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Adidas Is Said to Be Close to Deal to Acquire Reebok

Socket
08-03-2005, 03:12 AM
The New York Times
August 3, 2005
Adidas Is Said to Be Close to Deal to Acquire Reebok
By ANDREW ROSS SORKIN and BARNABY J. FEDER

Adidas-Salomon is near a deal to acquire Reebok International for about $4.4 billion, executives involved in the discussions said yesterday. The transaction would reshape the sports footwear and apparel industry.

The deal, which was being negotiated late last night and could be announced today, would give Nike its first formidable competitor in more than a decade. A combined Adidas-Reebok would control about 20 percent of the market, but would still remain behind Nike, which has about a third of the $145 billion worldwide market.

The transaction puts two of the world's best-known brands together and combines a star-studded stable of athlete and entertainment endorsers including the basketball player Allen Iverson (Reebok), the soccer player David Beckham (Adidas) and the rap artists Jay-Z (Reebok) and Missy Elliott (Adidas). The transaction would also bring together Reebok's other brands, like Rockport and Greg Norman's line of golf wear, with Adidas's other lines, including its Solomon ski franchise and its TaylorMade golf equipment and apparel business.

Driving the deal, analysts said, is Adidas-Salomon's chief executive, Erich Stamminger, who has been vocal about the German company's effort to build market share in the United States. John Horan, publisher of Sporting Goods Intelligence magazine, sees the $9 billion branded-shoe market in the United States rising 8 percent this year.

The combined company would likely have increased clout among retailers and an ability to command shelf space. The company would also be better positioned to bid on endorsement contracts and to wring discounts from the multitude of media outlets from which it buys advertising.

"The remaining entity clearly is strengthened in terms of competitive position versus Nike," said Stephen A. Greyser, a professor of sports marketing at Harvard Business School. "The combined company will have more globally than either of the two alone, not just because of size but because of geographic strength. The same goes for distribution, too."

Still, the transaction may raise questions among some investors because it comes at a time when consumers are moving toward fashion-related footwear. Indeed, Nike demonstrated that trend last year when it acquired Converse sneakers for its Chuck Taylors, which have become a retro-fashion staple.

Under the terms of the deal being negotiated, Adidas would pay about $59 a share for Reebok, the executives said. That represents about a one-third premium over Reebok's shares yesterday, which closed at $43.95, up $1.19. Adidas would also assume about $550 million in debt from Reebok, which is based in Canton, Mass. Adidas is based in northern Bavaria in the town of Herzogenaurach.

While the deal is expected to face some scrutiny by regulators in the United States and Europe, antitrust lawyers suggested that it would likely be approved because the marketplace would probably be defined very widely.

The deal's biggest beneficiary would be Paul Fireman, who brought Reebok to the United States from Britain in 1979. Reebok, which is credited with inventing track spikes, capitalized more than any other company on the fitness boom of the mid-1980's, particularly by catering to women, and its fortunes soared in that period.

It moved ahead of Nike as the athletic shoe industry leader in 1987 for a brief time. In 1987, the Reebok board decided it was time to let somebody else run the company and Mr. Fireman was elevated to the new position of chairman, with no responsibility for the day-to-day running of Reebok. He came back as chief executive in 1999, with the stock hovering around $7.

Adidas has made China a particular focus for its expansion, signing on as a sponsor of the 2008 Olympic games in Beijing. Acquiring Reebok would bring Yao Ming, the popular Houston Rockets center from Shanghai, into Adidas's stable of high-profile athletes. According to a recent survey Nike released to analysts, 52 percent of Chinese currently rate Nike as the "coolest" athletic brand compared with 38 percent for Adidas and 15 percent for Reebok.

Eric Dash contributed reporting for this article.

* Copyright 2005 The New York Times Company

NYCtennisfan
08-03-2005, 04:43 AM
Wow. That would be something.

Fee
08-03-2005, 04:45 AM
would they pay their third world laborers any better?

rogertooogood
08-03-2005, 05:22 AM
would they pay their third world laborers any better?

that is one of the best post i have read here :) :)

1sun
08-03-2005, 10:03 AM
would they pay their third world laborers any better?
some things in the world will never change unfortunatley.

Rex
08-03-2005, 12:17 PM
yeh thats true

Deboogle!.
08-03-2005, 04:40 PM
The deal's now official, it was just on the news and there are stories all over the net.

http://news.yahoo.com/s/nm/retail_adidas_reebok_dc;_ylt=AoY5nRgrSPy5sGOpiSTyV TSs0NUE;_ylu=X3oDMTA3ODdxdHBhBHNlYwM5NjQ-