Adidas sells Reebok to Authentic Brands for US$2.5B

Company set to focus on core business

BERLIN • Adidas is selling its Reebok business to Authentic Brands Groups (ABG) for up to 2.1 billion euros (US$2.5 billion) as the German sporting goods company seeks to focus on its core brand after a deal that failed to live up to expectations.

Adidas bought Reebok for US$3.8 billion in 2006 to help to compete with archrival Nike, but its sluggish performance led to repeated calls from investors to sell the brand.

In the meantime, Adidas managed in any case to eat into Nike's dominance in the United States with its core brand, helped by partnerships with celebrities like Kanye West, Beyoncé and Pharrell Williams.

ABG has rapidly amassed over 30 labels that are sold at about 6,000 stores. Those brands include apparel chains Aéropostale and Forever21, as well as Sports Illustrated magazine.

“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,” said Jamie Salter, founder, chairman and CEO of ABG. ABG last month filed for a U.S. initial public offering following a year of strong earnings growth.

After Kasper Rorsted took over as Adidas CEO in 2016, he launched a turnaround plan for Reebok, which

helped it return to profitability, but its performance continued to lag that of the core Adidas brand and it was then hit by the COVID-19 pandemic.

Adidas reported last week that Reebok's first-half sales jumped to 823 million euros from 600 million a year ago, and the brand made a net gain of 68 million euros compared to a net loss of 69 million in the first half of 2020.

Reebok's recent collaborations with celebrities like Cardi B and a renewed focus on women's apparel have put the brand in a better place, analysts say.

Adidas has already sold the Rockport, CCM Hockey and Greg Norman brands for 400 million euros, which had been part of the original Reebok acquisition.

Adidas said in a statement that the sale had no impact on its financial outlook for the current year or for its targets set out in the fiveyear strategy it announced in March.

Adidas said the majority of the 2.1 billion euros would be paid in cash at the closing of the transaction, expected in the first quarter of 2022, with the remainder comprised of a deferred and contingent consideration.

It said it would share the majority of the cash proceeds upon closing with its shareholders.

THIS IS AN IMPORTANT MILESTONE FOR ABG.

JOE RAEDLE / GETTY IMAGES Adidas has eaten into Nike's dominance in the U.S. with its core brand, helped by partnerships with celebrities like Kanye West, Beyoncé and Pharrell Williams.