With the recent acquisition of Reebok's business, Adidas is betting high on its position in the US as well as in the global sporting goods market. But, will this combination bear an impact on the market leader Nike?
This is a once-in-a-lifetime opportunity to combine two of the most respected and well-known companies in the worldwide sporting goods industry.
Mergers and Acquisitions (M&As) have become the or-der of the day in this intensely competitive global business environment, irrespective of the nature and size of the industry in which companies are operating. The past decade has witnessed some of world's famous companies joining hands. Continuing with this merger mania, on August 3, 2005, the German-based Adidas announced its plans to acquire the US-based Reebok, in a deal estimated to be worth $3.8 bn (3.1 bn). Adidas and Reebok, two major competitors in the sporting goods industry, will now be seen together, competing with Nike, the Goddess of marketing.
According to the deal, Adidas will buyout the shares of Reebok at $59 per share. This accounts for a 34% premium over its share price of $43.95 prior to the announcement of the deal. While Adidas had a market capitalization of $8.4 bn with sales figures touching $8.1 bn in 2004, Reebok had sales of $4 bn during the same year. Analysts are of the opinion that these two companies have joined forces with a motive to attack Nike, the leader in the global athletic footwear and apparel business. Erich Stamminger, former president and CEO of Adidas America, Inc., who had been associated with Adidas for more than one-and a-half decade, has had unfulfilled plans to expand Adidas's business in the American market. He said, "The announcement represents a major strategic milestone for our group." By adding Reebok to its business, Adidas is hopeful of improving its financial strength too. Subsequently, Adidas will also be adding to its kit some universal brands like Rockport, Greg Norman's line of golf wear, Taylormade, Maxfli, CCM, Jofa and Koho. |
