An investment group is preparing a $2.2 billion offer to acquire Reebok from Adidas AG, according to a report in Monday’s Wall Street Journal that was later collaborate by Bloomberg News. Both news organizations attributed the report to anonymous sources.
The investment group is prepared to invest money to accelerate brand marketing and store openings and believes Reebok would perform better as a private, stand-alone company, the newspaper reported Oct. 20. in an article citing anonymous sources. The investors’s plan calls for leaving Reebok’s current senior leadership team and strategy in place at its headquarters in Canton, MA near Boston.
The bid, which comes from a group that includes Jynwel Capital of Hong Kong and funds affiliated with the government of Abu Dhabi, comes as Adidas stock plumbs new lows. Adidas stock price closed at €56.61 Monday, up slightly on the news, but still near its 52-week low and down nearly 40 percent from the beginning of the year. The stock has been under pressure amid concerns it is losing its self-proclaimed goal of winning global market share from Nike. Share price has tumbled 23 percent since mid-July, when Adidas announced it was abandoning its 2015 financial targets because of poor results at Adidas-Taylor Golf and in Russia.
While neither Adidas AG or the investment firms would comment on the report Monday, some observers say Adidas would be well advised to consider such an offer. Since being acquired by Adidas in August, 2005 for $3.8 billion, Reebok’s share of the U.S. market has plummeted from 8 percent to 2 percent, according to Matt Powell of Princeton Retail Analysts.
While Reebok has posted five consecutive quarters of growth, the growth has come from outside North America and wholesale channels. In the second quarter, for instance, Reebok sales grew 9.5 percent on a currency-neutral basis, driven by sustained sales momentum in the fitness training, walking and studio categories as well as at Classics. Retail sales also continued their double-digit growth in currency neutral terms as double digit e-commerce sales growth boosted comp store sales, which grew 2 percent in the first half.
Reebok’s growth strategy has focused in recent years on positioning itself as the leading cross training brand and market rolling out its FitHub stores in Boston, New York City, Washington DC and California as well as Paris, Korea, Russia, Dubai and London.
Nevertheless, Reebok’s overall sales declined in North America even as they increased 26 percent in Latin America and 20 percent in parts of Asia. Wholesale revenues, meanwhile, were only slightly above the prior-year level for the first six months of the year
“Reebok has become a huge distraction for Adidas, taking time and resources,” said Powell. “I think Adidas is better without Reebok.”