Adidas AG plans to divest its underperforming Reebok brand as the German sportswear maker moves forward after trying to revive performance for more than a decade. Adidas is starting a formal process to exit the business and will present more details. about its new strategy on March 10, the company said Tuesday. The clothing maker said in December that it was weighing options for Reebok.
Adidas is throwing in the towel 15 years after acquiring the brand for $3.8 billion. While the pandemic could mute the selling outlook a bit, rising stock markets are driving asset prices higher. Reebok can get between 1 billion and 1.5 billion euros ($1.2 billion to $1.8 billion), Cowen analyst John Kernan said in December. He estimates that the sale would be neutral for the profits of the German company.
RELATED ARTICLEAdidas plans to sell Reebok 15 years after buying it for around $3.8 billion
Reebok is likely to attract interest from rival sporting goods companies, especially in Asia, as well as suitors from private equity, according to people familiar with the matter, who asked not to be identified because the discussions are private. Several special purpose acquisition companies, or SPACs, have also shown interest, one of them said.
Since joining Adidas in 2016, CEO Kasper Rorsted has made it a priority to fix Reebok's sluggish performance. He closed underperforming Reebok stores and allowed some licensing deals to expire, driving down sales at the long-unloved sports label and further cutting spending. Reebok returned to profitability in 2018 and achieved 2% sales growth in 2019.
Better SeparatedStill, Rorsted never managed to return the once-world's best brand to anywhere near its former glory. After once stating that overseeing Adidas and Reebok is like being a parent who loves your children equally, Rorsted acknowledged in Tuesday's statement that the companies will be "significantly better" at achieving growth targets on their own.
The decision will allow Adidas to focus on gaining ground on rival Nike Inc. and building shareholder value, Bloomberg Intelligence analyst Poonam Goyal said in a note. Reebok represents approximately 7.5% of group sales.
Adidas shares fell 1.2% at 4:10 pm in Frankfurt.
In October, Bloomberg reported that Adidas was exploring a sale and may begin a strategic review, citing a person familiar with the matter. German publication Manager Magazin reported at the time that interested parties include VF Corp., which owns the Timberland and North Face brands, as well as China's Anta International Group Holdings.
Reebok became an industry giant seemingly overnight in the 1980s, fueled by the aerobics boom and soon surpassed even Nike for several years in terms of US sneaker sales . That momentum quickly faded, however, and Adidas has never succeeded in reviving the brand.
The opportunity to tap into Reebok's extensive archive of classic shoe and apparel styles, from the clean white Union Jack sneakers to the black-and-white basketball shoes worn by Shaquille O'Neal, could be a factor. motivator for potential. buyers.
