Adidas sells underperforming Reebok for €2bn to Authentic Brands

Adidas is selling its underperforming Reebok business to Authentic Brands Group for up to €2.1bn, adding another well-known name to the buyer’s growing line-up of consumer companies.

The majority of the price will be paid in cash at closing, with the rest coming as deferred and contingent consideration, the companies said on Thursday in a statement. The deal is expected to close in the first quarter of 2022.

Authentic Brands CEO Jamie Salter said in the statement that the deal is “an important milestone” in the company’s growth. “We are committed to preserving Reebok’s integrity, innovation and values, including its presence in bricks and mortar.”

Authentic Brands, which filed recently for an initial public offering in the US, has already acquired more than 30 names, including bankrupt assets such as Barneys New York and Brooks Brothers. Reebok has been formally on the block since early 2021 after Adidas had tried to revive the brand’s performance for more than a decade.

Adidas shares rose as much as 2.5% to €314.70 in Frankfurt trading after the announcement.

Earlier in 2021, Authentic Brands bought Eddie Bauer with Sparc Group, its joint venture with Simon Property Group. Authentic Brands, which also owns Forever 21 and Sports Illustrated, acquired a collection of brands from PVH Corporation that include Izod and Van Heusen.

The deal won’t change Adidas’s financial outlook for 2021 or its previously announced long-term targets, the company said. The bulk of the cash proceeds will be distributed to shareholders.

Reebok has long fascinated industry players, both as a cautionary tale and for the tantalising potential of recapturing some of its old success. It became a giant seemingly overnight in the 1980s, propelled by the aerobics boom and even exceeded Nike for several years in terms of US sneaker sales. That momentum quickly sputtered, however, and even Adidas has never managed to reignite the brand.

Sluggish performance

Adidas acquired Reebok for $3.8bn in 2006. When he arrived at Adidas in 2016, CEO Kasper Rorsted made a priority of fixing Reebok’s sluggish performance. He closed underperforming stores and allowed some licensing deals to expire, cutting sales at the sporting label while slashing expenses even more.

After Reebok regained profitability by early 2019, Rorsted said he wanted to generate sales growth with new footwear lines such as the CrossFit Nano and the FloatRide Run. He compared overseeing Adidas and Reebok to being like a parent who loves both his children equally.

The chance to capitalise on Reebok’s deep archive of classic footwear and apparel styles — from the clean white sneakers featuring the Union Jack to the black-and-white bullseye basketball kicks worn by Shaquille O’Neal — could be a motivating factor for potential buyers.

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