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Kill Your Idol Buy Your Sponsor

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Back when we used to work for LBO guys, we sometimes found ourselves on road trips playing “who’s going private next” with our co-workers. It’s an easy game to play—you just estimate how much debt a company can handle, and then try to minimize your equity contribution. Whoever captures the biggest EBITDA with the smallest equity contribution wins.
Seeking Alpha plays the game today. Our favorite part is the proposal that Tiger Woods and Michelle Wie take Nike private.

It's amazing how much money you can make selling $200 sneakers made by Vietnamese kids earning $0.50 an hour. Now if they could just cut Tiger Wood's and Michelle Wie's endorsements down to the same size, the company's profits would truly be stunning. Given the size of their endorsement contracts, Tiger Woods and Michelle Wie might actually want to make a play for Nike themselves.
Nike generated $1.5 billion in cash from operations in 2005 and is on track to generate about the same amount this year. The company's equity market cap is $20 billion, with a net cash balance (total debt minus total cash) of about $1.3 billion. So Woods and Wie would only need to find about $18.7 billion to buy the company - a sum they could probably pull together in a long weekend playing golf.
At an 8% interest rate, the interest payments on $18.7 billion would equal about $1.5 billion, which is right in line with what the company has consistently generated over the last 3 years. Since Nike only needs about $200 million in maintenance capital expenditures, it's a perfect buy out candidate. With some cost cuts and less endorsement expenses, the company could easily generate enough cash to continue operating smoothly.
In fact, Woods and Wie could take the company private today if Phil Knight wouldn't mind working for one of his current employees.

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[Seeking Alpha]