Why is Adidas selling Reebok for $2.5 billon to Authentic Brand Group and What will its future be?

PV Vyshnavi PV Vyshnavi
Sep 2, 2021 5 min read
Why is Adidas selling Reebok for $2.5 billon to Authentic Brand Group and What will its future be?

After 15 years of ownership, the German footwear giant Adidas sold Reebok to Authentic Brand Group in August 2021. Authentic Brand Group reportedly paid Adidas over $2.5 billion to acquire the company. The rumours of Adidas separating from Reebok were going around from past the mid of 2020, the company later confirmed its plans to sell the Reebok brand on February 16th, 2021.

The German conglomerate first acquired the company in 2006 for $3.8 billion, as it wanted to compete with its rival Nike. Over the years Reebok tried to position itself among the top athletic footwear and apparel companies with high profile partnerships in UFC and Crossfit.

But after the current losses and the stores shutting down due to Covid 19 pandemic in 2020 and after many failed efforts to grow the company, Adidas finally decided to let go of Reebok. Adidas will now focus on its own brand and try to improve it in order to compete with Nike in the North American markets.

A Brief History of the Reebok and Adidas
Reason Why Adidas is selling Reebok
What is the future for the two brands?
FAQ

A Brief History of the Reebok and Adidas

Before getting into losses Reebok was well known for its footwear and clothing designed especially for Fitness and running. The company initially became a part of the J.W Foster and Sons company in 1958. It was founded first in 1895 in Bolton, Lancashire, Great Britain as a sporting goods company.

The company has its headquarters based in Boston Massachusetts and is the official sponsor of Crossfit and Spartan Race for footwear and apparel. Reebok is currently the subsidiary of Authentic Brands Group in August 2021 but before that, the company was a subsidiary of Adidas from the year 2005 to 2021.

Adidas first acquired the company in 2005 after its intellectual property lawsuit and in an effort to take on Nike. Adidas reportedly spent over $3.8 billion to acquire Reebok. It then made Reebok the official uniform supplier for the NBA in 2006 which came alongside an 11-year deal, which made Reebok popular during those times.


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Reason Why Adidas is selling Reebok

Reebok has reportedly gone through tough times and financial struggles, for over a decade Adidas made numerous attempts to revive the brand and improve its performance but failed.

Besides that, Reebok was also facing problems with trends for sports clothing and athleisure because of the stiff competition. The Covid 19 Pandemic had also brought down the sales of Reebok, as in November 2020 Reebok sales fell over 20% in the durations of nine months.

Net sales of the Reebok brand worldwide
Net sales of the Reebok brand worldwide

During the lockdown, Reebok had to shut down numerous stores as it went under huge losses. In Britain, Footwear companies like Dr Marten and Birkenstock have seen an increase in sales as they promoting comfortable footwear products during the times where everyone is working from home.

During the first few years of the Adidas and Reebok partnership, Reebok constituted over a quarter of Adidas’s total revenue, but in 2020 Reebok only generated over 6.9% of its overall revenue.

During the press conference, Kasper Rorsted, the Chief Executive of Adidas said that, β€œAfter careful consideration, we have come to the conclusion that Reebok and Adidas will be able to significantly better realize their growth potential independently of each other. We will work diligently in the coming months to ensure a successful future for the Reebok brand and the team behind it.”

The German sportswear giant announced its plans to sell the Reebok brand on February 16th, 2021. After that Adidas shortlisted a number of potential buyers for the brand. The shortlisted companies include Wolverine World Wide, Authentic Brands Group, Advent International, CVC, Cerberus Capital and Sycamore Partners. The Authentic Brand Group came out on top and acquired Reebok by paying Adidas a sum of $2.5 billion.


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What is the Future for the Two brands?

For Adidas, selling Reebok will allow the company to reduce its distractions and focus more on its namesake brand as it needs to accelerate its momentum to match up to Nike.

Adidas is popular in some European countries but is weaker compared to Nike in other North American footwear and athleisure markets. Nike is known to be over three times bigger than Adidas in the North American market, this is why Adidas had to let go of Reebok.

Reebok is now the subsidiary of Authentic Brand Group which is a well-known conglomerate with over 30 brands in its portfolio. Brands like Juicy Couture, Forever 21, Barneys New York, JC Penney and Brooks brother are part of the multinational company. This is why many experts say that the Reeboks addition could be a major asset for the company.

ABG can help Reebok evolve in many categories of the brand and potentially make the company profitable again with unique methods. The consumers can now expect to see more retro style from Reebok being reintroduced in the near future as that is what the brand was known for. ABG will also help the company maintain its original DNA instead of building it from scratch and will continue investing in its marketing, products and people.

FAQ

When did Adidas acquire Reebok?

The German conglomerate first acquired the company in 2006 for $3.8 billion, as it wanted to compete with its rival Nike.

Who is the parent company of Reebok now?

The parent company of Reebok from August 2021 is Authentic Brand Group.

Why did Adidas sell Reebok?

After the current losses and the stores shutting down due to Covid 19 pandemic in 2020 and after many failed efforts to grow the company, Adidas finally decided to let go of Reebok.

What is Reebok?

Reebok is one of the top footwear companies and as it is well known for its footwear and clothing designed especially for Fitness and running.

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