Maryland football's best corporate friendNovember 20, 2012: 11:04 AM ET
Under Armour says CEO Kevin Plank will not be paying his alma mater's ACC exit fee. But with the University of Maryland moving to the Big Ten, he remains the school's biggest supporter in the business world.
By Daniel Roberts
FORTUNE -- And you thought your mobile plan cancellation fee hurt? Before the University of Maryland can exit the ACC, it will have to come up with $50 million—a hefty parting punishment indeed.
Yesterday, the school's Board of Regents voted "yes" on moving all of its athletic teams—most notably, its football program—from the Atlantic Coast Conference (ACC) to the Big Ten Conference. Maryland was a charter member of the athletic conference. And there is talk of Rutgers, a current Big East team, planning to leave for the Big Ten as well. In terms of win-loss records from the past few years, neither school brings much extra clout to the ACC.
Minutes after the news broke of the Maryland board's decision, ACC Commissioner John Swofford posted a statement on the conference's web site: "Our best wishes are extended to all of the people associated with the University of Maryland. Since our inception, they have been an outstanding member of our conference and we are sorry to see them exit."
One person not sorry to see Maryland exit the ACC, it seems, is Kevin Plank, CEO of Baltimore brand Under Armour (UA) and a Maryland football alum himself. Ever since walking onto the varsity squad as a special teams player in 1992, Plank, who founded his company while still an undergrad there, has been the school's greatest ally in the business world. Now 40 years old (and two-time honoree on our 40 Under 40 list) and established as a successful entrepreneur in the sports and apparel worlds, Plank has kept close ties to his alma mater. He founded and significantly contributes every year to the Cupid's Cup, a startup competition that he also judges. Under Armour, which says it now boasts some $1.8 billion in revenue, also considers Maryland its flagship school and continually redesigns its football uniforms (to both cheers and jeers).
It has been widely reported that Plank has been in support of the Big Ten move from minute one, and furthermore, that he has been the most vocal proponent of the idea, even though it will carry that hefty ACC exit fee.
The $50 million fee, meanwhile, is an almost brand-new development: the conference only just raised it, from $20 million, in September. That new penalty took effect immediately, and is the main reason, sources say, why Maryland even waited as long as it did to vote yes on moving to the Big Ten. (Maryland was also one of the only two schools, along with Florida State University, to vote against the fee hike a few months back.) Maryland has had other financial issues recently, and in July had to eliminate seven different sports teams: men's swimming and diving, tennis, cross-country, and indoor track, and women's swimming and diving, acrobatics and tumbling, and water polo.
Plank announced on November 12 that he will be selling off 1.17 million of his personal Class B shares of Under Armour stock. That amounts to 5.5% of his 21.3 million shares overall, and more importantly, to $59.99 million at Tuesday's open stock price of $51.28. (The stock, a solid performer, has been as high as $60 and as low as $35 in the past year.) This news has resulted in rampant speculation in other media outlets that Plank plans to singlehandedly pay for Maryland's exit fee.
However, an Under Armour spokesperson tells Fortune decisively that Plank "is not contributing to the reported $50 million ACC buyout. The reports out there are completely false." The spokesperson goes on to say that the 8-K form filed last week, which details Plank's plans, was merely part of a diversification plan, begun months in advance, for Plank to shed some shares for tax and estate purposes, as well as "for charitable giving."
Plank made a similar diversification move for 2012, and in fact has sold stock on other occasions this fall. On October 31, for example, he sold 82,800 of his shares at a price of $52.14 (that's $4.3 million) and 7,200 shares at $52.99 (about $382,000), though such behavior isn't unusual of a CEO.
Under Armour's statement is obvious bad news for all of those giddily expecting Plank to play Maryland's fairy godfather (though, in so many ways, he still is that). But more importantly, what this refutation means is that Maryland may indeed, as initially thought, have some trouble scrounging up the 50 million clams. And before it has to pay the fee, anyway, expect to see some court action, as the school attempts to argue that the new fee hike should not yet be in effect.
There is the possibility for wiggle room: the Big Ten, happy to have Maryland, could help the school pay its burden to the ACC. Or Maryland and its ex might yet settle on a lower penalty fee. Either way, both the University and the ACC have some time to dispute the fee, because this week only marks the initiation of a required 10-month's notice period before Maryland officially leaves the conference.