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According to Adidas, the new transaction will not change its financial outlook for this year. It will also not impact its previously announced long-term targets. The main part of the 2.1 billion euros will be paid in cash.
Global sports brand Adidas AG (OTC: ADDYY) has decided to sell its Reebok business that is currently struggling to Authentic Brands Group. The sum of the deal will be around 2.1 billion euros, or $2.5 billion. The companies are expecting to complete the transaction in the first half of 2022.
As a result of the sale, Reebok will join a huge conglomerate that owns more than 50 consumer brands, as well as the likeness rights and/or estates to a number of celebrities. Its portfolio includes apparel chains Aéropostale and Forever21, Zooey, and more. After the deal, Reebok will remain its headquarters in Boston. It will also continue operations in North and Latin America, Asia-Pacific, Europe, and Russia.
Authentic Brands CEO Jamie Salter commented:
“We are committed to preserving Reebok’s integrity, innovation, and values – including its presence in bricks and mortar.”
Reebook’s Lagging Performance
Adidas acquired Reebok back in 2006 for $3.8 billion. Its goal was to help the company compete with Nike (NYSE: NKE). However, within these 15 years since the acquisition, Reebok has been showing results below its potential. Therefore, Adidas decided to sell Reebok, giving another chance to the band as well as providing new opportunities for a new owner.
Adidas CEO Kasper Rorsted stated:
“Reebok has been a valued part of Adidas, and we are grateful for the contributions the brand and the team behind it have made to our company. With this change in ownership, we believe the Reebok brand will be well-positioned for long-term success. As for Adidas, we will continue to focus our efforts on executing our “Own the Game” strategy that will enable us to grow in an attractive industry, gain market share, and create sustainable value for all of our stakeholders.”
Last week, Adidas reported that Reebok’s sales in the first half of 2021 jumped to 823 million euros from 600 million a year ago. Besides, the brand made a net gain of 68 million euros in comparison with a net loss of 69 million in the first half of 2020.
Adidas has already sold the Rockport, CCM Hockey, and Greg Norman brands for 400 million euros. All of them were part of the original Reebok purchase. According to Adidas, the new transaction will not change its financial outlook for this year. It will also not impact its previously announced long-term targets. The main part of the 2.1 billion euros will be paid in cash. Adidas has promised to share the majority of the cash proceeds with its shareholders.
Following the sale’s announcement, Adidas stock added 2.09% to close at $184.53 yesterday. Its market cap totaled $70.32 billion.