Kevin Durant's representation, Roc Nation Sports, informed Nike on Wednesday that he has a deal on the table with Under Armour worth between $265 million and $285 million over 10 years, sources told ESPN.com.
The deal includes Under Armour stock and other incentives such a community center built in his mother's name whose exact worth will not be known for some time.
Nike, which saw its signature business related to the Oklahoma City Thunder forward grow to roughly $175 million at retail this past season, will now have the right to match, which is a condition of Durant's current contract with the brand. Durant can still choose Nike if they don't match, but can't legally choose Under Armour if they do.
Nike's last offer, sources said, would have given Durant a base and a minimum royalty guarantee that would equal no less than $20 million a year.
If Under Armour wins the services of Durant, it would be the largest sponsorship deal the company has ever committed to. The average of $26.5 million to $28.5 million means that Under Armour would be devoting nearly 10 percent of its current annual marketing budget on him. Although Under Armour has given investors guidance that it might hit $3 billion in revenues this year, only about one percent of that is from basketball shoes.
Because Under Armour has such a small basketball business, the company has to guarantee Durant his money up front, instead of the typical shoe deals that offers a minimum guarantee plus up to five percent royalty on the wholesale revenues. Michael Jordan, for example, made more than $100 million last year from Nike largely from royalties on sales of his Jordan brand.
Durant's potential move to Under Armour, despite the lure of more guaranteed money, is surprising if only for the fact that he was one of the most loyal Nike athletes.
In 2007, before he played in his first NBA game, he wanted to sign with Nike badly enough that the $60 million contract he signed with the Swoosh was more than $20 million less than what Adidas had offered.
But sources say his move to Jay Z's Roc Nation last summer started to turn the tables. His new agents were interested in a stronger negotiation, which would include both Under Armour and Adidas, which dropped out last week.
Durant's shoe deal free agency to Under Armour turned out to be a bigger deal because of the interest expressed by the company's founder and CEO, Kevin Plank. Sources say Plank felt Durant could accomplish two major goals including growing its small shoe business and improving its international presence that has been lagging behind its North American sales growth.
Making things more appealing was the fact that Under Armour is a Baltimore-based company.
Durant is a local kid having grown up in Seat Pleasant, Maryland, 36 miles southwest of Under Armour's headquarters, and the company has a record of spending marketing dollars in the community.
The company sponsors the Baltimore Marathon, put its name on the Baltimore Ravens' practice facility and training center, backed native and Olympic great Michael Phelps and recently added nearby Navy and VMI to its stable of schools, which includes Plank's alma mater, Maryland, for which it makes shoes and uniforms.
As LeBron James returned to his native Ohio to play with the Cleveland Cavaliers, there's talk of Durant perhaps returning to his native Maryland to play for the Washington Wizards when his contract with the Thunder expires after the 2015-16 season.
Should Nike pass and Under Armour win the battle for Durant, one has to wonder how much of a role Under Armour will play in Durant's decision where to play next. After all, in money alone, Durant would be more an employee of Under Armour than he is of the Thunder.
Durant is due $41.2 million over his next two seasons with the team, while his Under Armour deal will pay him at least $10 million more over that period.
On Aug. 13, Durant went to Baltimore and Under Armour's headquarters and was said to be blown away by their pitch. Scheduled to stay only a couple hours, he stayed the day and worked out in their shoes.
The pitch, at the time, didn't include talk of specific numbers, sources said, but impressed Durant with attention to detail about his life, the hometown flair and the returns on the investment of its stock, which makes up part of his compensation.
During the presentation, Under Armour executives showed the $4.5 million worth of stock it gave to NFL owners in 2006 as part of its deal with the league and what it was worth today -- north of $100 million.
Under Armour shares are up 96 percent over the last year compared to Nike which is up only 21.5 percent. Among public athletic shoe brands, no company has performed better than UA over that time period. The Durant deal is so big that if it is consummated, one has to wonder if it will have material impact -- for better or for worse -- on shares of the company's stock.
As Durant flourished, so too did his line of "KD" Nike products, which grew from shoes to socks to backpacks. With James and Kobe Bryant, Durant became a force behind the company's and the category's resurgence in basketball.
But these negotiations have caused some tension between Durant's interests and Nike. On Thursday, Roc Nation is putting on a basketball game at Barclays Center in Brooklyn with the charities of its clients New York Yankees pitcher CC Sabathia and Seattle Mariners second baseman Robinson Cano. Even though both are sponsored by Nike and Durant is an honorary captain, sources say Under Armour is providing product for the game.
If Nike passes, and Durant chooses to sign with UA, Durant would be the second high profile endorser Nike has lost in the last two years. Last year, the company outbid Nike for the endorsement services of Golden State Warriors guard Stephen Curry, who will get his own signature shoe with the company for the first time in February.
If his relationship with Nike ends, it will be interesting to see how they liquidate Durant's latest shoe, the KD7. Colorways are planned and have been sold through to retailers through the end of the year and sources say Nike has the contractual right to liquidate its current line.
How it has even gotten to this point for Nike is a mystery. The company usually likes locking up its top talent and teams before those players can even go elsewhere. While it's deal with Manchester United also came down to a situation where it declined the match adidas' bid, it's more the norm that Nike renews before the competition can get a crack. Six years into LeBron James' seven-year, $87 million contract, Nike and James agreed to terms on the next deal.
But once Durant hired Roc Nation Sports last year, negotiations became more intricate. The upstart agency was under pressure to deliver the biggest money deals to Durant and while he re-signed with partners like Sprint and BBVA Compass, he was willing to ditch Gatorade last summer. Durant recently signed with Talking Rain, which is behind the Sparkling Ice brand, a deal that will not only give him more money but that he says is more authentic to what he likes to drink.
Moving to Under Armour likely would mean Durant would have to adopt a new logo. Nike had used the "KD" logo as early as 2008, but was only actually granted the trademark for it in January. Durant himself doesn't own any trademarks, though, in February, he did file an application with the U.S. Patent & Trademark Office to trademark "Sniper Jones," his rap name, on everything from fragrances to shoes and apparel.
Under Armour also has the largest shoe and apparel deal in college sports as it enters a 10-year deal with Notre Dame worth $90 million. The company debuted its new jerseys for the Fighting Irish on Tuesday.