INSIDE THE DEAL
Adidas strikes $2.5bn deal to sell Reebok
François Locoh-Donou, president and CEO of F5. Credit: F5
German sporting goods giant Adidas selling Reebok for EUR2.1bn (US$2.46bn) to Authentic Brands Group (ABG) was one of the biggest deals struck this year in the apparel and footwear industry.
Adidas bought Reebok in 2006. At the time, the acquisition included the Rockport, CCM Hockey and Greg Norman brands, which Adidas later divested for EUR0.4bn.
In 2016, Reebok initiated a turnaround plan called ‘Muscle Up’ which led to the brand being able to significantly improve its growth and profitability prospects. However, in March Adidas presented its 2025 ‘Own the Game’ strategy, where it assessed strategic alternatives for Reebok. Following the evaluation, Adidas decided to focus its efforts on further strengthening the leading position of its namesake brand, announcing the start of a formal process to divest Reebok. Here’s what GlobalData analysts have to say about the deal.
Adidas elects to cash in Reebok to focus on main brand
When Adidas acquired Reebok back in 2006, it believed it had a vehicle with which to take on the might of Nike, especially in the United States. While Adidas did manage to restore Reebok to profitability it was far less successful in building a brand that was able to steal share and capture the hearts and minds of consumers. Part of the issue was a lack of clarity around what Adidas wanted Reebok to be. As a result, it was neither seen as the go-to brand for sporting professionals nor for those looking for athleisure fashion and style.
After years of difficulty and disappointment, Adidas has elected to cash in Reebok and focus on its main brand. Notably, Adidas is selling Reebok for far less than it paid for it which serves to underline the degree to which brand equity has eroded.
The decision to sell should not solely be chalked up to the pandemic. Indeed, the footwear and sports apparel market has performed extremely well over the past 18 or so months. However, the market is becoming much more competitive with Nike and others doubling down on direct-to-consumer sales, brands like Lululemon eating up large slices of growth, and retailers launching a multitude of sporting own labels. Against such a backdrop, Adidas has decided to raise the white flag and pass Reebok on to Authentic Brands Group.
For the Authentic Brands Group, this is a massive acquisition and one that further cements its position as a major player in American retail. It has had success with turning around brands like Aéropostale and so will be confident that it can do similar with Reebok.
If, under Authentic Brands, Reebok focuses less on competing with Nike and more on developing a credible brand that can be offered via its various stores and other third-party retailers it should be able to build sales. However, the market remains extremely competitive so coming up with a differentiated offer that has a clear customer focus and a strong distribution strategy will be key to its future success.
Main image credit: lucky boy studio / Shutterstock.com
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