Adidas is selling Reebok to ABG for $2.5 billion
What's the story
Sportswear major Adidas has announced that it will be selling Reebok to Authentic Brands Group (ABG) that has been snapping up labels ahead of a planned initial public offering (IPO). ABG expressed interest in preserving Reebok's ethos and retaining the headquarters in Boston, and operations in North and Latin America, Asia-Pacific, Europe, and Russia. Here are more details on this deal.
The purchase
Adidas planned to penetrate American market with Reebok
Back in 2006, Adidas acquired Reebok for $3.8 billion in an attempt to break rival brand Nike's stronghold in the United States. However, it was able to penetrate the market with its own brand recently, thanks to partnerships with pop icons Kanye West, Beyonce, and Pharrell Williams, among others. Reebok's sluggish performance prompted Adidas investors to suggest the brand be sold.
The sale
Reebok's buyer already owns Brooks Brothers, Barneys New York, Forever21
Adidas is now selling Reebok to ABG for $2.5 billion, less than what it had purchased the brand for. We just hope the loss in this sale is offset by the market share Adidas earned by dethroning Nike. Over the last 11 years, ABG has accrued over 30 labels retailing in around 6,000 stores, including apparel brands Aéropostale, JC Penney, and Forever21.
No impact
Recently revealed five-year plan remains unaffected by this deal: Adidas
Adidas said that the Reebok sale had no impact on its financial outlook for the current year or the targets detailed in its five-year strategic plan revealed in March. Reuters reported that the Reebok sale will be paid for mostly in cash around the first quarter of 2022. A majority of the cash proceeds will be shared among the shareholders, the brand added.
Number crunching
Adidas successfully turned Reebok into a profitable business
Last week Adidas claimed that Reebok made a net gain of €68 million compared to a net loss of €69 million in the first half of 2020, thanks to Adidas CEO Kasper Rorsted's turnaround plan for the brand. Notably, Adidas has already sold off Rockport, CCM Hockey, and Greg Norman brands (part of the original Reebok purchase) for €400 million.