soccer-cleats

adidas sells Reebok in a $2.5 billion almost-all cash deal to Authentic Brands after 15 years of ownership. Here’s what we think.

In 2006, The Three Stripes acquired Reebok for $3.8 billion, joining forces against their arch-rival Nike. This union seemed exciting at the time, as adidas has a strong position in global markets and looked to achieve the same success with their North American-focused brand, Reebok. However, 15 years later, due to underperformance, investors are pushing adidas to sell Reebok. As reports suggest, it’s being sold to Authentic Brands over a $2.5 billion deal, which will be paid in a majority of cash along with the rest coming as deferred and contingent consideration.

The buyer, Authentic Brands, filed an IPO in the U.S. in July and already have more than 30 bankrupt luxury names like Barneys New York, Brooks Brothers, Forever 21, and Van Heusen. In fact, Reebok has been on the sales block for a while now after numerous attempts by adidas to revive them. Interestingly, the $2.5 billion Reebok deal is the most expensive yet for Authentic Brands and seem highly ambitious about it. As adidas sells Reebok, Jamie Salter, Chairman and CEO of Authentic Brands, stated, “It’s one of the best athletic, footwear, apparel brands in the world.” The brand’s global distribution is on par with that of Nike Inc. and its Jordan brand.

Our take

I think adidas and Reebok’s formula for success differ significantly. While The Three Stripes collaborated with celebrities like

Kanye West, Beyonce and Pharrell Williams

, they actually managed to take a slice out of the Nike-dominated global market, whereas Reebok focused on reviving their heritage silhouettes with a contemporary twist. In 2016, CEO Kasper Rorsted spearheaded their mission to be profitable again, and they finally were in 2019 as they also introduced newer sneaker and athleisure profiles like the CrossFit Nano and the FloatRide Run.

As adidas sells Reebok, it simply seems like adidas wants to focus on their core brand and better what’s already brilliantly working for them. Essentially, putting all their eggs in one basket. More so, they wanted to hold both brands with an equal stature, which simply wouldn’t be possible simply because adidas is a market leader in itself. On the other hand, it’s also interesting to see Authentic Brands have Reebok on board with them, considering they don’t quite have any market experience in the speaker-sphere at all, and this being their very first. I wonder what Nike would be thinking right now.

We still believe Reebok are a gold mine when it comes to heritage footwear and can definitely be a success if tapped into correctly. With retro silhouettes being a predominant theme in today’s fashion world, they can very well regain their once golden market position.

All images: Courtesy respective brands

Sneakers Adidas Reebok Business