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Its Struggling Reebok Brand Planned To Be Sold Off By Adidas

Its Struggling Reebok Brand Planned To Be Sold Off By Adidas
The German sportswear maker Adidas AG had purchased the United States based fitness brand Reebok about 15 years ago. However in recent years the company has not been able to propel the brand enough to compete with its closest American and global rival Nike.
This has now prompted the German company to plan to either sell off or spin off the brand so that it attains a position to compete with its arch rival Nike in the fitness and sports and wellness segment. 
The company has decided to initiate a formal process which is targeted to divest the Reebok brand as a part of a five year strategy of the company which it will be presenting on March 10 on the occasion of publishing its performance report to shareholders for 2020, Adidas said on Tuesday. Starting from the first quarter of 2021, Adidas will be reporting Reebok as a discontinued operation in its balance sheet.
The total worth of the business of Reebok could be as high as around 1 billion euros ($1.2 billion), said reports quoting banking sources.
"Reebok and Adidas will be able to significantly better realize their growth potential independently of each other," Chief Executive of Adidas, Kasper Rorsted, said in a statement.
Back in 2006, the Boston-based firm Reebok was acquired by the German company. However investors of the company have been repeatedly pushing the company to divest the American brand because of the sluggish performance of Reebok during recent years.
Over the years however, a part of the dominant market share of Nike in the United States was eaten into by Adidas with its core brand which was further aided by the German company’s partnership with celebrities like Kanye West, Beyonce and Pharrell Williams.
A turnaround plan for Reebok was launched by Rorsted after he was appointed as the CEO of the company in 2016 which helped the American brand to return to the path of profitability. However the overall performance of the brand was lower than that of the core Adidas brand. And then the brand’s business was hit by the Covid-19 pandemic.
During the third quarter of 2020, the bet sales of Reebok dropped by 7 per cent to 403 million euros ($488 million) after a mammoth 44 per cent fall in the quarter before. The book value of Reebok was reduced by half by Adidas in 2019 compared to its value in 2018 to about 842 million euros.
According to analysts, there are multiple options available for Adidas about Reebok which include spinning off the brand as a stand-alone public company as well as the path of a complete divestment of the brand to a private equity to another major sports retailer or even a multi-brand player such as VF Corp.
Analysts said that the brand position of Reebok is now in a better place because of the company’s recent partnerships with celebrities such as Cardi B as well as due to a refreshed focus on women's apparel.

Christopher J. Mitchell

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