Adidas plans to divest its underperforming Reebok brand as the German sportswear maker moves on after trying to revive its performance for more than a decade.
Adidas is starting a formal process to exit the business, and it will present more details on its new strategy on March 10th, the company said Tuesday. The apparel maker said in December it was weighing options for Reebok.
Adidas is throwing in the towel 15 years after acquiring the brand for €3.1 billion. While the pandemic could mute prospects for the sale somewhat, soaring stock markets are driving asset prices higher. Reebok may fetch €1 billion to €1.5 billion, Cowen analyst John Kernan said in December. He estimates the sale would be neutral for the German company’s earnings.
Reebok is likely to attract interest from rival sporting goods companies, especially in Asia, as well as private equity suitors, according to people familiar with the matter, who asked not to be identified because discussions are private.
Several special purpose acquisition companies, or SPACs, have also shown interest, one of them said.
Since his arrival at Adidas in 2016, chief executive Kasper Rorsted has prioritised fixing Reebok’s long-sluggish performance. He closed underperforming Reebok stores and allowed some licensing deals to expire, cutting sales at the long unloved sporting label while slashing expenses even more.
Reebok returned to profitability in 2018, and eked out 2 per cent sales growth in 2019.
However, Rorsted never managed to return the once world-beating brand anywhere close to its former glory. After once claiming that overseeing Adidas and Reebok is like being a parent who loves his 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 making up ground on rival Nike and building shareholder value, Poonam Goyal, an analyst at Bloomberg Intelligence, said in a note. Reebok accounts for about 7.5 per cent of the group’s sales.
Adidas shares slumped 1.2 per cent as of 4:10 pm in Frankfurt.
Reebok became an industry giant seemingly overnight in the 1980s, propelled by the aerobics boom and soon exceeding even Nike for several years in terms of US sneaker sales. That momentum, however, quickly sputtered, and Adidas has never managed to reignite the brand.
The chance to capitalise on Reebok’s deep archive of classic footwear and apparel styles – from the clean white sneakers featuring the Union Jack to the black-and-white bullseye basketball kicks worn by Shaquille O’Neal – could be a motivating factor for potential buyers. – Bloomberg