The German sporting goods company Adidas’ strategy of completely focusing on its core brand will see it selling off its Reebok brand to Authentic Brands Group for up to 2.1 billion euros, ending an acquisition that was not successful.
Reebok was acquired by Adidas in 2006 for $3.8 billion as part of its efforts to rival with Nike. However the poor performance of the brand prompted repeated demand from investors to sell of Reebok – a brand that is focused on the United States and Canada.
Since the acquisition, Nike’s dominance in the United States was chipped away at by the core brands of Adidas as it partnered with celebrities such as Kanye West, Beyonce and Pharrell Williams.
The US brand management firm said in a statement that after the acquisition, the headquarters of Reebok will remain in Boston and will continue with its operations in North and Latin America, Asia-Pacific, Europe and Russia. The statement added that the firm will work closely with Adidas during the transition.
More than 30 labels sold in some 6,000 stores have been amassed by ABG over 11 years. Apparel chains Aéropostale and Forever21, as well as and Sports Illustrated magazine are among the brands owned by the company.
“We’ve had our sights set on Reebok for many years, and we’re excited to finally bring this iconic brand into the fold,” Jamie Salter, founder, chairman and CEO of ABG, said.
“We are committed to preserving Reebok’s integrity, innovation, and values – including its presence in bricks and mortar,” he added.
After a year of strong earnings growth, ABG also filed for an initial public offering in the US last month.
A turnaround plan was implemented by Kasper Rorsted in 2016 after he took over as Adidas CEO. That strategy allowed Reebok to make profits once again. However, the performance of the brand was not as good as that of the core Adidas brand. The Covid-19 pandemic also hit Reebok hard.
The sales in the first half of the current year for Reebok jumped to 823 million euros compared to 600 million for the same period a year ago, Adidas reported last week. A net profit of 68 million euros was also reported for Reebok in the first half of 20-21 compared to a net loss of 69 million in the same period a year ago.
According to analysts, the performance of Reebok was linked to its focus on women’s apparel and its recent collaborations with celebrities like Cardi B.
The Rockport, CCM Hockey and Greg Norman brands have already been sold by Adidas for a total of 400 million euros. These were a part of the original acquisition of the Reebok brand.
There will be no impact on the financial outlook of Adidas for the current year or on its targets that were announced for a five-year strategy in March, said the German company.
The majority of the 2.1 billion euros from the deal would be paid in cash at the closing of the transaction, Adidas said. The deal is expected to close in the first quarter of 2022. The remainder of the money will comprise of a deferred and contingent consideration.
(Adapted from Bsiness-Standard.com)