Authentic Brand Group has acquired Reebok, a brand well-known for its footwear and clothing
for $ 2.5 billion from Adidas, its owner for 15 years. The German footwear brand Adidas had previously acquired Reebok in 2006, for $3.8 billion to contest with competitor Nike. From 2006, the brand was globally well-placed in the sports footwear and clothing category. It was made the official uniform supplier for NBA for more than a decade, popularizing the brand in North American markets. However, the Covid-19 pandemic and subsequent lockdowns in major countries, forced Adidas to shut Reebok shops. Due to this, Adidas decided to part with Reebok and focus on its own brand to improve sales and handle competition in North America.
Why and how was Reebok sold
Though rumors were rife of Reebok parting from Adidas, the German brand confirmed its plans to sell Reebok only in Feb 2021. Reebok has been facing financial struggles over a decade. Almost all plans to revive the brand had failed. Due to intense rivalry and competition in the athleisure category, in the pandemic, sales from Reebok fell by about 20% in a short span of nine months. Also, shops had to be shut on account of underperformance. This could also be due to brand placement by competitors as being more comfortable, when majority are working from home. Also, the revenue contribution by Reebok to Adidas was a minimal 6.9%, thereby proving to be difficult to maintain it as a subsidiary for Adidas. A number of buyers were shortlisted, like- Advent International, CVC, Sycamore Partners etc.., but Authentic Brand group acquired Reebok for $2.5 billion in August 2021. This acquisition is expected to close in the first quarter of the next year, where majority of the acquisition amount being paid in cash and the rest as deferred and contingent consideration.
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The Future of the brands
After selling Reebok, Adidas can now concentrate on its own brand. Though globally popular, it still falls behind Nike in the Northern American market. Authentic Brand Group has over 30 brands in its kitty like Nine west, JC Penny, Arrow, Nautica etc.. Investing in Reebok can prove to be another feather in their cap as it is a name synonymous with style and comfort. What the group does with the brand will be to something to watch out for.
