German sporting goods maker Adidas has launched the sale of its Reebok brand in an auction.
But the move faces risks of being affected by a political row over possible forced labor in China’s western Xinjiang region. Some researchers and foreign lawmakers say the Xinjiang authorities use forceful labor programs to meet seasonal cotton picking needs, which China strongly denies.
Prospects for Reebok
Adidas bought the US fitness label for $3.8 billion in 2006 to help compete with arch-rival Nike, but its mediocre performance led to repeated calls from investors to dispose of the brand, which is now expected to fetch only around $1.2 billion.
Adidas has asked for first round bids to be submitted next week and is expecting China’s Anta Sports and Li Ning to hand in offers, with Korea’s Fila and US-based Wolverine also seen as possible bidders, according to sources.
Financial investors including TPG, Sycamore, Cerberus and Apollo are also likely to join the consortium, attracted by the turnaround potential of Reebok which is expected to make a loss in 2021 and post only “slightly positive” core earnings next year, they added. Adidas and the prospective bidders declined to comment on the matter.
Chinese consumer boycott
For Chinese buyers the appeal could be affected by consumer boycotts of Western fashion brands in the country over comments they did not use cotton sourced from Xinjiang.
Among others, the Shanghai Half Marathon in April scrapped plans to provide runners with Adidas-branded T-shirts. Recently, Germany’s luxury fashion house Hugo Boss said it expects sales in mainland China to keep growing fast despite the boycott calls, while Puma said last week that it expects a hit to its sales.
Analysts predict Reebok’s recent collaborations with celebrities like Cardi B and a refreshed focus on women’s apparel have put the brand in a better place.