Adidas Considering Reebok Sale: Sources

Evan Clark
·3 min read

Shaq might just be able to get his wish to become a sneaker mogul — if he can pay up.

A little more than a year after the NBA superstar and former Reebok pitchman mused on CNBC that he would “love to buy” the sneaker brand and bring it “back to basketball and to fitness,” Adidas is said to be considering a sale of the business.

But even Shaquille O’Neal could find he’d have some competition.

U.S.-based banking and private equity sources have been buzzing that the oft-rumored divestiture could be coming sooner rather than later, with Adidas said to be mulling options and potentially laying out its intentions at its investor day in March.

Shares of Adidas rose 2.9 percent to 282.10 euros in Frankfurt Thursday on multiple reports that the German footwear giant was exploring the possibility of a sale. A spokeswoman for Adidas declined to comment.

The sale would be a big one, even though Reebok’s star has waned since Adidas bought the company for 2006 in a 3.1 billion euro deal.

Reebok’s sales rose 3.6 percent to 1.75 billion euros last year, but were down 27.3 percent to 600 million euros in the first half of this year as the coronavirus shut down retail, particularly hard in the U.S. and Europe.

That pandemic decline was in line with the drop at the larger Adidas brand, which fell 26.9 percent to 7.56 billion euros in the first half, but the competition is fierce in the sneaker space. Nike Inc.’s revenues over the past two quarters combined were hit as well, falling 19 percent, but were larger at $16.9 billion.

Even so, now could be the right time for Adidas to sell. Companies of all sizes are looking at what they’re best at and which businesses have the most potential and cutting away the rest.

And a flood of money to support markets has many buyers with money in hand looking to pick up assets on the cheap. In addition to potential private equity buyers, there are plenty of blank-check companies — essentially management teams with money looking to do a deal — out knocking on doors.

But at least some U.S. dealmakers are considering how recent Adidas spin-offs have fared and factoring that into their back of the envelope valuations for Reebok.

Two sources WWD spoke to pointed to Adidas’ 2015 spin-off of the Rockport business, which Berkshire Partners and New Balance bought and set up into a separate company with an eye toward turning operations around. The business, however, struggled and the sources argued that part of the problem was that Adidas did a poor job of separating from its own operations — a potential misstep that would be more costly with the much larger Reebok business.

Even the exploration of a sale process is a shift for Adidas, which has been working in recent years to build the business.

On a call with analysts and investors in August, Kasper Rørsted, chief executive officer of Adidas, said the Reebok business has been progressing.

“In the past number of years, the Reebok brand showed a positive development under the turnaround plan, Muscle Up,” Rørsted said. “After returning to profitability in 2018, Reebok achieved growth again in 2019. Of course, this year, Reebok is also very much affected by the COVID-19 pandemic, like others….

“Reebok has a unique and independent brand positioning, which we have sharpened continuously in the framework of our strategic orientation starting in 2016,” he added. “The brand’s mission is to be the best global fitness brand, and it offers consumers technological innovation and classic designs from this specific area.”

That is a mission that it seems someone else might be carrying through on.

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