Adidas to sell Reebok to ABG for $2.5 bn

Adidas AG is going to sell its underperforming Reebok business to Authentic Brands Group Inc. (ABG) for up to $2.5 billion. 

Adidas bought Reebok for $3.8 billion in 2006 in order to compete with its main rival Nike, however, its torpid performance prompted frequent calls from investors to sell the brand. 

Following the deal, Reebok will get to keep its headquarters in Boston and continue its operations in North and Latin America, Europe, Asia-Pacific, and Russia, the US brand management company said in a statement. The company added that it will work closely with Adidas during the transition.

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Over 11 years, ABG has amassed more than 30 labels sold in some 6,000 stores. Its brands include apparel chains Aéropostale and Forever21, as well as and Sports Illustrated magazine.

"We've had our sights set on Reebok for many years, and we're excited to finally bring this iconic brand into the fold," Jamie Salter, founder, chairman and CEO of ABG, said.

"We are committed to preserving Reebok's integrity, innovation, and values - including its presence in bricks and mortar," he added.

Last month, ABG also filed for a US initial public offering (IPO) after a year of strong earnings growth.

Fitness plan

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

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

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

The German company 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 five-year 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.

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

(With inputs from Reuters.)