Adidas closes Reebok takeover to take on Nike
Tuesday January 31, 11:59 am ET
By Ulf Laessing and Mark McSherry
FRANKFURT/NEW YORK (Reuters) - German sporting goods maker Adidas (XETRA:ADSG.DE - News) has officially completed its $3.8 billion acquisition of U.S. rival Reebok International (NYSE:RBK - News) in a bid to zero in on market leader Nike (NYSE:NKE - News).
Reebok's shareholders and European anti-trust authorities approved the deal last week, clearing the last two hurdles for the biggest sector takeover for years.
Adidas, the world's second largest sports goods firm, said in a statement on Tuesday the deal would create group annual sales of about $11.8 billion, coming close to Nike's sales of $13.7 billion in its last fiscal year.
"By combining two of the most respected and well-known brands in the worldwide sporting goods industry, the new group will benefit from a more competitive platform," Herbert Hainer, chief executive of the new group, said in a statement.
Paul Fireman will step down as chief executive officer of Reebok and serve as Hainer's advisor, Adidas added. Reebok's management has supported the takeover.
The German firm, famous for its three-striped sportswear logo, reiterated that it expects the deal to boost earnings in the 2007 fiscal year and lead to cost savings of about $150 million by the third year after closing.
Adidas hopes the deal will complement its strength in classic sportswear such as soccer shoes and jerseys with Reebok's strong position in the United States, where Adidas has failed to seriously threaten Nike's position.
In addition, Reebok brings strength in the lifestyle fashion market and its women's aerobic business. It also offers key sponsoring contracts with major U.S. professional leagues in hockey, basketball, football and major league baseball.
REEBOK INTEGRATION
Analysts had expected Adidas to close the deal on Tuesday after Reebok shareholders approved the German firm's offer of $59 per Reebok share in cash last week.
Investors had originally been worried that Adidas was taking on too large an integration job while ramping up sales campaigns for the 2006 World Cup. Adidas is pinning great hopes on the biggest sports event for years to be held in its home market.
Adidas has allayed some of those fears with forecasts that the deal will boost earnings by a double-digit percentage rate in the medium term.
But analysts say they are hoping that Reebok will not require restructuring after it posted an 11 percent sales slump in its third quarter. The company is losing market share at key U.S. retailers to Nike's marquee product lines and more European-style footwear by other shoe manufacturers like Puma.
Adidas said teams from both firms have worked in the past few months to ensure a smooth integration of Reebok in the new group, whose headquarters will remain in Herzogenaurach near Nuremberg. Reebok will operate as separate brand based in Canton, Massachusetts.
More details of the deal are expected on March 2 when Adidas reports on its fourth quarter at an annual news conference.
Effective Tuesday, with the closing of the deal, trading in Reebok's common stock has been halted.
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