Europe’s largest sportswear manufacturer Adidas is looking for strategic options like a potential sale of Reebok, 15 years after it bought the US-based brand to take on its rival Nike, American footwear company.
The final decision regarding the sale would be made next year in March when the German manufacturers officially reveal its new strategy, Adidas said.
Adidas purchased the Boston-based Reebok for $3.8 billion in 2005, which was then the world’s third-largest sporting goods brand, but in recent years the American company was facing a lack of progress which led to repeated calls from investors for a disposal of the brand.
Acquiring Reebok would be an attractive target for a private equity firm or another smaller sports retailer that could use it to get into the US marketplace like Adidas did 15 years back, said Michael Faherty, a portfolio manager at Adidas and Nike investor Seilern Investment Management.
Adidas in a statement cleared that the strategic alternatives it is considering include both a potential sale of Reebok as well as the brand remaining a part of the company.
“There is still a material chance that nothing will come out of it,” Colin Wong, a portfolio manager at Nike shareholder Mawer Investment Management, said.
Some of the potential options for Adidas are spinning Reebok off as a stand-alone public company or selling the brand to private equity, another major sports retailer or a multi-brand player like VF Corp, which earlier expressed its interest in the deal.
In the third quarter of 2020, Reebok’s net sales came down 7 percent to $489.40 million, after falling as much as 44 percent in the preceding quarter. In 2019, Adidas wrote down Reebok’s book value by nearly half, compared with 2018, to $1.02 billion.
The recent collaborations with celebrities like Cardi B and a focus on women’s apparel have placed the brand in a better place. “Reebok won’t be much of a burden for whoever takes it on if there is a sale,” said Jessica Ramirez, retail analyst at Jane Hali & Associates.
Earlier in November, Adidas had forecasted a fall in its overall sales for the last three months of the year as the reimposition of lockdowns in Europe would likely offset a return to growth in China and strong demand for running gear and products designed by singer Beyonce.
The German multinational corporation, Adidas designs and manufactures shoes, clothing and accessories. The company is the largest sportswear manufacturer in Europe, and the second largest in the world.
The American footwear and clothing company, Reebok International Limited was acquired by Adidas in 2005. Reebok produces and distributes fitness, running and CrossFit sportswear including clothing and footwear.