(FORTUNE Magazine) – Nike

Athletic powerhouse Nike (NKE, $52) is adding a new member to its team. The company announced in early July that it would acquire Converse in a $305 million deal. The agreement adds a legendary label to the $10.7 billion sportswear behemoth. While known more for its namesake products and campaigns, Nike also owns swooshless brands like Cole Haan and surfwear retailer Hurley International. Last year non-Nike lines generated $911 million for the company. By adding low-priced Converse canvases to the mix, Nike can further diversify its product line.

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Converse

The 95-year-old sneaker maker lost its dominance in the 1980s when Reebok and Nike started to run the court. Converse was forced into bankruptcy in January 2001 and bought three months later by a group of private investors calling themselves Footwear Acquisition. With revenues of just $205 million last year (2% of Nike's total), the house Chuck Taylors built gains a deep-pocketed suitor to help it return to the big time. Nike can use the Converse cachet to extend its reach into the retro market and potentially mass-merchandise chains like Wal-Mart.

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What it means for you

Sneaker purists need not worry: The Converse classics will not be trading in their stars for swooshes. Nike says Converse will be run as a separate entity, leaving the current management team in place. It's a win-win situation for the two companies, according to Lehman Brothers analyst Bob Drbul. With $634 million in cash on its balance sheet, Nike is in solid financial shape and did not overpay. "This is one way to really put some of that cash to work," says Drbul. But investors won't be cheering anytime soon. While analysts applaud the strategy, they aren't boosting their price targets. In the long term, though, Nike should benefit from signing up this all-star. --Julie Schlosser