Adidas reached a definitive agreement to sell Reebok to Authentic Brands Group (ABG) for a total consideration of up to €2.1 billion, or about $2.5 billion.
The majority of the purchase price will be paid in cash at the closing of the transaction and the remainder comprised of deferred and contingent consideration. The closing of the transaction is subject to customary closing conditions and is expected to occur in the first quarter of 2022. Adidas intends to share the majority of the cash proceeds to be received upon closing with its shareholders.
With the sale, Reebok will become part of a retail conglomerate that has snapped up many bankrupt brands such as Brooks Brothers, Aeropostale and Forever 21. Authentic Brands is preparing for an initial public offering that could come as soon as this summer.
“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,” said Kasper Rorsted, CEO of Adidas AG.
Jamie Salter, founder, chairman and CEO of ABG, commented, “It’s an honor to be entrusted with carrying Reebok’s legacy forward. This is an important milestone for ABG, and we are committed to preserving Reebok’s integrity, innovation, and values – including its presence in bricks and mortar. We look forward to working closely with the Reebok team to build on the brand’s success.”
Adidas bought Reebok in 2006 for $3.8 billion. At the time, the acquisition included the Rockport, CCM Hockey and Greg Norman brands, which Adidas later divested for a total consideration of €0.4 billion, according to Adidas’ statement.
Adidas noted that in 2016, Reebok initiated a turnaround plan called “Muscle Up” through which the brand was able to significantly improve its growth and profitability prospects. In March of this year, Adidas presented its 2025 “Own the Game” Strategy designed to significantly increase sales and profitability and gain market share by 2025. During the strategy formulation process, Adidas assessed strategic alternatives for Reebok with a focus on ensuring both Adidas and Reebok would be well-positioned for sustainable growth. Following this evaluation, Adidas decided to focus its efforts on further strengthening the leading position of the Adidas brand in the global sporting goods market and announced the initiation of a formal process to divest Reebok in February 2021.
Adidas said the sale of Reebok has no impact on Adidas’ financial outlook for the current year or the company’s 2025 financial ambition that was announced as part of its Own the Game strategy in March of 2021.
In a separate statement from ABG, Salter said, “We’ve had our sights set on Reebok for many years, and we’re excited to finally bring this iconic brand into the fold. Reebok not only holds a special place in the minds and hearts of consumers around the world, but the brand also has expansive global distribution. Adidas has been an incredible steward of the Reebok brand, and we look forward to working with the Reebok team to continue their great work and further its position as one of the world’s leading consumer brands.”
ABG noted that Reebok is known for creating the first spiked running shoe, the first athletic shoe designed for women, and its The Pump technology.
ABG said, “Reebok has a rich and storied fitness heritage and continues to introduce innovations that propel the industry forward. Today, Reebok sits at the intersection of active and lifestyle, offering high quality and modern styles that are adaptable for every sport. Recent trends have drawn more consumers to a market that the brand has excelled in for decades. Reebok currently operates in 80 countries, with approximately 70 percent of its business hailing from outside of the U.S. and Canada. Reebok continues to be a premier destination for athletic and casual offerings, and it is ABG’s goal to maintain the brand’s global footprint across retail, wholesale and e-commerce channels.”
ABG’s statement added, “Reebok has deep ties to professional sports and pop culture and will continue striving to deliver on its mission of providing each and every athlete, from professionals to enthusiasts, with the opportunity, products and inspiration to reach their full potential.
Shaquille O’Neal said, “As a longtime partner of Reebok and an owner of ABG, it’s a dream come true to welcome this legendary brand to the family.”
Last year, O’Neal told CNBC that he was intent on owning Reebok, arguing that Adidas had “diluted” it so much “to where it’s almost gone.”
In its statement, ABG said that with Reebok, it plans to “use its core playbook, connecting strong brands with best-in-class licensees and a network of partners that seek to optimize value in the marketplace.”
The brand’s world headquarters will remain in Boston and ABG will work closely with Adidas, Reebok’s President Matt O’Toole and the Reebok team to transition the brand to ABG’s platform.
Reebok’s operations will continue in the U.S. and Canada, Latin America, Asia Pacific, Europe, and Russia.
In July, reports arrived that ABG has dropped out of Adidas’ auction of Reebok due to Adidas’ demands that Reebok operates as a standalone business. Adidas was also reportedly seeking fees for several years during the transition period and wanted the buyer to avoid layoffs of Reebok employees. ABG, according to reports at the time, only wanted the rights to the Reebok name and to integrate its U.S. business with Sparc Group, its joint venture with Simon Property that operates Aeropostale, Brooks Brothers, Forever 21, Lucky Brand, and Nautica. Wolverine Worldwide was expected to help with sourcing.
ABG, which just filed for an initial public offering and owns about 30 fashion, sports and entertainment brands, reportedly offered about $1 billion for Reebok in the auction’s first round that had been the highest bid for the brand, according to a report in the The New York Post.
ABG’s portfolio of brands include Marilyn Monroe, Elvis Presley, Muhammad Ali, Shaquille O’Neal, Sports Illustrated, Dr. J, Greg Norman, Neil Lane, Thalia, Nautica, Aéropostale, Eddie Bauer, Forever 21, Juicy Couture, Vince Camuto, Herve Leger, Judith Leiber, Barneys New York, Brooks Brothers, Frye, Lucky Brand, Nine West, Jones New York, Frederick’s of Hollywood, Hickey Freeman, Hart Schaffner Marx, Adrienne Vittadini, Bandolino, Spyder, Tretorn, Tapout, Prince, Volcom, Airwalk, Vision Street Wear, Thomasville, Drexel, and Henredon. It recently reached an agreement to acquire Izod.
On February 16, Adidas formally announced plans to divest its underperforming Reebok brand after announcing last December it had begun a review whether to sell the brand. Other cited potential acquirers involved in the first round of the bidding process are buyout firms, including Advent International, Cerberus Capital Management, CVC Capital Partners, and Sycamore Partners
The transaction, which is expected to close in the first quarter of 2022, is subject to customary closing conditions, including regulatory approval.
J.P. Morgan acted as exclusive financial advisor to Adidas AG and Hengeler Mueller served as legal counsel.
BofA Securities and Goldman Sachs & Co. LLC served as financial, strategic and M&A advisors, while also providing committed financing, and KPMG International Limited served as accounting and due diligence advisor for ABG. Latham & Watkins, LLP acted as legal counsel for ABG. Private equity partners BlackRock LTPC, General Atlantic and Leonard Green & Partners, L.P. also played an instrumental role in this partnership.
Photo courtesy Reebok