15 years after purchasing Reebok, Adidas has now decided to sell the footwear and clothing company. Adidas said that it has struck a deal for USD 2.5 billion or 2.1 billion euros. The deal to sell the struggling sportswear brand has been finalized with US-based celebrity and clothing licensing group Authentic Brands. The German sportswear maker is selling the company in less than its price for acquiring it in 2005. It had purchased Reebok for USD 3.8 billion. Back then, Reebok was riding high and had some of the biggest deals. Adidas acquired it intending to take on rival Nike. But the plans to give Nike tough competition in its home market but the lackluster sales failed to make any impact. The total proceeds from the deal would be around USD 381 less than the original price. According to the company, this is because of the stranded costs around the divestment. As a result of the acquisition, around 4,300 employees will now join Authentic Brands. Out of total employees, three-quarters of them are retail staff. The deal is expected to be closed by early next year.
According to Neil Saunders, managing director of GlobalData, Adidas did manage to bring Reebok to profitability but not the way it wanted. “Adidas wanted to give some tough fight to Nike. But it couldn’t manage to restore the brand value of Reebok that was required to steal a share of the market. Despite all the efforts, Reebok failed to capture the hearts and minds of consumers.” Experts feel that Reebok neither managed to become a go-to brand for sporting professionals nor it could tab customers looking for athleisure fashion and style. Adidas has been planning to offload Reebok for and the brand was earmarked for sale last year. The decision was taken after a series of restructuring plans and strategic rejigs. Several private equity firms had shown interest in the deal. Some of the prominent names were Permira and Triton. The selling was delayed because Adidas was keen on selling some smaller brands it had acquired with Reebok. The company cashed in USD 469 million while offloading these brands. “This is a very big acquisition for the group. It will further cement our position as a major player in the retail industry of the United States,” Saunders had said.
Commenting on the development, Adidas chief executive Kasper Rorsted said that the change in ownership would help Reebok to gain a position that would help it in long-term success. Authentic Brands had paid USD 870 million two years ago for a controlling stake. It is part-owned by USD asset manager BlackRock. The company owns a portfolio of fashion brands like Eddie Bauer and Forever 21 along with brand rights to Muhammad Ali and Marilyn Monroe. Authentic Brands chief executive officer and founder Jamie Salter said that the transaction is an ‘important milestone’ for his firm. It is pertinent to mention that Reebok had generated around USD 2.05 billion or €1.74 billion in sales just a year before the coronavirus pandemic. This was a considerable amount as the revenue was around 8 percent of the total revenue generated by the Adidas group. This year, the company reported sales of USD 967 million or €823 million in the first half. This resulted in an operating profit of USD 184 million or €157 million. As per the company, this was up from an operating loss of USD 682 million or €58 million in the same period in 2020. Adidas would get a major of USD 2.5 billion or 2.1 billion euros in cash as part of the deal.