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Adidas overtakes Reebok with $2.5bn sales to ABG

Adidas is selling Reebok to Authentic Brands Group (ABG) for up to 2.1 billion euros ($2.5 billion), allowing the German athletic goods manufacturer to focus on its core brand following a failed transaction.

Adidas

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Adidas purchased Reebok for $3.8 billion in 2006 to better compete with arch-rival Nike, but the brand’s slow performance caused investors to demand that it be sold.

Meanwhile, Adidas’ own brand has managed to eat into Nike’s supremacy in the United States, aided by collaborations with superstars such as Kanye West, Beyonce, and Pharrell Williams. Reebok stated in a statement that it will maintain its headquarters in Boston and continue operations in North and Latin America, Asia-Pacific, Europe, and Russia, and that it will work closely with Adidas during the transition.

ABG has amassed more than 30 labels that are offered in over 6,000 retailers over the course of 11 years. Aéropostale and Forever21 are two of the company’s brands, as is Sports Illustrated magazine.

“We’ve had our eye on Reebok for a long time, and we’re thrilled to finally welcome this famous brand into the fold,” said Jamie Salter, ABG’s founder, chairman, and CEO.

“We are dedicated to retaining Reebok’s integrity, innovation, and principles, including our physical presence,” he said.

Following a year of significant profits growth, ABG filed for an IPO in the United States last month.

What’s the Fitness Plan?

After Kasper Rorsted took over as CEO of Adidas in 2016, he started a rescue strategy that helped Reebok return to profitability, but its performance continued to lag behind that of the primary Adidas brand, and the COVID-19 epidemic hit it hard.

Reebok’s first-half sales increased to 823 million euros from 600 million euros a year earlier, and the brand earned a net gain of 68 million euros, compared to a net loss of 69 million euros in the first half of 2020, according to Adidas. Analysts think Reebok’s recent collaborations with superstars like Cardi B, as well as a renewed focus on women’s products, have put the company in a stronger position.

Adidas has already sold the Rockport, CCM Hockey, and Greg Norman brands, which were acquired with Reebok, for 400 million euros. The sale had no influence on the German company’s financial projections for the current year or the objectives set forth in its five-year strategy unveiled in March, according to a statement.

The majority of the 2.1 billion euros will be paid in cash upon the transaction’s closure, which is scheduled in the first quarter of 2022, with the remainder consisting of delayed and contingent compensation.

It stated that the majority of the cash profits will be distributed to its stockholders.

(1 dollar = 0.8526 euros)

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