Adidas will be selling its sneaker brand Reebok to Authentic Brands Group for $2.5 billion (€ 2.1 billion), $1.3 billion less than what the German multinational initially paid for it in 2006.
Authentic Brands Group is a retail conglomerate that owns Brooks Brothers, Aeropostale, and Forever 21.
The transaction is expected to close by the first quarter of 2022, according to Adidas. The company said it intends to share the cash proceeds with its shareholders. The majority of the price will be paid in cash at closing, with the rest coming as deferred and contingent consideration, the companies said Thursday in a statement.
Reebok has been struggling to get sales up for the last few years despite recent attempts to reposition itself and partnering with UFC and Crossfit. Some stores were closed and some other cost-cutting exercises were undertaken to bring the brand on track.
Adidas revealed plans for a buyer in February last year. In March 2020, Adidas said it had developed a new five-year strategy that involves “further strengthening the leading position of the Adidas brand in the global sporting goods market.”
Adidas bought Boston-based Reebok in 2006 for $3.8 billion in an attempt to compete with Nike.
“With this change in ownership, we believe the Reebok brand will be well-positioned for long-term success,” Kasper Rorsted, CEO of Adidas AG, said in a statement.
ABG, as the conglomerate is called, will soon be going public, according to regulatory filings. Authentic Brands already has more than 30 names under its umbrella. Reebok is Authentic Brands’ biggest acquisition since its inception. Chief Executive Officer Jamie Salter said in an interview on Thursday that it’s also the largest transaction in his career. “It’s one of the best athletic, footwear, apparel brands in the world,” Salter said. The brand’s global distribution is at par with that of Nike Inc. and its Jordan brand, he said.
Adidas shares rose as much as 2.5% in Frankfurt trading after the announcement. The deal won’t change Adidas’ financial outlook for this year or its previously announced long-term targets, the company said.
Reebok became a household success riding on the giant aerobics boom in the 1980s. It even overtook Nike for several years in sneaker sales. But the brand was not able to keep up the momentums and Adidas’ acquisition also could not revive its fortunes. The brand has had a good run with some great sports endorsements from celebrity athletes. It has some iconic shoe launches such as the clean white sneakers featuring the Union Jack to the black-and-white bullseye basketball kicks worn by Shaquille O’Neal.
