed in a range of martial arts styles, was once considered so violent that in 1998 Arizona Senator John McCain tried to ban what he called “human cockfighting.” Since then the UFC has added some combat restrictions. Prohibitions on its website include “no knees to the head of a downed opponent” and “no groin or throat strikes.”
“People are starting to respect these athletes as athletes and not just street brawlers,” Tim Pogue, Authentic Brands’ chief marketing officer, said in a telephone interview.
Salter’s history with extreme sports dates back to Ride Snowboards, in which he sold shares in 1996. Later, at the Toronto-based private equity shop Hilco Consumer Capital, he helped oversee the acquisition of Sharper Image Corp and brands associated with the estate of Bob Marley.
Earlier this year, Salter left Hilco and started Authentic Brands with backing from Leonard Green & Partners LP, the investment firm with stakes in Sports Authority Inc. and Whole Foods Market Inc. The mixed martial arts acquisitions are the firm’s first.
Mixed martial arts fans are younger and more affluent than the general population, according to Scarborough Sports Marketing, a New York-based consumer researcher. More than 75 percent of MMA fans are male, the firm says.
Because the UFC has “done such an extraordinary job of building their brand, retailers -- and others -- will want a piece of the action, especially as global opportunities increase,” David Carter, principal at the Sports Business Group consulting firm, said in an e-mail.
Last year, TapouT introduced a mid-tier brand, TapouT MPS, to supplement sales to department stores, and is weighing a discount line that could sell at Wal-Mart Stores Inc. and other mass chains, Caldwell said. TapouT’s Hitman brand already sells at Sears Holdings Corp.’s Kmart stores. Salter predicts he’ll double revenues in the next two years.
The founders have already branched out, with plans for more TapouT gyms, a new energy drink in Canada and a documentary unit. They’re peddling combat cages similar to those used in bouts to fitness centers and other interested parties, including a Saudi prince who flew them to the Middle East earlier this year, Caldwell said.
Caldwell will remain president, while co-founder Timm “SkySkrape” Katz will stay on as marketing/creative director. (The company’s third founder, Charles “Mask” Lewis, died last year in a car accident.) They’ll now be joined by Luke Burrett, who started rival apparel maker Silver Star Casting Co. in 1993 after detailing cars in Southern California. Burrett, who runs the company with his wife, Charis, a former Playboy model, met Salter at a UFC after-party in Canada earlier this year.
“We’ve been fierce competitors with TapouT, and now that we’re under the same roof we’ll be unstoppable,” Burrett said in a Sept. 3 telephone interview.
Mixed martial arts remain controversial in some quarters. Last month, the Canadian Medical Association called for a ban, following its British counterpart.
Salter says criticism of the sport is overblown.
“Mixed martial arts are safer than many other contact sports that have been around for decades,” he said. “The UFC has rules in place to protect fighters from injuries that regularly occur in other contact sports.”
Salter says he sees opportunities for growth outside the U.S. in countries like Brazil, whose version of Jiu-jitsu provided inspiration for mixed martial arts in the U.S. The sport also combines elements of boxing and wrestling.
Ira Mayer, publisher of The Licensing Letter, says the recent controversy around the sport won’t hurt the brands’ sales. “Look what’s going on with football,” he said in a telephone interview. “They’re finally acknowledging these guys are getting concussions. Is that going to stop anybody from carrying the merchandise? No.”