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Strategic Options For Reebok, Including Sale, Being Considered By Adidas

Strategic Options For Reebok, Including Sale, Being Considered By Adidas
Various strategic options, including a potential sale for its Reebok brand is being considered by it, said German sportswear maker Adidas AG on Monday.
The United States based Reebok was acquired by Adidas 15 years ago as a tactic to rival Nike Inc in its home market.
Adidas said that it will announce the final decision on March 10 when it will officially reveal its new strategy.
In2005, the Boston-based Reebok was acquired by Adidas for $3.8 billion but there have been repeated pressure from investors to divest the brand after Adidas struggled to turn it around.
Michael Faherty, a portfolio manager at Adidas and Nike investor Seilern Investment Management, said that a private equity firm or another smaller sports retailer could find the brand appealing as it will allow its usage in the same manner as Adidas had done to set foot and take a market share in the United States sports apparel industry.
Both strategic alternatives – that of a potential sale of Reebok as well as the brand remaining a part of the company, are being looked at by it, Adidas said.
“There is still a material chance that nothing will come out of it,” Colin Wong, a portfolio manager at Nike shareholder Mawer Investment Management, said.
Spinning off Reebok and transforming into a stand-alone public company, or selling off the brand to private equity fund, another major sports retailer or a multibrand player such as VF Corpare some of the potential options for Adidas, Wong said.
In the third quarter of 2020, there was 7 per cent fall in nest sales of Reebok at 403 million euros ($489.40 million). In the preceding quarter, the net sales of the brand had dropped by as much as 44 per cent. Almost half of Reebok’s book value was written down by Adidas in 2019 against 2018 values, to 842 million euros.

According to Jessica Ramirez, retail analyst at Jane Hali & Associates, the brand has however found itself fin a better place because of recent collaborations with celebrities like Cardi B and a refreshed focus on women’s apparel.
“Reebok won’t be much of a burden for whoever takes it on if there is a sale,” Ramirez added.
Fort the last three months of the year, the company is now expecting a drop in overall sales, Adidas had said earlier in November. The company said this because of resurgence of Cvoid-19 infections and reimposition of locakdown and business restrictions in Europe. According to the company that slump in Europe will potentially offset the gains made because of a return to growth in China as well as strong demand for the company’s products such as running gear and products designed by singer Beyonce.

Christopher J. Mitchell

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